Jeff  Carter

Yesterday’s unemployment report offered some encouraging signals, and some discouraging signals. It was nice the headline rate dropped. But, it was sad that there is a continued exodus of productive labor from the labor force. People are frustrated and can’t find a job.

Erik Hurst hit the nail on the head last week. Austan Goolsbee made a similar point. In previous recessions, the economy would bottom and then have a very strong comeback. So if we dropped by 3%, we’d pop by 6% or more. When the economy popped, old jobs that disappeared would reappear. If you were an out of work carpenter in the recession, you’d find a way to be an employed carpenter in the growth out of the downturn.

In this deep recession, unskilled labor jobs disappeared as usual. But in the recovery, they aren’t coming back.

The jobs didn’t magically go to China or India because of lower wages. If anything the change in exchange rates and the earthquake in Japan caused manufacturing companies to rethink their supply chains. They are implying different costs and some companies are even bringing some manufacturing back to the US. They can’t risk supply chain disruptions caused by natural disaster.

The glut of housing persists, and that is where a lot of the unskilled labor made a sustainable living. America still has a lot of supply to work through before housing demand will begin to increase again, so those jobs won’t get created for awhile. That frustrates the unskilled worker and they make the decision to collect benefits and sit at home. Much of the government support program mimics the old “job banks” that unions used to fleece General Motors.

Meanwhile, some people are acting on their frustrations and blaming the wrong people for their trouble. Instead of doing something about their problem, they wait for the government to act, or try to get someone to do something for them.

Instead, what they ought to do is start brainstorming and start a business. If you are an unskilled laborer, it may seem like there are no opportunities. But, there are if you move to where the jobs are. In the 1930's and 1940's, there were several great migrations in the United States. The migration from the Great Plains to California was captured in the John Steinbeck novel about the Joad family. Many families moved from the rural south to the industrialized north for work. Just because you have lived your whole life in one area of the country doesn’t mean you are stuck there.

For other people that consider themselves “skilled labor”, and I am talking about people that have made a large investment in their own human capital and have the college loans to prove it. There are two options for you. One, use the principles laid out in the Risky Hire equation to try and get a company to take a chance on you. The other is think of ideas for a business and build it.

There are phases to the building of the business that works today.

1. Come up with the idea
2. Flesh out the idea quickly
3. If it involves computer programming, find someone to program it. You may even be able to use something like WordPress to launch your business with a blogging platform and the correct plug ins
4. Find a paying customer.

Once you find a customer, interact with them and find out what they like and what they don’t like. Respond by adding functionality or features that the customer finds useful and will pay for. Keep adding customers and get their feedback.

Eventually you may be on to something big. Or, at the least, you will have a nice lifestyle business you can operate. Plus, if you run your own show you don’t have to worry about big corporations or Wall Street. Get big enough and they’ll be your client you won’t be theirs.

It keeps you in beer, helps you pay down your loans, and keeps you from sleeping in the park.


Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.