I’ve been in the structural camp for a long time.  Yes, as always, there’s a definitional problem–if you’re going to haul out fifty- sixty-year Kondratiev cycles, there isn’t much space left for anything structural.  But if you take a common-sense distinction between jobs that are going to come back soon, in line with economic recovery (cyclical), vs. ones where there’s very little chance of near-term improvement (structural), I think there are clear structural elements affecting the US job market today.

I’d like to offer two new reasons why I think so.

Up until now, my thoughts have been:

–excess supply of housing and retail space mean that construction jobs aren’t going to come back soon.  In fact, in some respects, the construction situation is getting worse, as big box retailers who are under attack by internet sales work out that they have (much) more retail square footage than they need.

–as anyone who has worked as a manager in a big corporation knows, there has always been, say, 1%-2% of the workforce that adds no value but is very hard to fire because sub-par performance has been tolerated for too long.  The fine art of foisting such “dead wood” on other departments entails writing semi-glowing performance reviews, which, as each new one is typed, increase further the potential for wrongful termination lawsuits, thereby entrenching the dead wood deeper into the company.

To me, the fact that even debt-free, cash-rich companies made layoffs during the recession means they saw a once-in-a-lifetime chance to clean house and a significant portion of those workers are now gone.  The slow accumulation of unaddressed hiring mistakes is likely beginning again.  But the counter has been set back close to zero.  And no one is going to rehire the dead wood.

–a related point:  I think many managers have been surprised by their ability to continue to function at a high level with fewer workers.  They won’t forget this overnight.

–by providing lots of jobs for manual workers, the housing boom delayed the adjustment of the economy to the fact of foreign competition for five-ten years.  Instead of the creation a decade ago of a group of out-of-work forty-somethings with little education/training and no computer skills, we have a group of out-of-work fifty-somethings currently needing retraining.  That’s harder.

My new thoughts:

—Time magazine (I can’t find a link, sorry) has a recent story about the changing role of secretaries.  Among other things, it mentions that two million secretaries and related clerical workers were laid off during the recession.  They’re not coming back.  And that’s 1.3% of the workforce.

–older workers aren’t retiring as fast as normal.  Why?  I think the financial meltdown, which included temporary 401k and IRA vaporization, brought home to many that retirement doesn’t mean going to the mailbox periodically and finding a pension check.  It means managing your own money and making it last for thirty years (maybe more).

Sixty-somethings know once they retire there’s zero chance they’ll be able to get a comparable job again if they change their minds. And they realize that, while they may know how to save, they don’t have the slightest idea of how to manage their own long-term investments.  So they’ll stay in their jobs until forced out…or until they find and start reading this blog.

To gauge the order of magnitude of this factor, assume the typical worker has a fifty-year career and that the workforce is distributed evenly across all ages.  Then, 2% of the workforce should be retiring each year, opening positions for new workforce entrants just leaving school.  That’s a lot.

Investment implications?

The Fed’s quantitative easing is a political/social program, not an economic one.  Keeping interest rates at today’s low levels will eventually make the housing situation better, but won’t affect anything else on this list.  The other factors are tasks for Congress.  (Good luck to all of us!)