I don't think the tight labor market will end any time soon. But, as I have posted in detail before, it's OK. In the early '70s it was thought that a 4% unemployment rate was the normal full employment rate. We started thinking otherwise only after 15 years of stagflation and all sorts of problems. (Remeber all that Japan-will-conquer-the-world-and-poor-old-rust-belt-US-is-history attitutde.) Gradually, as productivity continues to increase, and inflation stays low, the mindset on this will change back. This is similar to the early '80s when people started thinking 10-20% interest rates will last forever. As all other factors improve, the unemployment rate at 4% should be less of a problem.
I was not a Reagan fan, but this it is the trickle down effect that is causing full employment. On my street in LA, for example, there is not a single household that cuts their own lawn. (I would anyway, but I am renting and my landlord pays for it, and I don't own a mower.) Everyone has a service do it. This is the source of full employment, the proliferation of low paying jobs. And it is a good thing in many ways. At the high end, the extension of 100's of thousands of h1 visa's for high tech keeps the growth pumping.
The NY Times today has a story that several other papers are also featuring about all the great rates savings accounts are offering. So, some will go for that, but the money has to go somewhere. It goes into bonds, loans, lowering rates, forcing people back to the market. There's just too much money around. This won't last forever. 5 years from now, things WILL start to slow down; the economy will stabilize. Profits will contract. This won't happen till the build-out of the 'nervous system' of the economy nears completion. With 3G wireless just coming online, B2B just starting to get installed, optical network hypergrowth, we aren't there yet. Sprint announced that they will spend $6.2B on CAP-ex next year, 55% > than Merril Lynch had previously estimated; another example of how a cap-ex slowdown in telephony has been over hyped.
Also, yesterday, the LA Times had an interesting story about how mom and pop dot-coms are proliferating. One of the great appeals of the net has been how democratic it is. Even I own a URL for a business (tho I haven't started it yet) for example. For every troubled high profile dot-com, like PriceLine, there are a hundred small dot-coms, with no VC money, growing, surviving, striving. Despite the high profile layoffs - "A recent survey found that more than 16,000 dot-com workers had been laid off since December, but the government estimates that the job category dominated by Internet workers grew by nearly 11,000 jobs in the same period." - Saturday LATimes. I think this is very healthy.
Regards,
Tom |
