Today’s jobs report shows a bit of good news–123K new private sector jobs.
But let’s take a step back from the month-to-month flow of the data and ask a different question. Is the job market giving any sign yet of the shape of the coming recovery? I’m going to apply what I call “Mandel’s Second Law of Booms and Busts” : Industries which recover first in a bust tend to drive the next boom.
The intuition is that any industry that can hire in the face of economy-wide malaise clearly has enough strength to boom when the economy does finally start to rebound. For example, after the 2001 bust, residential construction and real estate businesses started adding workers well before the rest of the economy recovered. This gave a clue (a ‘weak signal’) to the shape of the coming recovering, suggesting that it would be powered by housing.
So which industries are jumping ahead of the pack this time? Healthcare, of course, has not been in a slump at all. But other industries have also been able to withstand the downward pressure– Internet publishing, broadcasting and web search portals, computer systems design and programming, and wireless telecom.
Broadly speaking, the communications sector, broadly defined, seems to be recovering before the rest of the economy. This may be telling us something about the shape of the coming recovery.
I’m going to put myself out on a limb here. I think that this coming recovery will be driven by a communications boom, including a media boom. This includes everything from Google, to Apple, to Facebook, to mobile payment, to health-related applications, to my new company Visible Economy LLC (I am putting my money where my mouth is!)
That suggests we may have a two-track economy for a while. Communications and related areas may have good times, adding jobs and growing. But the rest of economy may bounce along the bottom for a while, especially if local and state governments have to start tightening their belts several notches.
Mandel on Innovation and Growth 
That’s great news hope you’re right. I do think this falls in line with the thesis from Rifkin’s “The End of Work”
Oh, I think the two tracks will stay apart for a long, long while, maybe forever. The US faces a real problem with huge numbers of less-skilled workers, many / most of whom will never be able to make the leap into a knowledge- or technical skills-based economy. Even something as basic as home construction is becoming far more technically demanding, especially with new ‘green’ technologies. Is retail really gonna get us where we need to go? How many Targets can the consumer US support?
In little Rhode Island, I did some back-of-the-envelope numbers and we need to add about 15k new jobs just to get unemployment under 10%. The state is actually quite strong in the web and IT sectors, but those new jobs are filled mostly by immigrants / MA commuters.
Long story short: we may add jobs, but our unemployment number won’t go down until we add low-skill jobs. And the way we’re gonna do that is….
How long have I been calling this for? I even gave a necessary condition for the next boom to take off, micropayments. Why would your data imply a two-track economy? First, you don’t quite define what that means, was it two-track after the last bust too? If you’re saying that it’ll take a couple years for the boom to really kick into gear, sure, but that’s meaningless compared to how great this boom is going to be. 🙂
Michael,
Industries which recover first in a bust tend to drive the next boom.
Also, industries that suffered the most in the last recession (telecom, web commerce, and networking in 2001-03) weather the next recession the best, since hardship is still fresh in their memory, and they never overhired in the interim to begin with.
Very good point.
Housing is a classic cyclical industry. Are you adjusting for that? Industries like steel, autos, and copper would all have similar growth curves, and they would ‘lead’ a recovery to the extent that they grow faster than the economy when it grows (and shrink faster when it shrinks).
It would still be useful to know that the first cyclical industry to recover tends to do better than usual.
I actually work in Internet publishing and search (specifically search engine marketing). From what I’ve seen, the growth never stopped, but it’s largely coming at the expense of larger advertising agencies.
Housing was not cyclical in the 2001 bust….residential construction employment dipped briefly and then quickly returned to the uptrend.
Is Internet publishing the new consulting? I wonder whether the people who used to call themselves consultants now employ other terms of art, like Internet publisher or social media guru? Does the data show whether these people are self-employed or not?
Good question. Overall the number of people who identify themselves as ‘self-employed’ has fallen across the whole population over the past couple of years.
Excellent point, highlighting the aspect of the internet as a new “attention economy” platform for service delivery, service advertisement, marketing, and self-promotion. You have mentioned the primarily-business side of it, but there is a substantial “extracurricular” side of self-expression/presentation, social interaction, and self-promotion for individuals that previously didn’t have a platform (e.g. one couldn’t publish the equivalent of a Facebook page in print media). And that individual exposition is not just social, but very much about hawking one’s wares/labor and angling for clients/job leads.
Aside from being the perceived essence of “Web 2.0”, that is all great, and once the basic needs of people are met it is always about social interaction, entertainment, and status ranking, but I still cannot see how one would get a sustainable economy out of this.
I don’t see the internet as “the actual economy”, but largely as a platform for mediating general economic activity (which is arguably the very essence of “communications”, aside from the social interaction aspect). Of course, the internet-as-the-medium will have its own infrastructure industries with their nomenclature of technical experts, business visionaries, celebrities etc., but it cannot all be “meta”.
Yes, that’s been my point all the way along. We need some of the investment in innovation in the life sciences to actually start paying off to sustain the economy as a whole.
Mike, I don’t see the “reply” link in your response, so I’ll respond to mine.
How will those “investments” pay off when all money flows to the top? Much of the money does actually circulate “through the economy”, of sorts, but along pathways controlled by the rent extractors and their middlemen. For most people, whatever money comes in goes out immediately to pay the bills. Over the past decade(s) much of the “discretionary” spending came from consumer and corporate debt, the overhang of which has not yet been fully recognized. There seems to be no income growth to pay off any investments other than nondiscretionary expenditures on healthcare and provision of staples.
Michael,
Great to hear of the new undertaking, Visible Economy LLC. Didn’t you or someone write a story once about the high proportion of enduring companies that started during bad economic times?
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