Opinion / Op-Ed Contributors

Why the US is not recovering

By Handel Jones (China Daily) Updated: 2011-06-21 07:56

The GDP growth of the US economy was 2.8 percent in 2010 and 1.8 percent in the first quarter of 2011. The indications are that GDP growth will be 1.8 percent to 2.0 percent in second quarter of 2011. This is not the level of growth that is normally associated with a recovery from a recession.

The unemployment level in May 2011 in the US was 9.1 percent compared to 9.0 percent in April 2011, and this compares to 5.0 percent in early 2008, when the recession started. The level of employment and types of jobs are key factors in countries increasing their levels of wealth. The US has not rebuilt its employment base, and many of the unemployed are unemployable in the high-growth segments such as high-tech.

Some of the key reasons for the slow recovery of the US include the following:

The US has lost a large amount of its manufacturing base through outsourcing, and once the basic skills are lost, it is very difficult to rebuild a new base.

While the automobile industry is adding employees, the number is small.

In December 2006, the number of people employed in the automobile industry was 2.955 million, while as of May 2011, it was 2.365 million.

While the US automobile industry is recovering, automobile companies have recovered at a faster rate and, in many cases, are more innovative.

There needs to be a large industrial or other base that provides employment to 50 percent to 60 percent of the workforce to build wealth. In the past, this base was agriculture, but it was replaced by manufacturing. The latest phase is high-tech, but in many high-tech companies, a high percentage of employees are outside of the US.

It is important to stimulate the growth of industries that can absorb the decline in employment in manufacturing. The workers also must be trained so that they are able to contribute effectively within the new work environments.

There are growing high-tech jobs, such as at Internet-centric companies in Silicon Valley. The skill levels in these types of jobs are very high. A problem in the US, however, is that many of the 14 million that are unemployed are either in different parts of the country or are not well-educated.

There is also an increasing mismatch between the education programs in the US and the needs of the high-tech industry.

With the cost of education increasing in the US, this gap will become larger rather than smaller in the future.

Strengthening education is a critical long-term investment, but it can take 30 to 40 years before the benefits become extensive. Based on the weakening education system in the US, the competitive position of the US will be much weaker in a number of industries in the next 30 to 40 years.

Long-term as well as short-term plans need to be in place to maintain the strengths of an industrial nation.

Salaries and employee costs continue to be much higher in the US than in many other countries. This is why large companies such as IBM, GE, HP and others are increasing employment outside of the US at a faster rate than in the US. Also, many of the customer opportunities are outside of the US, and it can be advantageous to have people interface with each other that have the same cultural background.

The strengthening software and skill base in India is a major competitive threat to employment in the US in the longer term, and while salaries in India are increasing, they are lower than in the US.

There is competition from the manufacturing base in China and the software base in India.

Previous Page 1 2 Next Page

Most Viewed Today's Top News
New type of urbanization is in the details