There is a very interesting article in today's WSJ by Robert Reich, former Secretary of Labor under President Bill Clinton. I say it's interesting because unlike most politicians in the Democratic Party he laid out some of the serious issues in the jobs market. His points included:
> Only 112,000 real new jobs last month are fewer than the 150,000 needed to keep up with growth of U.S. population.
> Since start of "Great Recession" the economy has shed 8.4 million jobs which when coupled with 2.7 million not created leaves the economy more than 11.0 million behind.
> At the end of 2009, debt averaged $43,874 per American or 122% of annual disposable income...sustainable at 100% or less.
> The only way many are likely to retain their jobs or get new ones is by settling for much lower wages and benefits
The article didn't offer solutions although I think that Reich is in favor of greater government spending. He brought up productivity and the use of numerically controlled machine tools, robotics, and office software. These are things that I write about often and it simply boils down to a new paradigm shift with respect to employment. People are going to make less money if they're lucky enough to have a job. This is a serious paradigm shift and one that has been looming since the Babylonians began using levers to replace men on building projects.
But there is something else at work here, too. Reich eluded to education and the fact that there is a major difference in unemployment rates for college graduates (5%), only high school (10.5%), and less than high school (15.6%). Although many programs are aimed at getting more kids into college, with the rise in high school dropouts the efforts should be focused like a laser on grades K through 5. In the meantime, there is a new economic reality. Ironically, I think what Reich wants in terms of major government intervention would only make matters worse.
We can kick the can down the road and follow the example of Greece but I think that we are aware of the risks and maybe ready to take our lumps. Of course that $61.0 billion bailout for Greece is being funded 1/3 by the IMF, which means America is involved as a big-time contributor to the fund. (The CBO says that the $108.0 billion pledged to the IMF last year would only cost the U.S. $5.0 billion, but I've read where the real price tag is around $25.0 billion.) Greece not only got a bailout that was supposedly forbidden in the EU treaty but they are getting it at 5%, or 2% less than what the free market was willing to accept.
The market will probably keep marking time with some late buying today ahead of the Alcoa (NYSE:AA) earnings report after the close. Alcoa has been very inconsistent, only besting the consensus twice in the last four quarters, including missing by more than 80% for the December period. There have been two downgrades on the stock this month after three upgrades in the first quarter. This report is a real nail biter even as consensus has dropped to $0.10 per share from $0.22 per share just three months ago.