Coping with a Jobless Recovery

from NY Times, source BLS

Employment (hiring) tends to lag in an economic recovery.  This is generally true and has been the case in past economic cycles.  What’s different though in this economic cycle is how much employment recovery has lagged other indicators.  In other words, as capital investment, capital spending, and revenues have improved, business owners have been reluctant to hire, and when hiring, have kept wage growth generally down.  Last Friday, the BLS indicated that the headline unemployment rate rose to 9.7%, higher than expected.  Furthermore, if you consider underemployment the broader measure (U-6 which represents unemployed, marginal workers, and those working part time due to economic circumstances) this is at a much higher 16.5%.

In addition to the cyclical issues normally associated with unemployment, it seems to me that several secular issues are at work keeping hiring anemic and wages stagnant.  These include structural changes in the economy, high fixed costs of hiring full-time workers (such as healthcare costs), outsourcing, and a shift to hiring people on a contract or commission basis to lower the fixed costs associated with employment.  While most people offer advice to the unemployed, I thought it was important in this environment to offer advice to the majority, which are the 80+% that are employed:

--Be realistic about your industry — this includes not being overly optimistic or pessimistic.  If your industry is in trouble, it’s best to take action while your still employed.  Research other fields, keep up to date of industry changes and important developments, and importantly, make sure the emergency fund is funded to tide you over in case of a layoff or furlough.  If your industry is likely to bounce back quickly, it’s important not to get too caught up with the bad news and accidentally miss the recovery.

–Look at a recession as a time of opportunity — I have previously written about using recessions as a time to jump-start your career.  This is particularly true if layoffs have happened and you are asked to take on increasing responsibilities.  It’s an opportunity to let yourself shine.

–Consider building up entrepreneurial and freelance skills and contacts– with the labor force shifting to more ‘flexible’ employment avenues, it’s important to consider starting your own business or working as a freelancer while still employed.  In fact, almost everyone should think about this.

–Be realistic about incurring huge debt– in particular I have in mind debt incurred for another degree.  While I am a big believer in education (and possess a graduate degree), I think the economics of taking out massive student loans has shifted in recent years.  When I hear of stories of people that go tens of thousands of dollars in debt to obtain a fine arts degree or other certification that is not generally tied to stable employment or high compensation, I have to wonder if they are sinking into a money pit.

–Try to offer help to friends or family members that are not so lucky– it is hard to overstate the stresses and emotional toll of being unemployed.  If you are fortunate, but know of many people that are not, you can help out by being a good friend.  This includes being empathetic, offering solid career advice or introductions if possible, and creating social activities that are not demanding on the wallet (such as a group hike or a potluck instead of an evening at an expensive restaurant).

posted at this week’s Carnival of Personal Finance