2011′s job market: The separation of the haves and have nots

by Pop on January 5, 2011

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It’s getting better, but not for everybody.

By haves and have nots, I don’t mean the wealthy and poor. I mean those who have the right skills and the right jobs and those who don’t.

I’m not really one to make predictions most of the time. When I do, they’re often laughably false. But there’s been a trend emerging in today’s job market that most economists think will continue, and it’s something that you really need to pay attention to if you’re just starting out your career or are still in school. (Those of us who are midcareer are screwed. Kidding! Kind of.)

For the first half of this year, you’re probably going to see a lot of news about how things are getting better in the job market, how employers have more job openings, and how hiring in some sectors (Hello, software engineering!) is going crazy. If you’re outside of those sectors (Hello, construction workers!) the market’s going to feel just as bad as ever. Maybe even worse.

The phenomenon is called structural unemployment. It’s a different cat from the “cyclical unemployment” most economists hope we’re in. In a normal job cycle, the job market comes and goes with the regular business cycle. So things are bad now, but as the economy improves, companies hire more and unemployment goes down.

However, it’s possible that the cycle could be broken for now. That’s not because the economy’s not improving. It is. It’s because the kinds of jobs that employers need to hire for aren’t the kinds of unemployed people who are out there today.

Think about it. One of the sectors that’s seen the largest rise in unemployment is the construction industry. According to the Bureau of Labor Statistics, construction suffered from 18.8% unemployment in November (around 6.9 million worked in construction at the time). In November 2007, that rate was only 6.2% with 9.6 million doing construction work.

Let’s say all the jobs that the U.S. economy creates this year are in construction. Many economists expect the U.S. to create around 200,000 jobs per month this year. That adds up to 2.4 million in 2011. Even in that ridiculously positive scenario for the construction industry, their employment level still wouldn’t be back to where it was in 2007.

Now think of the new openings you’re seeing today. The housing boom hasn’t exactly returned, right? Instead, we’re seeing competition heating up in the technology and health care markets, which aren’t exactly the kinds of professions you can take a former carpenter and plop him into.

So far, I’ve been playing around with extremes, but obviously this matters when you’re deciding on what skill sets to learn going forward. Like I said, my crystal ball can at times be, um, defective, but here are a couple trends I’m pretty confident of.

For the love of God, go to college.

Much was written last year about how college degrees have less value than they used to. Something about how too many people are getting college degrees and too many people are majoring in useless stuff.

The thing is, the near ubiquity of college grads nowadays isn’t making the degree needless, it’s making it indispensible.

Seriously, this is not meant to be a knock on executive assistants. But there was one day when you didn’t need a bachelor’s degree to answer phones, screen calls, know your boss’s whereabouts, and, you know, fulfill his needs before he needs them.

Now, “B.A. required” is right on the job description. My favorite/saddest link I stumbled upon while researching this post was somebody asking if he or she needed a Master’s degree to become an executive assistant.

And it’s not even that employers actually think jobs that can be learned quick need college degrees. It’s that employers are desperately searching for some sort of filtering mechanism to bring the thousands of resumes they receive for every opening down to something manageable to look at.

Ex-con? Gone (despite sometimes being illegal, by the way). Unemployed? Gone. Bad credit? Gone. And requiring all of your applicants to have a college degree is just one more filter that allows a manager to bring his pile of applications down to something he can read in a manageable time frame.

How does that bear out in unemployment? The difference between the unemployment rate for those with a bachelor’s degree and up and those with just a high school diploma in November 2007 was 2.3 percentage points. The difference in November 2010 was 4.8 percentage points.

In fact, the unemployment rate for those 25 and up with at least a Bachelor’s degree was only 4.8% in November. That’s more than twice as bad as it was a few years ago, but that’s not the dire straights suggested by the overall 9.8% rate.

You’re not a profession. You’re a set of skills.

I’ve always found it depressing that “what do you do” is often the second question at parties, after “what’s your name.” Not only is it bad for that old, work-life balance, but it’s also a bad way to think about your career track.

How about we break that mindset? I’ll start.

I’m Pop. I’m not going to tell you my profession, and most of you who have guessed have been incorrect. Several of you have guessed that I’m Ben Bernanke. In fact, someone actually wrote this up in a college paper, which I won’t link to because I know how it feels to be embarrassed by mistakes. But I think I’m pretty good at writing, math, and turning complex subjects into something everyday people can understand. I (just recently) have gained basic web publishing and marketing knowledge. And I think I have a decent eye for catchy design.

Ok, so what profession am I? No idea, right? That’s the point. I could be a number of things. I could write technical manuals. I could be in marketing for an engineering company. I could be a teacher.

Those are all options because I’m not thinking of myself as “locked in” to one career track that one day could die, even if popular now. You know, construction managers used to have a pretty good gig.

I’m glad that I have several vehicles in my life that keep me learning, and with stuff like this blog, I have something to actually show employers I can do if I ever did need to find a new job. That’s a good feeling.

Now let’s take a hypothetical person in a job that’s “good” now, but who doesn’t keep learning new skills.

Let’s make him a software engineer and say he works for an investment bank maintaining their old, internal computer programs. At one time, he needed to know cutting edge programming languages, but he’s spent 10 years at this company, learning the ins and outs of a decades old system built on an ancient language.

Even though he’s nominally a “software engineer”, how much do you think that intricate knowledge of “proprietary computer system that no one uses” is going to help him on his resume? Almost none.

That’s one of the reasons why programmers are so cognizant of finding jobs that let them deal in the latest languages. It makes them more marketable if they ever do need to look for something else.

So before you’re in need of a new job, take an honest inventory of your skills to assess what you could do. Trust me, those construction guys are regretting that “construction manager” is the only thing they can think of to type into Monster.com.

Anyway, just some job thoughts to start off the New Year. Thanks so much for the feedback on the last post. I’ll hopefully come up with a more comprehensive survey sometime in the next couple weeks. Happy New Year!

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{ 14 comments… read them below or add one }

Anonymous January 5, 2011 at 7:27 am

I would appreciate knowing if you have postgraduate training (e.g., MA, PhD, CPA) in econ or finance. I’m not an economist/financial analyst, and the degrees are nice handles for discerning who has thought critically about many different models.

Vicki January 5, 2011 at 8:34 am

I love this post because I’ve been thinking about it and its implications for the past several years now. While I have an undergrad degree in economics and my first job was in that area, I’m no longer doing anything close to what I studied for and rely on consantly building my skillset to boost my career abilities. If I’m not doing anything that’s building my skillset, I become stressed out because I know others out there who will be my competitors are.

It’s what’s making me reconsider turning my nose up at an MBA over a Master’s in Econ: MBAs are just that much more employable. Or are they, in your opinion?

Additionally, I agree with you 110% about software engineering. If you have this skillset, you are not going jobless anytime soon. So, whenever I hear about the recession, I think that maybe it’s more about adapting to changing work environments as opposed to being able to land any job.

Anna January 5, 2011 at 9:00 am

Great post. Networking has proven invaluable for my daughter (mid-twenties, no college degree) and myself (college degree but disabled.) Both of us are working, and we have these jobs because the people who hired us knew us personally and were able to look beyond the limitations.

Janette January 5, 2011 at 12:10 pm

After watching all of my nephews and nieces land great jobs- networking is the most important skill set of them all.
I agree that if you are looking for a job and you do not have a network into that job, a degree COULD put your foot in the door. On the other hand- if you have the network and the skill set needed, the job could be easier to get an interview for.
One family member got out of the military with a skill sets in languages and computers which is needed in most industries. He does not have a degree. He was hired, quickly, by a company that saw his skill set. They are putting money into his skill set to make him even more valuable to their clients. The people going after the same job had several degrees (most had Masters) but not the experience in the skill set.
He constantly asks us if he should leave the position and return for a degree. NOOOOO! Stay with it. IF the position runs out, and the network is not present for another great job, THEN return to get a degree.
Yes, he is lucky. His brother, who is just as bright, is working at a nursing home making $6.50 an hour. Networking and skill set!

Nick January 5, 2011 at 6:39 pm

I ones earned $104,000.00 a year working for a internet company, but with only a Hight school degree and a Tech certification. I was very good with solving problems! It is my gift to solve problems. I got a opportunity to use that gift at the company I worked for, but what really carried me through was my attitude and a great work ethic. I had been a painting contract for many years and was tiered not getting paid for what I was really worth for the talents I was selling. Many contractors charged about the same as I did, but in many cases delivered sub-standered work. The morel of the story just getting a degree is a small part of the story. Yes, it may get you in front of that prospective employer. You need the grit to become competitive and stand out among many looking for that same job. To many of this generation of job seekers have little experience in doing HARD STUFF. Try paint for 20 years with little office experience and raising up to the task and pulling off a 6 figure income.

Eric January 6, 2011 at 10:04 am

The basic moral of your post is good: Better variety of skills + larger network of people = better job prospects. Really nothing to argue with there, and I agree with this principle for the most part.

However….

There’s little to no evidence that the unemployment problems in the U.S. right now are structural. Employment is down across almost all industries, it’s not sectored in just one or two. The Roosevelt Instituted and Economic Policy Institute released studies last summer addressing this topic:

http://goo.gl/y1w1Z (Roosevelt)
http://goo.gl/eXBc0 (EPI)

You talk about construction being one of the larger sectors of unemployment. While this is true, check out the graphs in the EPI report, specifically Figures A and D.

Figure A shows that the short and long term unemployed in construction (as a percentage of overall unemployed) hasn’t changed much at all over the last three years. If unemployment were structural, we’d see this number climb gradually as people in other sectors of the economy went back to work in there industries, leaving construction workers, who would have little skills for, say, computer programming, making up an ever larger share of the total unemployed. Yet this hasn’t happened.

Figure D compares the shortfall in job openings (by industry) from this recovery to the recovery in 2001 and 2002. The shortfall appears across all industries, with only that in mining out pacing the recovery from the last recession. In other words: If we have structural unemployment, than why is there a job shortfall across the ENTIRE economy instead of just one or two places.

In every recession, but especially those with bubbles, structural employment is the logical argument: we had a recession due to financial implications related to the housing market, which flooded the market with homes that are built but can’t be sold, therefore lessening the need for new homes, which impacts the construction industry, creating high unemployment in that particular sector of the economy. Logical, right? The data, however, doesn’t play out that way. In nearly every recession, even the “dot-com”, construction takes a hit immediately. Why? Because construction related employment is based on investment, and in a recession, investment drops off as confidence erodes.

Structural employment, as I’ve seen it used in many posts (but not in this post, which is a relief), is basically an excuse for NOT providing fiscal stimulus to increase demand — because what good is demand if people are out of work due to having only skills that provide value in a depressed area of the economy?

RB Boren January 14, 2011 at 12:45 pm

The decision to go to college is intensely personal; it is not for everyone. Currently I am reading Lester Thurow’s Building Wealth, and he has some numbers which should give anyone pause before going to college.

According to Thurow, over 20 percent of college graduates earn less income than the median high school graduate, and over 20 percent of high school graduates earn more than the median college graduate. I don’t have the exact numbers handy, but both are in the mid 20s neighborhood.

College is a mighty big financial investment, especially including the opportunity costs of foregone income while in school, to take a 20 percent chance of failure

You are a set of skills but you don’t have to tie yourself to an employer or a profession. I buy and resell things online and I’m very good at it. You don’t even need a high school diploma for that plus it thrives in a down economy. I do contract writing and research, mostly for a single small organization, so I have to plan for the time that’s no longer an option. I do a zillion different things on Craigslist and other online sites.

Don’t put yourself in a box. Become extremely good at something but also diversify. Keep your options open for when your single specialty becomes devalued or outdated. I’d rather have eight consistent modest streams of income than one larger equal stream of income that could vanish in an instant.

Pop January 14, 2011 at 11:13 pm

@Anonymous – I don’t make any claims about my education or background. So you have to take everything I write here for what it is: The writings of someone you don’t know whose avatar is a cartoon character. That said, I also don’t do anything more than basic financial analyses on here. Everything I write is backed up with economist/investor sources . So take everything to be as credible as what I linked.

@Vicki – I know successful and unsuccessful people with pretty much any degree. I’d try to figure out what I want to do with the degree first. With an MBA program, for example, you’re going to have to start applying to internships pretty much as soon as you start school. Those who judge your application for the MBA program will also want to know what you plan to do with the degree before they let you in.

@Anna and Janette- Great point. If I could add anything to this post, it would be about networking opportunities in college and beyond. More valuable that the other stuff I wrote, no question.

@Nick – That’s awesome that you were able to do that. The thing that scares me about that situation though is what would happen if you lost that job. That $100k you made seems like it was earned because your employer became gradually impressed with your skills and ethic. A new employer might not catch onto that immediately and balk at such high pay. That’s one good thing about a college degree: “Harvard ’91″ is an easily identifiable line on a resume that almost any hiring manager recognizes.

@Eric – I don’t think our points are opposed. You can have structural unemployment and cyclical unemployment at the same time. So using “structural unemployment” as an argument against fiscal stimulus is silly when demand is so low. It’s like saying you shouldn’t put gasoline in the tank of a car because one of the tires is flat. We’ll see whether or not there’s structural unemployment once the jobs recovery actually starts—100k per month isn’t going to separate the winners from the losers.

@RB Boren – I’d frame those numbers differently. 80% of college graduates earn a greater income than the median high school graduate, and 80% of high school graduates earn less than the median college graduate. Sure, you’ll always have outliers on both sides, but you’re upping your chances of high pay and job security with a college degree. I really like you’re thinking on developing multiple income streams, though.

CVS February 28, 2011 at 12:44 pm

Now, my question is for you sir, how does this explain jobs that are just disappearing?

On one of my contracts I was assigned, I noticed that outsourcing is becomming a huge trend in the business world. Even jobs for computer programmers, help desk support, ect. (which around ’99-’00 was still a job to take pride in) are being shipped over to India. The reason why, is that they cost a fraction of what a programmer does here. Even if to get the same job done, you now need a team of 5 programmers, instead of one in-house programmer that would do the job right the first time.
And no, I’m not saying that as a opinion of superiority. Even from the managers at the comany I worked at said, on paper, they have us beat. They have masters degrees, part of this is the cultural belief that it insures reincarnation.
But from the measurement of quality, the output isn’t there.
You need to hire someone to act like a consultant to “interpret” the specs of a program, give it to the overseas team, and hope it comes back looking like what you wanted. And if it doesn’t, your company is charged additional money to “fix” the code. But since you’re not paying health care benefits on that outsourced team. It’s just a small inconvenience for saving money, right?
And even the people that are doing help desk work, try looking up a generic answer on Google for a problem, close the ticket. And the end user is still angry their problem wasn’t solved. (Eventually the end user goes to local management, and the on-site PC techs are called in. So this solution seems hardly acceptable either.)

These are standards that seem to indicate that the corporate structure is finally to the point of sacrificing quality just so they look good from an accounting standpoint. How often have we seen in the papers that a company turned a profit for the quarter for their share holders right after laying off tens of thousands of workers? Business plans, and looking outward for future growth (10 year plans) seems to be a thing of the past. Only the quick buck seems to be the deciding factor. It doesn’t matter if the company is understaffed and the grunts are overworked. The unemployed are willing to work, and the overall quality of output would increase. But the companies need to stop cutting corners.
It seems like our country set itself up for a collapse. This could be just the start.

Johnathan April 5, 2011 at 3:51 am

I moved to Europe (Germany) after a long term assignment, briefly moved back to the USA to find that as a well educated professional I preferred the my entire condition afforded to me in Europe. Hence I finally returned to Germany and do not ever plan on returning to the USA. I now have a much more stable and enjoyable life.

wjk April 19, 2011 at 8:17 am

During the housing bubble, 40% of job growth occurred in real estate related industries (estate agent, construction worker, mortgage broker, etc) which is why there is now a surplus. That’s another big downside of a bubble: It misallocates human capital, not just financial capital.

Concerned May 27, 2011 at 6:25 pm

I’m glad everyone agrees that networking is a great way to get a job but yet nobody discusses how it causes a problem as well both for the company as well as other individuals. If there is someone else that is more qualified for the position and you get the job because your brothers sisters friends dog is friends with the dog of a manager that works for the company then something is wrong. There is a reason why the U.S. is splitting between the have and have nots.

Jennifer July 19, 2011 at 7:14 am

I have always said that we are all entrepreneurs who carry our own unique skill set with us. I truly appreciate the message in this article; it’s important to remember that your skills and education do apply to many different positions. Skills-based searching has enabled this career automotive industry HR person to gain new experience in this tough economic time.

Since walking away from an industry that was barely breathing in 2008, I have served as a part-time Instructor (based on a MBA, volunteer teaching history, instructional design certification, and knowledge of business communication) and Case Manager (based on a long history of customer service and proper documentation learned during my HR positions). These positions were definitely not Human Resources or Labor Relations, but I loved the opportunity to develop other skills and see new organizations in the educational and government sectors. After a 14-year stale stint in automotive, I needed to breathe new life into my career and demonstrate my adaptability to other positions and industries.

Believe me, networking is important. HOWEVER, I have received more activity from my unsolicited internet applications than through my network. In fact, my last five interviews were due to posting for jobs that fit my skills.

Folks, don’t sell yourselves short. The right organization is out there, and it’s lucky to have your skill set. Remember, you have to kiss a lot of frogs before you find your prince/princess.

Kevin Nasky September 5, 2011 at 2:38 pm

Forget the skill set mentality, and become a licensed professional, preferably within a profession that controls its supply, i.e. medicine.

If you’re a board-certified [insert specialty], you can’t be replaced easily (in some locales, you can’t be replaced AT ALL). Physicians can’t be outsourced (the only exception is some talk about radiology being outsourced overseas, but this is a LONG way away, if it ever happens at all). Same goes for all tiers within medicine: registered nurses, physician assistants, etc.

Not to mention the obvious, but HEALTH CARE is a job market that’s not going anywhere any time soon. So my prescription for this problem is for all these construction workers to enroll in their community college’s R.N. program, or better yet, go to medical school!

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