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Learning on the Job

This op-ed first appeared in the Los Angeles Business Journal and is reprinted with their permission.

Dave Smith, PhD
Dave Smith, PhD

In recent weeks there hasn’t been much data supporting sustained economic stability, much less a recovery. However, it does appear the economy is no longer in a freefall, and we are likely experiencing the depths of this downturn.

Since the start of the recession in December 2007, 6.3 million people have lost their jobs in the United States. Hundreds of thousands more per month are likely to join the ranks of the unemployed for the next several months, and the national jobless rate is expected to reach as high as 10 percent. In California, unemployment hit 11.5 percent in May and will surely peak at more than 12 percent in the coming months. L.A. city’s unemployment rate was even worse at 12.5 percent.

There is little cheer for the currently unemployed, underemployed or those seeking better career prospects. However, looking ahead, there are some breaks forming in the gray cloud hanging over the economy, brightening the outlook for job seekers.

In reviewing a number of sources of information, I believe it is likely that several areas of the economy will lead the way for jobs and economic growth. It also is my opinion that near-term jobs created as an outgrowth of the 2009 American Recovery and Reinvestment Act will not be among them. Here’s how I see it:

Small Business and Entrepreneurship

Certainly the recession has hurt small businesses along with the rest of the economy. In fact, there are 600,000 fewer people claiming to be self-employed in May 2009 than December 2008. However, the major job producers in the future will likely come from today’s small businesses. A recent report in CIO magazine noted that 35 percent of companies on the 2009 Fortune 500 list were incorporated during a recession.

Many entrepreneurial experts will tell you that there is opportunity in a downturn. There are abundant market problems waiting to be solved by entrepreneurs. What’s more, the basic resources for a successful small business remain in place – finance, free markets, available talent and low-entry costs. All of this holds true in Los Angeles.


The energy sector – green technology in particular – promises to be a significant job creator. The Pew Charitable Trust recently released a study that said the renewable energy industry has grown steadily over much of the past decade and added jobs at more than twice the national rate. Although there have been some failed ventures and layoffs, the Bureau of Labor statistics show oil and gas extraction jobs jumped 28 percent from 2003 to 2009.

Jobs connected in particular to green technology, energy innovation, refining and transportation will be high-growth areas. According to the Pew study, California led the nation in all green job categories measured. Before the recession, the California economy was adding more than 10,000 green jobs a year. I expect the pace to pick up and meet or exceed previous levels by mid-2011.

Residential Construction

I also expect residential construction jobs to pick up in California beginning in 2010. Though experiencing a major real estate correction, California does not have a glut of housing. It has an improper high-end and affordable-housing mix, much of which is being worked out in the current housing correction. Demographics will drive an increase in residential construction over the coming months.

Export-Related Jobs

In the face of a global slowdown, there will be a drop in the value of the U.S. dollar. However, this will eventually promote exports (and curb domestic demand for imports). California is the single largest source of manufactured exports in the United States. While demand for exports may be slow to pick up, California export manufacturers are poised to do well when an economic recovery is fully under way.

Stimulus Package Not Stimulating

Interestingly, there is scant evidence that the $787 billion economic stimulus will produce jobs in any great numbers for the near and midterm. The economy lost about 1.5 million jobs over three full months after the passage of the stimulus bill, March to May. The 150,000 jobs that President Obama touted were created by early June (a difficult to verify number, by the way) seem well off-course in meeting the goal of 600,000 jobs by summer’s end. The jury is still out on the effect over the longer haul. However, despite the hype about quickly engaging in “shovel-ready” projects, there is little evidence that the stimulus is producing long-term employment.

Certainly, tax cuts and incentives would do much to improve California’s job-generating machinery. However, with the current shortfall in state and local tax revenue, it is highly unlikely we will see these kinds of actions. So it will largely be up to the brave, creative and ambitious people who are prepared to set aside fear and seek out new employment opportunities that will get Los Angeles moving toward sustainable recovery.

Although there will be rough waters for the next two years, there are good things ahead for the Golden State.

Related Articles in the GBR

What’s Next LA: The Road to Economic Recovery (A Preview) by Danielle L. Scott

Taking Advantage of California’s Retirees to Help Close the Budget Gap by Owen P. Hall. Jr., PE, PhD

California Greening: Boom or Bust? by Owen P. Hall, Jr., PE, PhD

Author of the article
David M. Smith, PhD, Associate Dean of Academic Affairs and Associate Professor of Economics
David M. Smith, PhD, Associate Dean of Academic Affairs and Associate Professor of Economics
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