|Graph credit: Paul Hodges, Chemicals and the Economy|
"Consumers have no real choice about their spend on gasoline and energy bills. And its only after these have been paid, that they decide whether they can afford the discretionary spending that drives chemical and polymer sales.And at Calculated Risk, some economists (Justin Weidner and John Williams) from the San Francisco Federal Reserve talk about the "new normal" in unemployment rates:
Of course, sentiment indicators, even well-established ones like this from the University of Michigan can be wrong. But it just adds to the blog's sense of uncertainty about what is really happening to end-user demand, and to inventories down the value chain."
A second explanation is that the degree of mismatch between job seekers and potential employers has increased. The construction, finance, and real estate sectors have shrunk after the bursting of the housing bubble and the subsequent financial crisis. The skills of workers who used to be employed in those sectors may not be easily transferable to growing sectors such as education and health care (see Rissman 2009 and Barnichon et al. 2010). Similarly, the housing bust has left millions of homeowners underwater on their mortgages, which locks them into their homes and may make it more difficult for them to move to higher growth areas. These sectoral and geographic mismatches between workers and job openings may be making it harder for employers to fill vacancies. [snip][CJ here again.] It's a weird couple of things to link together, but here goes my thoughts:
Mounting evidence suggests that structural factors may have increased the “normal” rate of unemployment to about 6.7%. Much of this increase is likely to be temporary. In particular, the extension of unemployment benefits probably accounts for about half of the increase. But, even with a 6.7% natural rate, current and forecasted levels of unemployment imply that significant labor market slack will persist for several years. It is important to stress that each of the methods used to estimate the natural rate is subject to considerable error, especially given the limited experience of very high unemployment in the post-World War II U.S. economy.
- Hodges' notes on the high price of oil and gasoline do not bode well for chemists in the consumer products world. If consumers are spending on heat and gas, they're not buying as much toothpaste and shampoo. For that matter, high oil and gas prices do not bode well for the health care dollar, either.
- At the same time, I am curious about the employment prospects for oil and gas chemists; I suspect that they are close to a local maxima.
- Weidner and Williams suggest a few sectors that are doing poorly, employment-wise: construction, finance and real estate. No surprise there. They suggest 2 sectors doing well: education and health care. In my opinion, both of these 2 sectors are primed for a bubble.
- That said, I suspect that chemists looking to move are better positioned (re: skill set) than folks in those 3 hurting sectors.
- It will still be a few years until the "new normal" arrives. And when it does, it is unclear what it will look like.