One of the common developments in “the olden’ days” of five years ago and earlier was the concept that American workers typically had the ability to be mobile — to move from one geographic area to another, from one state or city to another — in order to fill an open employment position. What helped in previous years was the fact that one could likely sell their home for more than they paid for it and/or a new employer would provide a reasonable relocation package to assist one’s effort to move.
That was then — this is now
The movement of Americans is at its lowest level since World War II (The Associated Press). Weak housing markets of the past 4-5 years now find millions of people buried in their homes, with no chance of selling at a profit. Note that roughly one out of every four homeowners across the nations is “underwater” on their home; they owe more on their mortgage than the home is worth.
In addition, pressures on profitability have found fewer companies willing to provide attractive relocation packages. Even fewer employers are willing to take a hit on the prospective new employee’s current residence.
More young people who have recently graduated from college continue to live at home or move back in, given currently limited employment opportunities for younger workers. More and more stay in the communities where they went to school.
This has profound implications for the American economy, with perhaps the greatest impact on manufacturing firms around the nation. A recent survey conducted by Deloitte & TouchÉ and The Manufacturing Institute noted that American manufacturers cannot fill 600,000 skilled positions, or 5 percent of all current manufacturing jobs (NADCA). Such a number works out to an average of 12,000 open and available manufacturing jobs per state. Such a number also keeps the nation’s unemployment rate higher when compared to prior economic expansions.
The survey showed that 67 percent of manufacturers have a moderate to severe shortage of available, qualified employees, noted a Deloitte & TouchÉ spokesperson. The survey also noted that 64 percent of manufacturing executives lament the lack of skilled workers, which is making it more difficult to expand their operations or boost productivity.
One reason is the fact that many older skilled workers took early retirement in recent years and don’t want to move to fill a position. The other factor is that noted above —they simply can’t get away from the house that binds.
The lack of mobility has also had a major impact upon traditional retirement locales such as Arizona, Florida and Nevada. If people can’t sell their homes in colder climates following retirement, they can’t easily move to warmer destinations.
This reality has contributed to the real estate busts or painful price corrections in one retirement community after another in Phoenix, in Tucson, in San Diego, in Las Vegas, in Miami, in Naples, etc., over the past four years. It has not been unusual to see initial home or condominium prices down 40, 50 or 60 percent and sometimes even more in these communities.
The old mindset for a retirement community developer was “if you build it, they will come.” The mobility issue rendered that view flawed in recent years.
Reference is frequently made to the BRIC nations — Brazil, Russia, India and China — four nations with considerable geographic size, large populations and enormous economic potential. The past few years have seen China garner most of the attention, as that nation of 1.3 billion people just surpassed Japan as the world’s second largest economy.
Brazil also draws considerable attention, given its rise in the agricultural and energy areas. Russia also draws attention as an energy and commodity player, but perhaps equal attention for the corrupt nature of the political structure and the need to pay bribes to get most anything done.
And then there is India
This nation of 1.2 billion people has what is now the global community’s 10th largest economy. While China draws praise (in some circles) for its ability to grow the economy and move closer to being a world class player in many sectors, India struggles.
Economic reforms unleashed 20 years ago created the potential for a world class economy. While economic growth has remained “solid” in recent years, the Indian economy continues to face major challenges.
The media likes to paint China and India with the same brush. They are actually very disparate economies.
China is an export-based economy with a current emphasis on internal investment to minimize volatility tied to exports. India is an internal demand economy with aspirations of building exports to the world.
One might think that global investors are just “chomping at the bit” to push massive amounts of investment dollars into this nation of enormous potential. They would be wrong.
During 2008, foreigners poured twice as much direct investment into India — $33 billion — as Indians plowed into businesses overseas. By 2010, that changed in a big way. Indian citizens invested $40 billion abroad, twice as much as foreign investment in India (The Associated Press).
Capital outflows by foreign investors from Indian stocks have been massive, with investment down by more than 95 percent in 2011, versus 2010 (www.dbfsindia.com). The potential allure of sizable investment gains in this newly emerging nation has been offset by massive government corruption and political paralysis on a grand scale.
Inflation has been a major issue in recent years, with prices rising more than nine percent in 2011. The Reserve Bank of India, that nation’s central bank, tightened monetary policy 13 times in 2010 and 2011 in an attempt to slow inflation pressures. Such aggressive tightening was the fastest since 1935 (www.bloomberg.com).Comment on this story
The Indian population accounts for one of every seven people on the planet. By contrast, the American population accounts for less than one of every 20 global citizens. Various estimates suggest that India could overtake China by 2030 to become the planet’s largest as measured by population (Herman Trend Alert).
Indian economic growth this year could slow to around seven percent after inflation. Such growth, while impressive when compared to that of more developed nations such as the U.S., will not be enough to lift the hundreds of millions of citizens still subject to severe poverty.
JeffThredgold is the only economist in the world to have earned the CSP (Certified Speaking Professional) international designation, the highest earned designation in professional speaking. He is also economic consultant to Zions Bank.