The Two-Track Economy: The Coming Communications Boom

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.