We Need to Get Serious About Job Creation Now

Aug. 10, 2011
To put unemployed Americans back to work and accommodate all the new entrants into the workforce, the U.S. needs to create 21 million jobs by 2020.

The debt ceiling issue is settled for now. But no one is celebrating and no one feels better for having ducked Washington's bullet. The NAM has expressed its support for the bill, but the Institute of Supply Management tempered any enthusiasm manufacturers may have felt with a reported 4.4 drop in the July manufacturing index. On reflection, the manufacturing index's decline to 50.9 did not shock me in light of all that has been going on in the economy; but actually seeing the number was definitely a cold splash in the face. On the positive side, it is still a positive number. Ok, maybe more flat than positive-but one month does not a trend make. It does, however, push prospects for the second half of the year scarily close to the edge, literally and figuratively.

The August 5th jobs report indicates private sector employment picked up 154,000 jobs and government dropped 37,000 jobs for a July net of 117,000. Those numbers, and the continuing housing/mortgage issues, do not inspire great confidence. A recent survey of financial advisors shows that 41% believe we are heading into another recession. Another way to look at that is 59% of financial advisors believe we are not heading into another recession. Attitude and perspective are important in challenging times.

Bob Jirsa, managing director, McGladrey

I am absolutely confident manufacturing will recover. What worries me more is the outlook for job creation. McKinsey Global Institute's (MGI) jobs recovery report, released in June: An economy that works: Job creation and America's future, did manage to shock me. MGI found the length of time it is taking for employment to recover from U.S. recessions has expanded exponentially since the 1990s. The average employment recovery after the recessions occurring between the end of World War II and the end of the 1980s took 6 months. That jumped to 15 months following the 1990-91 recession, and to 39 months after the 2001 recession. Additionally we are all aware of the large number of people being "underemployed" in new positions, and others just giving up and "retiring" early. "At the recent pace of job creation," says MGI, "it will take more than 60 months after GDP reached its prerecession level in December 2010 for employment to recover."

Five years! And that is with several million Baby Boomers retiring. To put unemployed Americans back to work and accommodate all the new entrants into the workforce, the U.S. needs to create 21 million jobs by 2020. That, says the MGI, can be done if all the stars align. This is a daunting task, but we just have to get at it.

MGI expects six sectors to account for 85%t of new jobs created by 2020 (those same sectors account for 65% of all new jobs today). Manufacturing is one of the six. The primary challenge is to ensure we have a workforce with the requisite skills companies need to innovate and compete.

It is clear we cannot look to government. Mobilization needs to happen at the corporate level, working hand-in-hand with our nation's trade organizations and educational institutions. The NAM and its educational arm, The Manufacturing Institute, are on board ready to go.

Bob Jirsa is a managing director and leader of McGladrey's Manufacturing & Distribution practice in the mid-Atlantic region.

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