When will the estimated 8 million jobs lost in the recent economic recession return to the United States in a meaningful way?
According to a panel of Fordham-educated economists and financial analysts who spoke on Feb. 3, likely no time soon.
The sobering predictions were part of “Growth or Stagnation After Recession in the U.S. Economy,” the second economic roundtable sponsored by the University’s Graduate School of Arts and Sciences (GSAS).
The panel was moderated by Dominic Salvatore, Ph.D., Distinguished Professor of Economics, whose statistics on previous recessions and post-recession job growth painted a dismal portrait of the state of today’s American economy.
After the 1970 recession, he said, it took 10 months to return to pre-recession employment levels. The post-9/11 recession in 2001 recovered after approximately 40 months.
Given the current 9 percent unemployment rate, coupled with new entrants into the labor force and capped by shifts to a global labor force, it may take six or seven years—if ever—to reach 5 percent unemployment again.
“The underlying problem is structural,” Salvatore said. “Who invented the iPad? The United States. How many iPads are produced in the United States? None. Where are 15 million produced? In China.”
Simply being more innovative, said Salvatore, will not solve the problem. “Suppose we create another iPad? How many jobs will that create in the U.S.? Very, very few.”
From a business perspective, said Sherif Assef, Ph.D. (FCRH ’81, GSAS ’82, ’94), today it makes sense to spread out a company’s operations due to corporate tax rates and other regulatory functions. Manufacturing may be centered in Mexico; intellectual property can be owned overseas more economically (even if developed here); and a company’s finance center might be located in Luxembourg.
“What do you have left in the U.S.? The management,” said Assef, an expert in transfer pricing and managing director of Ceteris.
The United States, through corporate regulation and legislation, has created a “compliance culture,” said William G. Foote, Ph.D., (FCRH ’76, GSAS ’81, ’84), principal at Paraclete Risk Solutions, LLC.
“Right now, there is a ‘deer in the headlights’ threat (type of) management,” said Foote, who has worked internationally in risk and performance management. “Companies spend money on compliance management rather than risk management because the cost of bad compliance is huge.
“But I would wager that the cost of bad risk management is much larger.”
Foote said he has almost “gotten used to” the idea that the American labor force will not recover. “There are a number of things we can’t do in the United States anymore,” he said. “We can’t make a laptop here, which worries the intelligence community.
“We are creating a huge layer of structural inability—uncapacity—in the U.S. We can talk about solutions, but they are going to have to be very strenuous—across the economy and across enterprise.”
Mattieu Royer (GSAS ’94), managing director of Credit Agricole Corporate and Investment Bank, said that the United States needs to align its incentives to achieve its economic policies, which he said, perhaps need clarification anyway.
“What is the American dream? Is it really to have a car or two cars and a house? Or is it for your kid to be better off than you?” he asked.
Even though American gross domestic product has grown over the past 20 years, Royer said, the distribution of income has changed so that fewer and fewer Americans see the benefits of that growth. “We never talk about in what pockets that money ends up.”
Other problems affecting America’s recovery, panelists said, were a tentative Europe, Yuan currency manipulation from China, the rising global price of commodities and several bubbles that may yet burst–including municipal budgets, pensions and the commercial housing market.
One note of hope for American employment, said Mario Torsiello (GSB ’78), founder and CEO of Torsiello Capital Advisors, is the fact that corporate America is sitting on a trillion dollars in cash, and that there are ample amounts of money in money market funds and in precious metals.
“That is a lot of pent-up demand,” he said. “As the money comes into the market, it will create growth.
“But it is hard to say when it is going to happen,” he added.