The economy's new normal

A few months ago I dedicated a column to what I described as a “bathtub recovery,” or a sharp macro-economic decline, followed by a protracted plateau, before a steady economic rise and an eventual return to previous production and economic levels.

Based upon the economic data that continues to emerge, it seems like we’ll continue to bounce along the bottom of the tub a bit longer before we see the signs of a more sustained recovery.

As I noted before, those who projected that the ascent to economic recovery would be as steep as the descent into recession were kidding themselves — especially as it relates to the return of more normal levels of unemployment.

The length of the average work week, which includes all full- and part-time workers in the workforce, continues to decline incrementally and now stands at 33 hours per week, according to a September Bureau of Labor Statistics report.

What this means is that as the overall economy recovers and both demand and production tick up, there will be ample room to increase the productivity of the existing workforce well before employers feel the need to hire new employees. As I said then — this is going to take a while.

As with all recessions, we know that at some point the economy will fully recover and demand and production will both reach pre-recession levels. Hopefully by then we will feel that things are back to normal. But I’m not sure it will be that simple.

Since the recession began, Minnesota has shed more than 140,000 jobs, with more than 46,000 of them lost in the manufacturing sector alone. Will all of these manufacturing jobs, especially those in rural Minnesota, return when the economy fully recovers? I doubt it.

As in any economic downturn, some of these jobs were lost as a result of business failures. Those jobs simply won’t return. Other firms were merged or acquired by larger firms, while still other jobs were exported to other locations, including some that have been lost overseas.

For the first time in many years we are also beginning to learn that the health care industry is not completely immune to the effects of the recession.

While the health care sector clearly has not taken the beating that most sectors have, there have been seen selective health care job losses. Until recently health care jobs looked like a safe harbor when economic seas got rough; but no more. As efforts to curb the costs of health care become more serious, we will no longer be able to assume that continued growth in health care jobs will be the norm.

When the economy fully recovers, we will likely find that the composition of businesses in rural Minnesota and our employment opportunities will be somewhat different.

It has been interesting to document many of the structural demographic changes that Minnesota has experienced since the release of 2000 Census data. Many of these changes will have major impacts on the size, shape and skill level of Minnesota’s work force of the future. The two most significant factors are the retirement of the baby boomers and the increasing racial and ethnic diversity in the state.

We have known for years that the baby boomers represent an extraordinarily large and economically-successful cohort that led the workforce and drove the economy for years. But the boomers are running out of steam as they age and will soon retire from the work force in large numbers. The leading edge of the boomers is already eligible for Social Security and will turn 65 beginning in 2011. With the average age of retirement today around 63, there’s going to be quite a few jobs to fill in the next decade.

That’s where the second demographic shoe drops. Minnesota’s minority population rose from approximately 6 percent in 1990 to close to 15 percent today. Latinos, African Americans, Native Americans and people of color are the fastest growing population cohorts in Minnesota.

It would be logical to look to these groups to fill the jobs that the boomers are exiting. But the fastest growing groups in Minnesota are also the ones that are experiencing the least academic success. This educational disparity will have a disproportionate impact on what types of businesses can grow and what types of jobs will be available as employers seek educated and skilled workers.

Will we eventually get back to normal? Sure, but we may find out that it’s a new normal.

Geller is a professor and head of the Arts, Humanities and Social Sciences at the University of Minnesota, Crookston. Geller also serves as the director of the federally-funded Economic Development Administration University Center at the university. He can be reached at gelle045@umn.edu.

Tags: business advice, geller