Saturday, September 11, 2010

A Look Back at the “Hard-Core Unemployed” Myth

In all U.S. post-depression economic recoveries, the housing sector recovered before the economy recovered. Currently, there is such an oversupply of housing, in a time of diminishing demand for housing, that the housing sector may not recover for 10 to 15 years. Therefore, the U.S. economy is in for a long pause, perhaps a whole “lost decade,” before any noticeable recovery occurs.

Well, not so fast. The lost decade scenario is certainly a reputable view among economists, but the U.S. economy is nothing if not adaptable. To illustrate this, I want to look back at another prediction that supposedly would doom the U.S. economy. The theory, circa 1991, was that many people were just not employable. They couldn’t read, they lacked skills, they were too undisciplined and disorganized to hold a job.

It was a theory at least as reputable as the theory about the housing sector. And it wasn’t true at all. When the jobs appeared, the workers were ready to take them. They learned to read and write, learned specialized skills, bought clock radios, and showed up for work.

In the current decade, the economy will adjust to the declining interest in housing. A house can be a huge purchase, but it doesn’t follow that if people aren’t buying houses, there will be nothing for workers to do. Even at this point, it is safe to say that people aren’t just sitting around.