Tale of two economies

“There’s only four things [America does] better than anyone else: music, movies, microcode (software), and high-speed pizza delivery.” — Neal Stephenson, Snow Crash.

There are increasingly, two different economies in the country, the knowledge economy, and the physical economy. The knowledge economy is thriving, since that is most of what we export nowadays and much of our lives are lived online. However, technology employs only part of the American workforce, and everyone working in the physical economy (construction, building, materials) is hurting. People who had been furloughed from the plant in prior recessions, only to come back to work when conditions improved five months later, are now facing the prospect of long-term unemployment.  How the US recovers from this particular recession will depend on how well this transition is managed.

We wrote the paragraph above in October 2009, almost four years ago.  The labor force participation numbers from September make it seem prescient. Rosie the iconic riveter did lose her job and never got another. The Bureau of Labor and Statistics tracks labor force participation (those working or seeking work), and this has dropped from 66.4% in January 2006 to 63.2% in August 2013. Some of that drop represents baby boomers retiring or retiring early, but that does not explain the entire 7 million people who are no longer working or looking for work. Some of them are discouraged from years of disappointment. The toll in lost opportunity and human skill for the economy represents a permanent loss. These years, for those workers, cannot be reclaimed.