Robert R. Harmon, Ph.D.

Some years ago I was invited to the Magic Castle in Los Angeles.  I was amazed by the
skills of the magicians.  Even though I knew it was all prestidigitation and illusion,
the suspension of disbelief by the audience ensured an enjoyable evening for all.  Now,
as I reflect on the graduating class of 2011 and the state of the economy that they
(and the rest of us) are facing, I am reminded of that magic summer evening in Los
Angeles.  For our economy, there is certainly that sense of illusion in the air, but
the suspension of disbelief is wearing thin, the government magicians not nearly as
skilled, and the bag of tricks less effective.

First, the good news; to be sure there are some positive signs of recovery.  For new
grads, starting salaries are up 3.5% over last year and average the salary for bachelor’s
 degrees is $50,000 (collegerecruiter.com).  Employers indicate they are increasing
hiring by 13.5% over last year (Society for Human Resource Management). The overall
unemployment rate for college graduates is 4.5% compared with 9.7% for those with a
high school diploma (Wall Street Journal, 5/7/11). If you are looking for bigger bucks,
the following majors paid the best:  chemical engineering ($64,641), computer science
($61,783), electrical engineering ($61,690), mechanical engineering ($60,598), finance
($50,535), accounting ($49,022), civil engineering ($48,885), and business ($48,089). 
Liberal arts came in at $35,633 (Society for Human Resource Management).  Forbes
indicates the ten best entry-level jobs are software engineer, sales representative,
business analyst, financial analyst, physical therapist, network engineer, occupational
therapist, registered nurse, quality engineer, and systems engineer (6/1/11).

Now, for some not so good news; the economy is still in the tank (unless you live in,
or near, Washington, D.C.).  The latest jobs report indicates that employers increased
payrolls by only 18,000 workers in June, definitely not good for grads.  The U-3
‘official’ unemployment rate is 9.2% but the ‘real’ U-6 unemployment rate (which
includes people who have given up or are involuntarily working part-time) is still
a depression-like 16.2%, only marginally better than last year’s 16.6% (www.bls.gov). 

                                                 
Although the overall U.S. stock market has recovered most of the ground lost in the
financial meltdown, it just doesn’t feel right.  How much of the market recovery
represents bubble economics and how much is sustainable economic growth?  It is real
or just an illusion?  Our modern day Merlin has used the magic printing press of QE1
and QE2 to paper over the still roaring housing market disaster and to conjure up
what looks like bubbles in emerging markets, precious metals, commodities, Chinese
real estate, alternative energy, and social-networking stocks, to name some prominent
examples (www.dailyfinance.com).  The alchemy continues as the price of gold reaches
new highs and the dollar plunges to new depths.  Record government spending, deficits
as far as the eye can see, no wonder that some economists feel that we are headed for
the dreaded ‘double dip” (www.zerohedge.com; www.leap2020.eu)

But where did the jobs go?  Approximately half of the 7.9 million jobs lost during the
recession are not likely to return. (www.CNNMoney.com ).  Manufacturing jobs, in
particular, were off-shored as industries such as mobile handsets, televisions,
computers, alternative energy, automobiles, aircraft and machine tools have outsourced
American jobs and technology to Asia, Brazil, and Mexico.  With the export-dominant
economic models adopted by emerging market competitors, it is easy to see most of
these jobs are gone for good.  Fortunately for German and Japanese workers, their
politicians and corporate boards have not been as enthusiastic about outsourcing jobs
and core technologies overseas.

In America, the new focus is on knowledge-based service innovation.  Over 70% of our
economy is based on services.  But, the hot areas such as social-networking, search-
based advertising and mobile services just don’t create many jobs.  Facebook, the
most successful social-networking firm, has 750 million users but only a few thousand
workers.  Zynga, a Facebook game platform has over 250 million users, but only 2,000
workers.  LinkedIn has 1,000 employees.  Google is a relative hiring machine at 25,000
workers, as is Amazon with 33,000.  Apple, viewed as the most innovative company in
the world, has successfully morphed itself into an information services company.  It
is an exception at 50,000 employees, not counting the 500,000 Chinese workers at Hon
Hai Precision Industry Company (Foxconn), Apple’s manufacturing partner.

Conversely, older technology and manufacturing-oriented companies hire a lot more
employees.  IBM, a 100-year old company that pioneered the information services market
has over 425,000 workers.  But, then again, it still makes things in the U.S.  Intel
has over 82,000 workers, Microsoft 90,000, HP 325,000, Oracle 109,000, Cisco 71,000,
Boeing 165,000, GM 209,000, and Ford 164,000.  Similarly, Siemens has 400,000, Daimler
260,000, BMW 95,000, Toyota 320,000, Sony 168,000, Samsung 276,000, LG 186,000, and
Foxconn 900,000.

Perhaps, you get my point.  All of the wildly successful social media, ecommerce,
and mobile services companies if taken together might not make up the employment
potential of one IBM or Siemens.  This becomes even more poignant when you consider
the employment opportunities afforded in the supply chains and distribution networks
of the large manufacturing companies.  We are outsourcing jobs from companies that
have created lots of them, and heavily investing in Internet companies that are
essentially advertising platforms that create very few jobs (Bloomberg Businessweek,
4/24/11).  It remains to be seen if the Facebook social-networking phenomenon is yet
another technology bubble or if it represents the new “operating system for life” that
will enable economy-wide economic growth.

But, don’t most Americans work for small firms?  Yes, they do. However, most work for
mature companies, not startups.  Only 2% of workers were involved in startups and
12.5% in companies 5 years or less in age.  55.8% worked for companies 26 years of
age or older (U.S. Census).  Unfortunately, it is the small business sector of the
job market that has been hit hardest by the recession.  Real estate, construction,
auto dealers, manufacturing suppliers, and consumer-facing services were all hit
very hard.  Small firms are having difficulty obtaining credit, are facing tax
increases and new regulations at the local, state, and federal levels (Price Waterhouse
Coopers).  With much uncertainty about the economy, healthcare reform, and the economic
stability of government, small business owners are rightfully scared.  They are also
not hiring. 

So what is the new college graduate to do? I offer my humble suggestions:
1. Read my blog post of June 16, 2010, “Good Luck with That and Have a Nice Day!”  
    Unfortunately, it is still very relevant.
2. Try living at home.  It is a surefire way to cut expenses.  Mom and Dad may 
    even be happy to see you for a while.  According to some researchers, 85% of 
    new college grads are likely to move back home (www.twentysomething.com).  
    Grads are deeply in debt—an average of $27,200 in college loans alone 
    (www.huffingtonpost.com, 5/13/11).  For those grads with less popular majors 
    this debt likely exceeds starting salaries if they are lucky enough to find work.
3. Go back to school.  It is a great time to get your MBA.  It might even make up 
    for that liberal arts background you have.  Sign up for an internship this time. 
    Think about how your course content might be useful for career development.  
    Avoid fun and/or useless classes.  Do not take classes from professors who have 
    never had a real job.  Do some informational interviews with companies you would 
    like to work for.  Network, network, network with real people face-to-face.  
    Have an Internet privacy firm scrub your digital profile from as many websites 
    as possible.  Be careful about what you post this time, especially those 
    compromising party photos (your undergraduate experience is now officially over). 
    Better yet, unsubscribe from every social media site.  You get enough ads just 
    surfing the Web.
4. Take your gap year off right now and go overseas to an emerging market country.  
    That is where the jobs are anyway.  Learn Mandarin, Vietnamese, or Portuguese 
    (Brazilian version).  You will be a minority in a strange land. Learn to think 
    and survive like one without a social safety net.  You may wish to never come 
    back.
5. Go to work for the government.  If the Fed continues to print money and the 
    debt limit is lifted as many expect, you are golden.  At least for a while.  
    However, avoid state and local governments; they have no magicians or printing 
    presses.
6. Go to work in alternative energy.  However, be aware that most companies in this 
    space are heavily dependent on government subsidies.  See #5 above. 
7. Marry someone very rich.  Age, looks, and personality are secondary.  But if you 
    go for age, marry someone very, very old.  Consult your attorney before signing 
    anything.
8. Go to work in healthcare.  Starting this year 10 thousand baby boomers are 
    turning 65 every day.  There will be plenty of patients.  The boomers are in bad 
    shape from a lifetime of overdoing every possible thing.  However, remember that 
    approximately one-third of doctors and other health care professionals are boomers
    and will retire soon.  There are not likely to be enough replacements.  Obamacare 
    is coming.  Don’t get sick.
9. Become a magician.  Learn some good tricks and grand illusions. The economy will 
    need people like you.  Soon!