So, how was your new year celebration? I would imagine for quite a few of you out there, 2010 was a crappy year. Now, I don’t have anything quantifiable to support my claim, but for most who are in my social network, the vast majority were quite ready to kiss off 2010 and are hopful that 2011 would be a better year. Yes, the unemployment rate still sucks (especially if you live in the Golden State like I do), and it seems despite all the record profits companies are making, they are just not hiring for any full time work. That is a major drag on the national mood, and makes people think that last year was just one be dark cloud. And if you’re one of those millions who are trapped in long-term unemployment, it was one dark cloud.
But Americans, despite all the grumbling, are a fairly optimistic lot — and we often look forward to better days. The new year one of those times, but it gets to the root of how much of what’s described as “The Market” is, at times, more psychology than metrics. Sure, an economy like we have in the United States is a pretty dynamic thing, and the collective mood of a people does not necessarily determine the direction the economy is going to go. Bank failures, automobile manufacturer bankruptcies, housing busts, countries defaulting on debt, and the cost of two wars are the tidal waves that hit us with an amazing force — and just saying “Oh, it’ll all get better” is just plain dumb and naive.
Expectations for a better 2011 than a 2010 come from a number of things. One of which is the fact that despite the Great Recession, the policies of the Obama administration (and the end part of Bush’s) have helped stabilize the macro economic pillars and prevented another Great Depression. Sure, we’re suffering through a Great Recession, but to say it could have been much worse is something we’ll never know — and something that we would really never want to know. So, two years after the worst of it, the economy is poised to grow even more that employers are going to have to start hiring (gasp!) employees — it happens after economic growth starts to ramp up and worker productivity starts to drop.
This, no doubt, is great news for the long-term unemployed and underemployed, but it’s not like people are going to get back the lost wages from two to three years ago. Nope. The wages are going to be lower than the high point of what they were in 2006/2007. That’s the bad new. The good news is that more people are going to be working again, and for places like California, Nevada, Florida, Rhode Island, South Carolina, Oregon, Kentucky, Illinois, and Michigan (those states that were hardest hit by the recession), it’ll mean a reduction in the 10-12% official unemployment rate that’s been plaguing those states for a couple of years now.
What this “new normal” will look like is anyone’s guess. What I hope is that those I personally know who have been hit by the effects of the Great Recession (i.e., friends and family) will have an easier time getting work, moving up in their careers, starting businesses, and generally pursuing happiness in that Declaration of Independence kind of way. But if there are a few things that this recession has taught us is that living beyond our means (because we’re chasing the American Dream that has become an elusive reality) is something we’re going to have to adjust in our collective minds. That’s not to say that we give up on our dreams, it’s just that we can’t achieve them through credit cards like we have in the past. And for those who employ the great many of us, the reason why so many folks have been living off of credit to keep the American Dream afloat is because wages have declined so much that the gap between the cost of living and the money we take home is huge. To fill it, we used to rely on credit. That’s not going to happen anymore because banks can’t grant easy credit to those who won’t be able to pay off their debts in short order. The other thing is that we’re in global economy. Yes, we like to tout that we won the Cold War against Soviet communism, but what that means is that former enemies and those we used to classify as Third World countries are now competitors in the global economy. And business in a capitalist system will always look for ways to maximize their profits — even if that means relocating whole industries to countries where the labor is cheaper.
Unfortunately, that’s the price of winning the Cold War.
One of the things the U.S. has going for it, however, is that our culture encourages creative and innovative thinking. And despite the usual conservative forces that discourages the kind of individualism that leads to creativity and innovation that exists in our society, people who do creative things in our culture is something that folks in other countries really can’t duplicate — but they can replicate our successes.
So let’s be positive and forward-thinking as we go into this new year, but let’s not be so idealistic to think that we’re “going back” to a life that built on house of credit to fund our dreams.