Monday, July 18, 2011

Why the Disconnect?

New job creation is lagging woefully behind, our legislators can't seem to compromise for the public good and the middle class is experiencing record wage stagnation - if they're lucky enough to still be employed at all.

Pretty dismal stuff, right?

Then you get a report like this one, from ThomasNet's Industry Market Barometer:

From upgrading facilities to buying technology, industrial companies are confidently investing in their businesses to build upon a period of sustained growth, according to the results of ThomasNet’s newest Industry Market Barometer™ (IMB).

Nearly half (45 percent) of the companies responding report growth over the last six months of 2010, and 88 percent of those are confident in their future expansion. The survey reveals a set of specific strategies that fueled this growth, from customer retention efforts to movement into new markets and product development. Bolstered by the results of these strategies, respondents are investing more in their companies and recruiting talent in anticipation of increased customer demand.

What in the world is happening to create such a huge disconnect between our economic sectors?

I certainly can't explain it, but it might have something to do with this Tale of Two Recoveries from the New York Times.

Even as the stock market and industrial production have recovered strongly over the past few years, jobs and personal income are way down.

Thomas Friedman addresses one of the causes in his New York Times column:

Look at the news these days from the most dynamic sector of the U.S. economy — Silicon Valley. Facebook is now valued near $100 billion, Twitter at $8 billion, Groupon at $30 billion, Zynga at $20 billion and LinkedIn at $8 billion. These are the fastest-growing Internet/social networking companies in the world, and here’s what’s scary: You could easily fit all their employees together into the 20,000 seats in Madison Square Garden, and still have room for grandma. They just don’t employ a lot of people, relative to their valuations, and while they’re all hiring today, they are largely looking for talented engineers.

What does this mean? Basically, we must all adopt entrepreneurial mindsets, and plan our careers accordingly. Here's how Friedman concludes, quoting an upcoming book by LinkedIn co-founder Reid Garrett Hoffman:

It also means using your network to pull in information and intelligence about where the growth opportunities are — and then investing in yourself to build skills that will allow you to take advantage of those opportunities. Hoffman adds: “You can’t just say, ‘I have a college degree, I have a right to a job, now someone else should figure out how to hire and train me.’ ” You have to know which industries are working and what is happening inside them and then “find a way to add value in a way no one else can. For entrepreneurs it’s differentiate or die — that now goes for all of us.”


  1. I agree the picture is dismal, and I've noticed the extreme disconnect as well, Karen. The graphs are very interesting, and one of the major differences in the two recoveries is construction spending and therefore, housing.

    Without the mad rush to build, which is what helped fuel recovery after the downturn in the 70's, we are left with the tech sector that doesn't require as many bodies....yet. That, along with the reluctance for many companies to spend what capital they have, has left us lagging.

    I don't know what the answer is, other than knowing we need to find a sustainable way to rebuild the economy. Which means finding some way to aid our small businesses, who employ the majority of people in the U.S. today.

  2. Fantastic post, Karen. You connected it.

  3. So true, Lori. Thanks, Petrea.

    There was an additional explanation offered in Sunday's NY Times Review section and I thought it interesting. Basically, we're not spending like we used to and we never will again because credit is just not available in the reckless, ill-advised way it was in the last half-century: