The Class of ’09
Just a few months ago, one of the main things on the minds of college students expecting to graduate this spring was studying for final exams. With most of the tests over and diplomas now (or soon to be) in hand, the focus has turned to getting a job.
For many, the prospects do not appear rosy, certainly not as bright as when the members of the Class of 2009 began their higher education work. Since the current recession started in December 2007, more than 5.7 million jobs have been lost across the country. That includes over 1.4 million among workers with college degrees.
According to a survey by the National Association of Colleges and Employers, the Class of 2008 anticipated a 16% increase in hiring. Until recently, job prospects for those graduating in 2009 were anticipated to be up some 6%. Now, however, because of the ongoing economic strains, projections for employment for new diploma holders is up just over 1%—the weakest outlook in approximately six years. In some areas of the country, employers are indicating they expect to hire up to 22% fewer first-time college grads than last year.
In the past, a college diploma was considered the best ticket on the employment train (it still is; the train just may be a little late leaving the station). With the job market now tighter than it has been in decades and graduates predicted to face highly challenging times, the diploma is thought by some to be a bit akin to a job “hunting license.”
As a result of the weak job market, many students plan to return to school for graduate studies or to prepare for new career opportunities. The Bureau of Labor Statistics points out that applications to graduate schools are currently up almost 19%.
Although the situation is fairly bleak, it certainly is not hopeless, especially for students who have majored in information systems, finance and accounting, computer systems analysis, nursing/health, physical therapy, engineering, and sales. Greater success in job searches is also expected for students graduating with associate’s degrees in business, drafting, design, and computer-aided design.
Still, for those able to secure employment, many are settling for lower-level positions or less annual salary than they had anticipated. Willingness to do so is proving beneficial for those competing against the recently unemployed professionals who, though they have much more experience, usually command higher remuneration.
As always, some of the key attributes employers are looking for in graduates seeking jobs include knowledge of the field they wish to enter, good communication and writing skills, and a solid work ethic. Practical experience in the workforce, with internships or part-time work, is considered a plus—75% of employers prefer to take on grads with some kind of job experience. Some of the shortcomings employers often voice about new graduates include their lack of professionalism, poor understanding of business etiquette, and desire to climb the ladder too fast.
The difficulties so prevalent in today’s economy are not only impacting current grads, but also students still in college. Many are rethinking their majors and career goals, especially those who intended to join the Wall Street crowd and now fear such a journey may not be as profitable as previously expected.
While the choppy economy is certainly causing a wave of concern among new graduates (and their parents), many avenues for employment remain open. It may require a “Plan B” that involves a new perspective on big-time opportunities or calls for acceptance of employment in smaller communities or even a change in careers.
The US labor market is always churning. Demand fluctuates according to varying circumstances, but hiring in some areas is ongoing. Although the brass ring initially desired may no longer be available, those willing to adapt to the changing times will likely find an array of brass rings available for the taking. Recognizing that such opportunities exist is often the first step required toward a meaningful career and quality of life.
posted @ 08:03 AM CST [link]
Friday, May 22, 2009
Stormy Weather
As we go to press, the Texas Legislature is struggling to find a compromise on the issue of windstorm insurance. Essentially, the issue boils down to whether (and, if so, to what degree) homeowners and others purchasing property and casualty insurance across Texas should subsidize those in coastal areas. While the debate continues, one important fact cannot be overlooked: windstorm issues are statewide in nature, and we all have a stake in finding a solution.
The Texas Gulf Coast is vital to the economy of Texas, with linkages to all regions of the Lone Star State. Without the key inputs and services provided by the industrial base located in the area, prosperity and business activity from the Panhandle to the Rio Grande Valley and from the Big Bend to the Piney Woods would be diminished.
The coastal area handles the vast majority of water shipments for goods produced for export throughout the state. Moreover, the refined petroleum and petrochemicals products produced in the area are used extensively in every portion of Texas and are essential to the viability of many production sectors. The end result is that every segment of the state is critically linked to the dynamic Texas Gulf Coast area, and disruptions in that region would be felt across the state.
Over the past few years, property and casualty insurance rates along the Gulf Coast have risen sharply and availability has declined. In the wake of recent, expensive hurricanes, insurance companies are significantly adjusting rates and underwriting criteria in areas considered vulnerable to similar phenomena.
The most directly affected area (the Tier 1 Windstorm Coverage Area) includes portions of Harris County and forms a large component of the Texas economy. By many measures, the region is responsible (including Harris County) for almost one-third of all business activity in the state.
Decreases in the level of insurance coverage by firms in the Coverage Area have enormous potential fallout, both within the directly affected region and across the state. Companies facing sharply rising property and casualty insurance rates will see competitiveness and profits diminish. In addition, some will elect not to purchase adequate coverage due to a lack of affordability or availability. The consequences of such decisions are decidedly negative.
These premium increases and lack of availability would contribute to underinsurance, as firms and individuals elect not to pay the much higher premiums. In the event of a major storm, insurance insufficiencies would delay the recovery process and negatively affect not only the immediate area, but also the rest of Texas.
Using the impact assessment system maintained by my firm (The Perryman Group), I recently estimated the effects on business activity if the Tier 1 Windstorm Coverage Area absorbs the entire premium increase. The losses to the economy include $5.89 billion in annual output (real gross product) and 78,690 jobs.
Moreover, because high premiums lead to underinsurance, all of Texas is more vulnerable to economic fallout from a catastrophic storm. In a prior study in December 2006, we quantified the impact of a major storm on the Texas economy and found that the ramifications across the state would be enormous. We found that if a “Katrina”-level storm were to occur, for example, the losses to the state would include $52.2 billion in output, almost 617,000 permanent jobs, and nearly $1.8 billion in annual State revenue. All parts of the state would be significantly affected, with regional losses ranging from 3.76% to 9.69% of aggregate output.
Property and casualty insurance is essential to conducting business. It is vital to mitigating risk and, hence, allowing for optimal investment and economic performance. The Tier 1 Windstorm Coverage Area is currently in an environment of rapidly escalating property and casualty premiums and shrinking availability from private carriers. Further restrictions on the scope and adequacy of coverage would exacerbate those problems.
It is in the interest of all Texans to ensure that reasonably priced property and casualty insurance is available along the Gulf Coast. All regions have a stake in seeing that adequate coverage is maintained at an affordable price. Efforts to find workable solutions to the problem of sharply rising rates are worthy of widespread support and essential to the economic vitality of every part of the state.
posted @ 08:13 AM CST [link]
Friday, May 15, 2009
Spring Awakening
Of all the seasons of the year, I believe that Spring is my favorite. It’s the time when we begin to see new life emerge, from blossoms on trees to bluebonnets that grace so many highways and byways. It’s a time of renewal, when the bleak of winter is over and prospects for tomorrow begin to burst into bloom.
From an economic standpoint, of course, we’re not yet in full flower. There are signs, however, that some of the difficulties which have dominated so many aspects of our daily lives are beginning to improve. While a few industrial sectors are still in freefall, others are beginning to confirm the fact that the rate of decline has slowed. Pervasive pessimism is gradually turning to hints of optimism, if ever so slightly noticeable. The deep winter freeze in credit markets is also beginning to thaw.
Even though the economic downturn continues to chill performance, the picture being painted by some signs is encouraging. Texas, aided by high oil prices through much of 2008, held out for a long time from being traumatically impacted by the recession, but is now experiencing difficulties and challenges much like those other states have been weathering for more than a year. Even so, the Lone Star State continues to be one of the brightest spots in the national economy.
A recent story in Forbes, based on information proffered by the US Census Report in March, noted that Texas remains attractive for people seeking a place to live and work. With unemployment rising, credit being on a stingy streak, and consumers showing some restraint in major purchases, many Americans are looking for greener pastures.
A recent Census Bureau analysis noted that of the top 10 metropolitan statistical areas (MSAs) in terms of population growth, four are located in the Lone Star State—Austin-Round Rock ranked number two, Dallas-Fort Worth-Arlington in fifth place, followed by San Antonio, and then the Houston-Sugar Land-Baytown metro.
Although it’s always nice to get reports of such a positive nature, we need to remember there is normally a considerable lag in the data since it takes quite a bit of time to gather, assimilate, and publish. Thus, the most recent changes are usually not included in the information that is the basis for such rankings.
Still, some of the principles that help these metros receive this special recognition remain viable. They include: vibrant business climate, diversity of industries, educated workforce availability, opportunities for entrepreneurial endeavors, cultural programs, and quality-of-life enrichment activities.
Similar characteristics can be used to describe many other parts of Texas and, indeed, the state as a whole. Because of such distinctions, we are poised to become one of the first states to be able to come out of the recession once the hibernation period concludes, perhaps toward the end of this year or early in 2010.
The underlying strength of the state’s economy is quite good, infrastructure is sound, economic development and regulatory framework is solid, cost structure is favorable, and the export capabilities remain strong, just to mention a few of the state’s pluses.
Energy and tech-oriented manufacturing and various other industries, which have been historically important to the economic growth of Texas, are now approaching the cusp of rebound and will in all likelihood be among the sectors that lead us out of the current malaise. Such was not the case in the 2000-2001 period, when Texas’ dependence on technology in the wake of Y2K and on airlines after 9/11 delayed expansion.
When looking at the prospects for the future in relative terms, Texas is still a very good place to be. It has an opportunity to be “last in, first out” and to sustain growth at levels above national norms over an extended period.
posted @ 07:58 AM CST [link]
Friday, May 8, 2009
A Piece of the Puzzle
Englishman John Spilsbury is credited with inventing the jigsaw puzzle in 1767. An engraver and mapmaker, Spilsbury often fashioned his puzzles so that the total picture was not recognizable until the last piece was placed properly.
So how do jigsaw puzzles relate to today’s economic situation and just what does the picture look like now? As the US moves toward economic stabilization, every piece of the puzzle has its place and each plays a role in the nation’s future recovery.
One of the key contributors to the country’s economic health relates to consumer spending, which historically has accounted for about 70% of the economy. When consumer sentiment is up, as it has been over the past two months according to the Conference Board, people are generally (but not always) more willing to spend their money, thus lifting the economy in the same way a rising tide lifts all boats.
Earlier this year, because of the dire economic straits the country was experiencing, many people were talking about retrenching and changing their spending patterns, perhaps even making their limitations a permanent way of life. Now, however, there seems to be a rethinking in the minds of many due to the recent news releases suggesting that the economy may be modestly improving, or at least getting worse at a slower rate. It remains to be seen if the new-found frugality and frowning on conspicuous consumption will last, but history suggests otherwise.
However, the news has not been all good, as first quarter data from the Commerce Department indicates that the economy shrank at a 6.1% pace during the first three months of this year. Still, government policymakers are now offering less dire predictions than they were just a few weeks ago.
This spate of moderate improvement (or less decline) does not mean that everything is hunky dory, but it does show that some of the nonpareil steps recently taken by government and business leaders could be the spark necessary to fire up the economic generator in the not-too-distant future. The impact of the $787 billion stimulus package and the various Federal Reserve measures are only beginning to be felt in most areas of the country. While pollsters and commentators try to pass judgment on these things before they are even implemented, it is well-established in the academic literature (including a few of my own contributions in another life) and past experience that it takes a few months for these things to gain traction.
Time will tell whether the positive consumer attitude reported for the past two months is a phenomenon with some legs or a temporary pattern to be derailed by swine flu concerns, a few disappointing statistics, or any one of myriad other things. The fate of the optimism could also depend on what additional actions might be required to fuel the economy in the coming weeks and months. The Fed has not ruled out expanding existing programs or formulating new approaches if the economy needs additional bolstering. While Congress is not excited about the prospect, they will also likely do whatever is deemed necessary.
Moreover, the spurt could well be nothing more than “battle fatigue.” Consumers have often simply refused to stay pessimistic for long periods, although job and savings losses may prevent this “feel good” attitude from being reflected immediately in spending.
The reports regarding recent positive consumer sentiment are certainly encouraging, but it is not enough to bring about a roaring (or even a whimpering) economy. Still, this upward trek is an important piece of the puzzle and one of the things ultimately required to make the picture of our nation’s future economy clearer and brighter.
posted @ 08:02 AM CST [link]
Friday, May 1, 2009
Ten Years of Success
Over the past 10 years, we’ve added over 3 million Texans and our economy (after adjusting for inflation) has grown by a quarter of a trillion (real gross product up $255.0 billion dollars since 1999). Many other things have also changed. I’ve lost more hair, my email inbox has grown exponentially, and my cell phone is less than half the size of the old one.
Another thing that has changed is that we’ve now seen 10 years of competition in the market for retail electric power. The Texas Electric Choice Act (Senate Bill 7—SB7) was passed in 1999. SB7 required the vertically integrated investor-owned utilities to unbundle their business functions, among other things. In doing so, room was created for new electric providers to enter the market.
Three years later, on January 1, 2002, the state retail market opened for competition with appropriate transitional mechanisms. With the introduction of electric competition, Texas customers were given a variety of choices of electric providers, differing not only in price, but also in source of energy, locked-in-rates, and other billing options.
Within six years (June 2008), some 80% of customers in the state had made a recognizable choice regarding the offerings of the various competitors. More than four out of every 10 customers served by retail competition switched providers based on price or other benefits. Many others opted to remain with their incumbent providers. About 43% of these decisions involved residential consumers with almost 60% commercial.
Over the past decade, with the increase in population and growth in business operations, demands for energy have significantly expanded. To help meet these growing requirements, private companies in the electric utility industry have invested billions in generation and transmission capacity. The state’s electric capacity in renewable energy has also increased, adding over 4,000 megawatts of wind power alone. The investment in wind farms and other renewable sources, together with those for other types of power generation and transmission, have led to billions of dollars in economic activity and tens of thousands of jobs across the state.
The opening of the retail segment of the electric utility industry in Texas has resulted in numerous benefits to residential, commercial, industrial, and public sector customers. Among them have been a greater consumer choice and product innovation and lower prices than would be in place in a regulated environment.
My firm recently took a look at the savings and what they’ve meant to the Texas economy. We found that the positive effects of competition continue to grow and now total an impact of nearly $22.4 billion in total spending in the economy each year, $10.3 billion in annual output, $6.3 billion in annual personal income, almost $4.2 billion in annual retail sales, and more than 131,000 permanent jobs. Moreover, the economic stimulus associated with competition is now responsible for $761.0 billion in annual State revenues and $338.0 million in resources to various local governments across Texas.
Today, markets are offering up to 90 options for power from as many as 25 different companies. The increases in the number of providers, service plans offered, and switching opportunities are important indicators of healthy competition. In addition, the large investments in power generation and transmission by the private sector signal the success of the Texas electric power market and the value of competition.
Although not without challenges, Texas has achieved remarkable success in electric competition. As the state faces the daunting tasks of fashioning a recovery from the current malaise and providing impetus for lasting prosperity, it is imperative that the healthy electricity market that has emerged continue to contribute to future economic development.
posted @ 08:11 AM CST [link]