The Jobless

1
The Jobless Recovery
2
RECESSION

3
Characterized by

• 3 billion overcapacity in telecom industry

• 80 of jobs lost were in manufacturing

• Internet bubble bursting

• Overinvestment in high tech

• 9/11 hurt services

• Global in scope

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PROFIT-LED RECESSION

• After-tax corporate profits declined 15.9

• One of the worst profit led recessions since
  WWII

• Sharp reductions in business
• investment in new plants and equipment

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Quick fiscal and monetary response helped
mitigate effects

• Federal funds at a 40 year low
• Bush Administrations tax cut
• Increased federal spending
• Strong consumer spending on
• housing and autos

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Risks to
the Recovery
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Rising Oil Prices

• Over the past year prices have risen from 20 to
  25 a barrel

• Oil prices reduce consumers purchasing power

• Increase inflationary expectations

• Every 10 increase in oil is a 70 billion tax
  increase

• Consumer spending is 2/3 GNP

8
Uncertain Stock Market

• Household wealth is down 4 trillion from peak 2
  years ago

• Wealth effect accounts for 20 of consumer
  spending

• Another plunge could reduce confidence

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Housing Prices

• Low interest rates helped
• consumers shrug off stock market
• losses

• Housing gains of 1.2 trillion

• Real estate cycle cannot continue
• forever

• Ultimately prices cannot rise
• faster than income

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Our New War

• Domestic terrorism

• Threat of military action
• against Iraq, Iran, and
• North Korea

• Uncertainty in the Middle
• East

• India and Pakistan
• nuclear threat

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ENRONitis

• Biggest corporate bankruptcy in history

• Aggressive accounting

• Growing budget deficits

• FBI bungling

• Reduction of foreign purchases
• of U.S. stocks, bonds and
• companies

E

• Loss of confidence in American
• institutions and leadership

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Burgeoning
Trade Deficit

• Need foreign capital-2 billion a day to fund
• our trade deficit

• 400 billion or 4.5 of GDP
• and likely to grow to 5

• Could put too much pressure on the dollar
• and lead to a currency crisis

13
Japans Woes

• Bank lending and consumer prices falling for the
  
• third year in a row

• A weak yen puts pressure on U.S. manufacturers
  
• in world markets

• Affects U.S. jobs in manufacturing and technology

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Slim Profits

• Income for SP companies
• after taxes fell by 50 last
• year

S

• High tech still has too
• much capacity

• Reduces investment plans
• for 2002

S

• Layoffs at IBM, Lucent, Bell
• South, WorldCom continue

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FISCAL
DRAG
IN THE STATES

• 39 states reduced their 2002
• budgets by 15 billion

• Eroding tax bases and increased
• Medicaid spending hurting state budgets

• Rising taxes and fees across the country

• Instead of counter-cyclical boost,
• states are a drag on growth

• More pressure on consumers

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Greenspans Future

• Although in a 10 trillion economy there is not
  one key player,
• politicians and CEOs have confidence in
  Greenspan
• Term expires in 2004
• Greenspan health scare could hurt markets
  particularly in this
• environment

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SHORT-TERM OUTLOOK

• Growth in second half of 2002 around 3

• Economy not strong enough to
• reduce unemployment much below
• current levels

• Manufacturing and technology jobs
• will experience slow recovery

• Stronger growth in 2003

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ASEEs New Corporate Role
ASEE Corporate members benefit from increased
market exposure, numerous networking
opportunities, and the most current industry
insights.

• Provides a unique opportunity for industry to
  interact with, learn from, and influence the
  engineering educators that shape the future of
  science and technology

• Current ventures include
• ASEE Center for Best Practices in K-12 Science
  and Math Education
• Engineering data-mining tool
• ASEE international conferences
• Learnon.org, ASEE's complete engineering and IT
  career resource