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ADP Reports Weak Job Growth

ADP has released its National Employment Report for April.   Non-farm private employment increased 32,000 during  the month on a seasonally adjusted basis.   ADP also reported an upward revision of 19,000 jobs for March.  The two consecutive net employment gains reported by ADP indicates that job loss may have bottomed and the slim increase in employment confirms a positive trend is underway.     The massive governmental intervention to recapitalize the banking sector and initiate stimulus programs have stabilized the economy.  The abatement of extreme risk aversion in the credit markets, favorable interest rates, improving consumer sentiment, low inflation and the dramatic rebound in securities markets are all positive growth drivers for the economy.

Highlights of the ADP  report include:

Estimates non-farm private employment in the service-providing sector increased by 50,000.

Employment in the goods-producing sector declined 18,000.

Employment in the manufacturing sector rose for the third consecutive month by 29,000 jobs.

Employment in the construction sector dropped by 49,000.

Large businesses with 500 or more workers  added 14,000 jobs

Medium-size businesses, defined as those with between 50 and 499 workers increased by 17,000.

Employment among small-size businesses with fewer than 50 workers, increased by 1,000 in April.

Employment in the financial services sector dropped 14,000, resulting in over three years of consecutive monthly
declines.

Overview of Numbers

The net gain of 32,000 jobs for the massive US economy is an admittedly weak gain for an economy that has shed 11 million jobs but it is an indication that the economy is stabilizing.

The correlation of the loss of jobs in construction and financial services is an indication of a US economy that continues to transition its dependency on residential and commercial real estate development.  The difficult conditions in the commercial and residential real estate market will continue as excess inventories brought on by high foreclosure rates continue to be worked off.   As the ADP report highlights construction employment has declined for thirty-nine consecutive months, bringing the total decline in construction jobs since the peak in January 2007 to 2,159,000.  Its clear that the US economy has lost two critical recovery drivers.

Soft conditions in the construction sector weighs heavily on small business job creation.  Most contractors are small businesses and with the anemic rate of new housing construction small business job creation will continue to be soft.

Specialty retail is another large component of the small business market.  Improving consumer sentiment will help this sector.  However small retailers have suffered massive business closures during the recession.  A robust recovery in this sector will not commence until commercial lending for start ups and business expansion becomes more readily available from the banks.

The report also indicates that the goods producing sector of small businesses shed 24,000 jobs during the month  to continue the trend in the deterioration of small manufactures.  This decline was offset by a 25,000 gain in service based jobs.  The  growth of the service sector of the US economy continues at the expense of the manufacturing sector.  The growth of small business service sector indicates that businesses continue to managed fixed costs of their business by outsourcing various services.

This ADP report is a positive indication that we may be at a bottom of the economic cycle.  Bottoms don’t mean that things are improving they indicate that conditions are not worsening.  The economic recovery is still confronted with headwinds.  The oil spill in the Gulf of Mexico, the economic and growing political instability of EU countries and the cooling off of the Chinese economy may present some challenges to a sustained and robust recovery in the United States.

Solutions from Sum2

Sum2 advocates the establishment of an SME Bank to sustain long term economic growth.  Sum2 offers SME’s the Profit|Optimizer to help them manage risk, devise recovery strategies and make better informed capital allocation decisions.

For information on the construction and use of the ADP Report, please visit the methodology section of the ADP National Employment Report website.

You Tube Video: Isley Brothers, Work To Do

Risk: unemployment, recession, recovery, SME

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May 5, 2010 Posted by | ADP, banking, credit, manufacturing, real estate, recession, small business, SME, Uncategorized, unemployment | , , , , , , , , , , , , , , , | Leave a comment

Sum2’s Hamilton Plan Getting Scholarly Attention

The following research paper on The Hamilton Plan was written by Deepak Verma, a business student at Baruch College. To our knowledge it is the first scholarly research that incorporates the Hamilton Plans theme of a focus on SME manufacturing.

ISSUES MANAGEMENT PROJECT
Prof. Michael Kirk Stauffer

DEEPAK VERMA
The Societal and Governmental Environment of Business
Baruch College, the City University of New York
December 16, 2009

Table of Content

Topic Page No
1. Executive Summary 2
2. The Issue: Shrinking Manufacturing Base 3-4
3. The Origin of the Issue and Solution 4-5
4. Small & Medium Enterprises; Catalyst of Sustainable Growth 6
5. Initiative for Development of SMEs 7-8
6. Future of SME and SMEs in USA 9
7. Appendix : References 10

EXECUTIVE SUMMARY
Living beyond means is not sustainable. One of the primary reasons of prolonged Economic and Credit Crisis in United States is its low manufacturing base and American way of consuming more than what is produced. This research paper will examine issue of shrinking manufacturing base of USA, unfair and unethical business practices adopted by countries such as China to boost export thereby causing trade deficit to USA, reasons for low manufacturing base and role of small and medium enterprise (SME) manufacturers in developing a sustainable manufacturing base of the US economy.

Prior to coming at Baruch College for pursuing MBA in finance and investments, I worked for over 10 years with Small Industries Development Bank of India (SIDBI), an apex financial institution of India engaged in the development and financing of SMEs and micro financial institutions. Having worked with this financial institution, I realized the importance of SMEs in bringing sustainable economic development and employment creation, particularly in a mixed economy like India.

The paper will discuss on public-private initiative in USA for development of SMEs, their efforts and capital investment for empowerment and financing of SMEs. Various initiatives taken by private and public sector will be analyzed. Efforts have been made to forecast future of SMEs vis a vis manufacturing sector, role of community development financial institutions (CDFIs), and flow of commercial bank credit and private equity investment in SMEs in the United States.

THE ISSUE: SHRINKING MANUFACTURING BASE
Why should shrinking manufacturing base be an issue in a market driven service oriented economy like US? Federal Reserve Chairman Ben Bernanke stated on Feb. 28, 2007, “I would say that our economy needs machines and new factories and new buildings and so forth in order for us to have a strong and growing economy.” Strong Manufacturing base is the only solution to rising trade deficit and industrial job loss. Manufacturing promotes innovation which leads to investments in equipment and people, research and development, improved products and processes and increase in productivity and higher standards of living. Increase in manufacturing leads to increase in demand for raw materials and other commercial services.

United States has transitioned from an agricultural economy to Industrial economy to a service economy. Over a period of this transition US has lost its manufacturing base substantially and has been importing goods from around the world which has resulted into huge trade deficit and industrial job losses. IMF has categorized the US current account deficit as unsustainable. Warren Buffet also once commented “The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil… Right now, the rest of the world owns $3 trillion more of us than we own of them.”

Since the United States joined the WTO, US trade deficit has risen from $150.6 billion in 1994 to $817.3 billion in 2006. US reliance on imports ranges from electronic items to apparels and other consumables. For example, electronic items sold in United States are developed by companies such as Philips, Toshiba, Sony, Hitachi, Samsung and Sharp. We have lost significant market share in Auto Industry also. Toyota has surpassed General Motors to become leading auto manufacturer in terms of global sales. Ironically, items such as clothing and apparel where USA had its dominance are also being imported from foreign countries. Over 90 percent of clothing and shoes sold in the United States are made in foreign countries. US economy has thrived on consumerism which has led to increase in demand for goods over the years but production of domestically manufactured goods has been declining, thereby giving rise to imports from foreign countries and loss of industrial jobs.

Critics of the argument say it is the increase in production efficiencies, resulted from technological innovation and advancement that has resulted in loss of jobs. Additionally, it is the increase in consumption which is the root cause of import deficit rather than shrinking manufacturing base. Undoubtedly long term data indicates an increase in US manufacturing, but the way we are loosing our manufacturing share from last 2 decades and if we continue shrinking, we will soon have no choice but to consume whatever is dumped in our market and will be on the mercy of foreign imported goods. Increase in manufacturing has not kept pace with global growth in manufacturing in USA. Since 2000 global manufacturing growth has been 47%, whereas USA has recorded a growth rate of only 19%.

ORIGIN OF THE ISSUE & SOLUTION
What is causing shrinking manufacturing base in the United States? Is it purely competitive and cheaper products manufactured in Asia and Europe or some other factors are also responsible? Undoubtedly competitive global business environment has severely affected domestic production in the United States, this crisis in large arises due to unfair and unethical business practices adopted by its trading partners mainly China. Some of those practices are significant government subsidies, currency manipulation, large-scale dumping in the U.S. market, and other market-distorting practices. Additionally, unfavorable govt. policies, tax structure, increase in cost involved in healthcare, litigation, and regulation has significantly affected the bottom line. Increase in cost and strict regulation forced manufacturing units to move their facilities to other countries where companies do not face those kinds of impediments. Companies operating in the U.S. started outsourcing low-value tasks like simple assembly or circuit-board stuffing, but lower cost of outsourcing and shrinking margin lured them to continue outsourcing sophisticated engineering and manufacturing capabilities that are crucial for innovation in a wide range of products. As a result, the U.S. has lost or is in the process of losing the knowledge, skilled people, and supplier infrastructure needed to manufacture many of the cutting-edge products it invented.

Is there any way to bring back our manufacturing base?
The view that the U.S. should focus on R&D and services is completely flawed. Manufacturing is part of the innovation process and United States has to expand its manufacturing base to remain a world leader.

Following may be suggested to address the issue:

(1) Increase the tariffs on foreign goods so that they are more expensive than domestic goods.
(2) Demand the same level of quality in all foreign goods as American goods.
(3) Diplomatic measures should be taken to create pressure on foreign countries particularly China to stop manipulating their currencies.

Efforts should be made to open up foreign consumption markets adequately to U.S. producers so as to increase export and minimize trade deficit and should endeavor to combat predatory foreign trade practices aimed at undermining U.S. producers in their home market. Next big step is to promote small and medium enterprises to set-up manufacturing units.

SMALL & MEDIUM ENTERPRISES (SMEs); CATALYST OF SUSTAINABLE GROWTH
The issue of shrinking manufacturing base in the United States has been discussed by economist, policymakers, industrialists, and think tanks since economic integration and various measures to improve domestic manufacturing base have been suggested. But considering our free market dominance no sincere efforts were made to expand manufacturing base. Alarming rise in trade deficit and current economic and credit crisis which resulted in to massive industrial job loss has called for immediate intervention of private-public participation to protect and develop domestic manufacturing base for long term sustainable economic growth of United States. It is this time only that the role of SME manufacturers was felt inevitable to address this alarming issue.

President Obama during an interview said “We’ve got to make sure that we’re cultivating small businesses and entrepreneurs who are going to be driving employment growth,” the President said, “so that 20 years from now we can look back and we can say, ‘This was the pivot point, this is where we started to turn the corner.”

US need to change course at this point of time and need to develop a network of small and medium enterprises focusing on cleaner and green technology. The U.S. can explore strategies used in emerging markets for development of SMEs. According to Hau L. Lee, a professor at Stanford Graduate School of Business, “America needs large industrial zones devoted to specific industries–similar to zones in Taiwan, Singapore, Malaysia, and much of China. Such areas offer tax breaks, cheap or free land, workforce training, plenty of water and power, and agencies that serve as one-stop shops for all of the necessary permits and regulatory approvals.” A national level specialized financial institution may be created to provide low cost credit to newly setup SMEs in the manufacturing sector. US strength lies in high end technology, innovation, R&D, robust infrastructure, and know-how.

INITIATIVE FOR DEVELOPMENT OF SMEs

US govt. runs a number of programs for providing technological know-how, contracting opportunities, counseling and assistance, financing, and R&D facilities to small and medium enterprises. Some of the prominent programs run by US department of commerce are Manufacturing Extension Program, Advanced Technology Program, Technology Transfer, and Small Business Innovation Research (SBIR) Program. State govt. and number of govt. agencies are deployed for implementation of these schemes across the United States. SBA provides technical and financial assistance to SMEs through its partner lending institutions.

On November 17, 2009 The Goldman Sachs Group, Inc. launched 10,000 Small Businesses — a $500 million initiative for development of 10,000 small businesses across the United States. The plan envisaged to provide greater access to business education, mentors and networks, and financial capital to small businesses. Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs quoted “Small businesses play a vital role in creating jobs and growth in America’s economy.” Warren Buffett, CEO of Berkshire Hathaway also mentioned “Our recovery is dependent on hard working small business owners across America who will create the jobs that America needs. I’m proud to be a part of this innovative program which provides greater access to know-how and capital – two ingredients critical to success.”

Sum2 LLC, a firm which assists SMEs in implementing sound business practices by offering a series of programs and products, announced The Hamilton Plan on Labor Day. The Hamilton Plan is a ten point program to foster the development of manufacturing in the United States by tapping the entrepreneurial energy of small and mid-size enterprises (SME). The Hamilton Plan requires concerted focus of investment capital to fund development and establishment of an SME Development Bank (SDB) which will focus, manage and administer capital formation initiatives to incubate and develop SME manufactures.

I contacted James McCallum, CEO of Sum2llc to discuss the issue of shrinking manufacturing base and how SMEs can help in restoring manufacturing base in the United States. In response to my comment here is what he stated “It is pretty amazing that the United States has not done more to specifically encourage and address the unique needs of this critical economic driver. Many Asian countries are miles ahead of the US in SME banking and capital formation. These banks have extensive portfolios of finance products and technical assistance they provide to SME’s. The reasons that the US lacks focus in this area are many. US commitment to free market forces has badly warped our economic infrastructure. SMEs in the US have primarily relied on community banks for financing. Most of which went for real estate and construction projects. SME manufactures have just about disappeared from the economic landscape of the US. The credit crash and the economic malaise are awakening our understanding of the critical nature of SMEs and our need to manufacture products. Goldman’s 10,000 Businesses Initiative coalesces nicely with the Hamilton Plan we developed in 2008.”

USA MANUFACTURING & SMEs IN YEAR 2030

With the concerted government efforts for promotion and development of SMEs and private sector initiatives such as “10,000 Small Businesses plan” by Goldman, SMEs will be largely benefited having access to innovative financial products and services from a network of financial institutions. Ten point program suggested in Hamilton plan, if implemented, will bring cluster based development of SME manufacturers. Cleaner and green technology will drive long term sustainable growth, increase national income and result in employment creation. Healthy SMEs will be focusing on export of goods thereby reducing the trade deficit and offer a new market for commercial banking sector. High-tech growth oriented SMEs will also have access to private equity investments and will offer a new avenue of diversification to private equity industry.

But the task of SME development is a challenging task and requires strong will on the part of different stakeholders. SMEs are considered to be the riskiest segment of borrowers from a financial institution’s perspective and thus struggle for timely and adequate credit. Access to technical and market information, financial assistance and trained and educated workers is the biggest challenge for SMEs. Future SMEs require sound business practices such as corporate governance, risk management, stakeholder communications and regulatory compliance.

I believe that SMEs are sine qua non for manufacturing sector & I can foresee a bigger space for SMEs in next 20 years from now. I am so intrigued with the idea of SMEs development and their contribution in the economic growth that in the long run I wish to work as a freelancer offering consultancy and advisory services on financial and strategic matters to SMEs. I would work with a network of financial institutions, venture capitalists, engineers, environmentalists, social workers, suppliers, and policy makers so as to offer SMEs a comprehensive set of services.

APPENDIX: REFERENCES

U.S. Needs to Return to Its Manufacturing Base
http://seekingalpha.com/article/119136-u-s-needs-to-return-to-its-manufacturing-base

Securing America’s Future: The Case for a Strong Manufacturing Base, A Study by Joel Popkin and Company, Washington, D.C. June 2003, Prepared for the NAM Council of Manufacturing Associations

http://www.pmihome.org/Popkin_Study_3-03.pdf

President predicts it will take decades to revive declining U.S. manufacturing base?

http://www.sodahead.com/united-states/president-predicts-it-will-take-decades-to-revive-declining-us-manufacturing-base/question-637119/

Manufacturing & Investment Around The World: An International Survey Of Factors Affecting Growth & Performance, ISR Publications, revised 2nd edition, 2002. ISBN 978-0-906321-25-6.

Economy Watch: Economy, Investment & Finance Report

http://www.economywatch.com/world_economy/usa/export-import.html

USA Manufacturing output continues to increase (over the long run), Curious cat, Investing and economics blog

http://investing.curiouscatblog.net/2008/12/02/usa-manufacturing-output-continues-to-increase-over-the-long-term/

Alliance for American Manufacturers http://www.americanmanufacturing.org/issues/manufacturing/the-us-manufacturing-crisis-and-its-disproportionate-effects-on-minorities/

Can the future be built in America? http://proquest.umi.com.remote.baruch.cuny.edu/pqdweb?index=28&did=1860761601&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1259505905&clientId=8851

TO SAVE AMERICAN MANUFACTURING: USBIC’S PLAN FOR AMERICAN INDUSTRIAL RENEWAL BY Kevin L. Kearns, Alan Tonelson, and William Hawkins

http://americaneconomicalert.org/USBIC_Save_American_Manufacturing_Jobs_Plan.pdf

Goldman Sachs Launches 10,000 Small Businesses Initiative

http://www2.goldmansachs.com/our-firm/press/press-releases/current/10-k-business.html

Goldman Sachs as Social Entrepreneur https://sum2llc.wordpress.com/

Hamilton Plan by Sum2llc https://sum2llc.wordpress.com/2008/09/03/sme-development-bank/

You Tube Video: Isley Brothers, Work to Do

Risk: SME, manufacturing, economic revitalization, social wealth

February 3, 2010 Posted by | business, commerce, credit crisis, economics, Hamilton Plan, manufacturing, recession, SME, Sum2 | , , , , , , , , , , , , , , | 1 Comment

Goldman Sachs as Social Entrepreneur

Goldman Sachs’ CEO Lloyd Blankfein and his largest investor, The Wizard of Omaha, Warren Buffett , descended from the mystical heights of Valhalla with some startling news.  They were bearing a new mythical golden ring.  As they held the ring aloft they made a bold proclamation.  They would embark on one of the grandest social entrepreneurial programs of all time by offering some of the rings precious power, about $500 million worth, to capital starved small and mid-size enterprises (SMEs).  The 10,000 Small Businesses Initiative will distribute $100 million per year over the next five years to SMEs through Community Development Financial Institutions.

These lords of commerce have heard the cries from endangered SMEs.  In their infinite wisdom Blankfein and Buffet understand that the real economy needs to resuscitate and incubate the critical SME segment as an absolute prerequisite to a vibrant economic recovery.    The buzz about this news in the marketplace ranged from cynical suspicion at one extreme to puzzled bemusement and  ecstatic aplomb at the other.

What motivated Goldman to announce this initiative is an interesting question.  Was it guilt, greed or a sense of corporate social responsibility?  Some suggest it is a master PR move to counter a growing public perception that Goldman Sachs,  the poster child of government favoritism and bailout largess,  has leveraged its unfair advantage to achieve historic levels of profitability.  Thus enabling management to pay obscene bonuses to company employees.  But capital has no psyche,  and half a billion dollars is a tall bill to underwrite absolution for some phantom form of guilt.  True to its nature, capital always  seeks a place where it will find its greatest return.  Goldman and Buffett are casting some major bread on the receding waters of a distressed economy.  As its foretold in the Good Book , doing God’s work will produce a tenfold return.  If the Bible’s math is correct, thats a lot of manna that will rain down from heaven for the shareholders of Goldman Sachs and Berkshire Hathaway.  Looks like our modern day version of Moses and Aaron have done it again.  Leading their investors across the dangerous waters of the global economy to live in the promised land of happy shareholders.

As one of the world’s preeminent investment banks and purveyor of capitalist virtues,  company shareholders must be questioning how Goldman’s managers will realize a return on this investment?  Has management examined the potential corporate and societal moral hazards surrounding the program?  Surely shareholders have asked when they expect to be compensated for this significant outlay of capital.   The desire to realize gain is a more plausible motivator and makes more sense for an enterprise like Goldman and the storied investment Wizard from Omaha.

Its wise to ascribe the best intentions and virtuous motivations to actions that we may not fully understand.  This program should be viewed as a seminal event in the history of corporate social responsibility and social entrepreneurship.  Its important to understand that institutions that practice corporate social responsibility do not engage it solely as a philanthropic  endeavor.  Indeed, the benefits of good corporate citizenship pays multidimensional dividends.  All ultimately accrue to the benefit of company shareholders and the larger community of corporate stakeholders.

Goldman’s  move to walk the point of a capital formation initiative for SMEs seeks to mitigate macroeconomic risk factors that are prolonging the recession and pressuring Goldman’s business.   Goldman needs a vibrant US economy if it is to sustain its profitability,  long term growth and global competitiveness.  Goldman needs a strong regional and local banking sector to support its securitization, investment banking and corporate finance business units.   Healthy SMEs are a critical component to a healthy commercial banking sector.  Goldman recent chartering as an FDIC bank holding company may also be a factor to consider.  This SME lending initiative will provide interesting insights into the dynamics of a market space and potential lines of business that are relatively new to Goldman Sachs.  This initiative might presage a community banking acquisition program by Goldman.  At the very least the community banking sector is plagued with over capacity is in dire need of rationalization.  Goldman’s crack team of corporate finance and M&A professionals expertise would be put to good use here.

Goldman’s action to finance SMEs will also serve to incubate a new class of High Net Worth (HNW) investors.  Flush with cash from successful entrepreneurial endeavors, the nouveau riche will be eager to deploy excess capital into equities and bonds, hedge funds and private equity partnerships.  Healthy equity markets and a growing Alternative Investment Management  market is key to a healthy Goldman business franchise.

Community banks, principal lenders to SMEs are  still reeling from the credit crisis are concerned about troubled assets on their balance sheets.  Bankers can’t afford more write downs on non-performing loans and remain highly risk adverse to credit default exposures.  Local banks have responded by drastically reducing credit risk to SMEs by curtailing new lending activity.  The strain of a two-year recession and limited credit access has taking its toll on SMEs.  The recession has hurt sales growth across all market segments causing SMEs to layoff employees or shut down driving unemployment rates ever higher.  Access to this sector would boost Goldman’s securitization and restructuring advisory businesses positioning it to deepen its participation in the PPIP and TALF programs.

The financial condition of commercial and regional banks are expected to remain stressed for the foreseeable future.  Community banks have large credit exposures to SME and local commercial real estate.  Consumer credit woes and high unemployment rates will generate continued losses from credit cards and auto loans.  Losses from commercial real estate loans due to high vacancy rates are expected to create significant losses for the sector.

Reduced revenue, protracted softness in the business cycle and closed credit channels are creating perfect storm conditions for SME’s. Bank’s reluctance to lend and the high cost of capital from other alternative credit channels coupled with weak cash flows from declining sales are creating liquidity problems for many SMEs.   Its a growing contagion of financial distress.  This contagion could infect Goldman and would have a profound impact on the company’s financial health.

The 10,000 Businesses  initiative will strengthen the free flow of investment capital to finance national economic development and empower SMEs.  It strengthens free market capitalism and has the potential to pool, unleash and focus investment capital into a strategic market segment that has no access to public equity and curtailed lines of traditional bank credit. The 10,000 Businesses initiative  will encourage wider participation by banking and private equity funds.  In the aggregate, this will help to achieve strategic objectives, build wealth and realize broader goals to assure sustainable growth and global competitiveness.  All to the benefit of Goldman Sachs’ shareholders and it global investment banking franchise.

Goldman Sach’s has always been a market leader.  We salute Goldman Sachs’ initiative and welcome its success.

In  September of 2008,  Sum2 announced The Hamilton Plan calling for the founding of an SME Development Bank (SDB).  The SDB would serve as an aggregator of capital from numerous stakeholders to focus capital investment for SME manufactures.   More on the Hamilton Plan can be read here: SME Development Bank.

Risk:  SME, bank, recession, unemployment, credit, private equity

You Tube Music: 10,000 Manaics, Natalie Merchant: Dust Bowl

November 19, 2009 Posted by | banking, credit, economics, FDIC, private equity | , , , , , , , , , , , , , , , , , , , , , , , , , , | 2 Comments

Rutgers Job Study: Full Employment By 2017!

help wantedRutgers University has released a sobering study on expected recovery rates in employment levels for the United States economy.   The study,  America’s New Post-Recession Employment Arithmetic indicates that the employment deficit has grown so large that it may take until 2017 for the nation’s labor market to return to its pre-recession level.

The study, released by the Edward J. Bloustein School of Planning and Public Policy is a cause for concern.  The study reports that the US economy has shed over 7 million jobs since the recession officially began in December 2007.  This has reduced the total number of jobs in the United States by 5.8%, the largest drop during any downturn since World War II.  The authors of the study, James W. Hughes and Joseph J. Seneca, project that the employment deficit will total 9.4 million private sector jobs by the end of the year.

The study estimates that if the economy adds more than 2 million jobs annually starting next year, it would take until August 2017 – more than seven and a half years – to both recover the jobs lost since December 2007 and create new positions for the roughly 1.3 million people who join the labor force each year.

Hughes and Seneca believe that a recovery in 2017 may be an optimistic assumption.  An economic expansion that lasts for seven years is about 50 percent longer than the average for postwar recoveries.   Hughes and Seneca refer to the last ten years as “The Lost Employment Decade,” because the U.S. is on track to finish this year with 1.3 million fewer total jobs than it had in December 1999. “This is the first time since the Great Depression of the 1930s that America will have an absolute loss of jobs over the course of a decade” the report states.

The past decade has witnessed a startling reversal in economic fortunes for the US economy.   The U.S. finished the 1990s with 19  million more private sector jobs than it had at the start of the decade.   Approximately 16 million jobs were created during the 1980s.  Before the recession,  annual rate of job growth was about 1 million jobs per year, about half of the growth rates of the previous two decades.

Hughes and Seneca believe that this will force states into fierce competition to realize job growth.  States must respond by creating desirable environment for business based on costs, affordability, business climates, support infrastructure, labor force quality and tax policies.

We believe that joblessness and unemployment continue as significant threats to economic growth.   The conception of  the unemployment rate as a lagging indicator is emerging as a lead driver inhibiting economic recovery.  High unemployment continues to inhibit consumer spending and works against a rebound in the housing market and related construction industries.  Retailers are already bemoaning the bleak forecast for this years holiday shopping season.  State and local governments reeling from dwindling tax receipts are beginning to crack under the strain to fund basic community services, public schools and social assistance programs.

The structural dysfunction of the  American economy is a critical issue that must be addressed.  A concerted program aimed at the development and incubation of SME manufactures will encourage the entrepreneurial energy and kick start badly needed economic drivers  to ignite a recovery.  Sum2 advocates the adoption of The Hamilton Plan and the creation of an SME Development Bank to reestablish sustainable growth and national prosperity.

You Tube Music Video: Bruce Springsteen Seeger Sessions, Pay Me My Money Down and Erie Canal

(RU and Bruce, Perfect Together)

Risk: unemployment, job creation, SME, political stability, recession,

October 8, 2009 Posted by | associations, business, commerce, economics, government, Hamilton Plan, labor, manufacturing, poverty, recession, risk management, SME, unemployment | , , , , , , , , , , , , , , , , , , , | 2 Comments