Professor Elam

Tuesday April 13, 2010

The economic pullback, recession, calamity, offers an interesting opportunity for social observation. How are your friends who have lost jobs or who have not found jobs reacting? The WSJ quotes Larry Summers in 1999 pointing out that extending unemployment results in no surprise, people staying unemployed. Indeed another study notes that people do not really start looking until the benefits start to run out. I have contended the better idea would be for unemployment weekly checks to decrease after the first three months, this would re enforce the idea that this is a temporary bridge, not your new job. 

In the economic collapse of West Texas in 1986, I noticed a new mental paradigm after about three months on unemployment. People would adjust to the new lower income and begin to rationalize that the alternative jobs available were just not good enough. A former oilfield worker at $45 K would reject the $25K job. This resulted in a skyrocketing divorce rate as spouses found their mate watching Oprah, as the expression goes, on their return from work. 

Bear markets wring out the excess of the previous bull market. Bear markets force failed business models to re think their strategy. But, Michigan keeps getting bailouts so the strategy remains unchanged, perhaps GM will outsell Toyota and Honda, eh?  Europe had double digit unemployment before the 2008 crash, the reason was the the social safety net did not encourage moving to where the jobs are, or taking alternate jobs. The Austin San Antonio economy is much better than many parts of the country and so we are getting an influx of people looking for jobs. And so the unemployment rate here is lower than other places. 

Again, watch what your friends and neighbors are doing. Everyone looks good in a bull market, a rising tide lifts all boats as the expression goes. But an extended downturn lets the creative and ambitious stand out from the crowd, have you noticed who among your friends is inventing new paradigms for themselves, and who is, well, watching Oprah waiting for change to find them. 

This article suggests that moving where you want to be is the first step. I would not suggest leaving San Antonio, I moved here!  And I am glad I did. 

And here is another look at how the Depression really ended after WW II.