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Job Creation and Green Energy

asiablues's picture





 

By Dian L. Chu, Economic Forecasts & Opinions

Even though unemployment claims drop, while job openings rise in September, the U.S. economy still shed 95,000 jobs in September with steep losses in government employment offsetting moderate rise in private sectors, based on the latest Labor Department reports.

The Math of Jobs

It is clear that the current employment trend does not fit into the harsh math of jobs - To make up for the more than 7 million jobs lost in the past two years, the U.S. would need 200,000 net new jobs each month for the next seven years to get unemployment back to what used to be considered “normal” 5 percent.

Companies just aren't ramping up hiring fast enough to reduce the unemployment rate, now 9.6 percent. And by Gallop’s measure, jobless rate in September is already at 10.1 percent, with an underemployment rate of 18.8 percent.

Green Tech & Manufacturing?

So where will the U.S. find jobs? In addition to aiming to double American export in the next five years, President Obama has long touted green energy jobs as the way to stimulate job growth and lead the economy out of recession. As recent as Saturday, Oct. 2, in his weekly national address, President Obama once again promoted green energy jobs:

"There is perhaps no industry with more potential to create jobs now, and growth in the coming years, than clean energy ….This will mean hundreds of thousands of new American jobs by 2012."

Industry Life Cycle

While most are wrapped up in the excitement of a future in clean energy, and some experts believe the U.S. may devalue its currency to achieve an export advantage, say over China, to bring jobs back to America, people tend to overlook where clean tech and manufacturing are situated in the Industry Life Cycle.

One reason that clean energy is classified as an “emerging technology” is that it is still on the far left side (development phase) of the Industry Life Cycle in terms of market size and maturity.

Meanwhile, the economic structure of the U.S. has been evolving from manufacturing-based into one that’s high tech and services oriented (for example, Info Tech, unconventional oil and gas, digital oilfield, and defense).

This natural evolution has thus rendered the U.S. manufacturing relatively uncompetitive, and sitting on the right (declining) side of the Industry Life Cycle (see chart).

In other words, this type of sectors are simply not big enough or growing enough to make a significant impact on GDP or employment—in the near to medium term--in an economy as big as the United States.

Clean Tech – U.S. Has Little Competitive Advantage

Within the energy sector, the U.S. has a strong presence in the conventional energy supply chain due to the dominance of major oil companies such as Exxon Mobil and Chevron, and the Big Four oilfield services players (Schlumberger, Halliburton, Baker Hughes and Weatherford); however, the supply chain of the alternative energy sector is largely with the European and Asian companies.

Furthermore, unlike the infrastructure spending on roads and bridges, the green stimulus funding does not increase the demand side of the market due to the lack of mass delivery system and the still high economic threshold (remember where it is at in the Industry Life Cycle).

With companies scrambling for government funds in tight credit conditions after the global financial crisis, the green funding actually increased demand in the middle supply chain for equipment such as wind turbine, and solar panels which the U.S. does not have the competitive advantage.

Green Jobs So Far?

So, it is of no surprise that even though more than 11 percent - About $92 billion--of President Obama's original $814 billion of stimulus funds were targeted for renewable energy-- at the expense of the tried and true construction infrastructure-- the results have been disappointing so far.

According to The Washington Times, only about $20 billion of the allotted funds have been spent - the slowest disbursement rate for any category of stimulus spending. Private analysts are skeptical of White House estimates that the green funding created 190,700 jobs.

Meanwhile, the Department of Energy estimated that 82,000 jobs have been created, while acknowledging that as much as 80 percent of some green programs went to foreign firms.

Service Sector Competitiveness

The industry cycle and supply chain analysis discussed here is further supported by a recent McKinsey Global Institute (MGI) research. After examining six industry sectors across eight countries, MGI concludes that to create jobs, service sector competitiveness holds the key and that competitiveness in new innovative sectors is not enough to boost economy-wide employment and growth. (See graph from MGI)

MGI further cited statistics that from 1995 to 2005, service sectors generated all net job growth in high-income economies and 85 percent of net new jobs in emerging economies.

Green Tech – Up to Speed in Ten?

Undeniably, innovation in R&D-intensive sectors including green technology may play an important role in the overall economic picture from a long term and strategic point of view--think ten years down the road.  Nevertheless, it is not at the immediate tier (jobs, food, place to live) of people’s Hierarchy of Needs right now – “Nice to Have..In the Future” vs. “Got To Have…Now”.

I have not even begun to discuss the supply security and environmental risks associated with rare earth metals -- of which China controls 97% of the world's supply. These are essential and have no substitution in many alternative and renewable energy sources.

Where Policy Could Have Made a Difference, But....

In order to make a dent in the 10% unemployment rate, it would be more efficient and effective to direct the bulk of government resource towards the large and established sectors in the Growth and Maturity stage, while still supporting sectors in the Development and Intro stage.

That means fostering sectors such as infrastructure (jobless rate in the construction sector, for example, is still riding high at 17.2%), capitalizing on the strong services sectors, while working on some deep-rooted structural and skill mismatch problems in the labor market.

With the world’s top economic minds at its disposal, I’m certain this is nothing new to the Administration. But unfortunately, the policies implemented so far have been doing quite the opposite where the government could have helped and made a difference.

I guess it is just the case as the old saying goes—“You can lead a horse to water, but you can't make him drink”. To that end, President Obama will most likely be greatly disappointed pinning jobs hope on clean tech and trade/currency maneuvers to prop up the declining-for-over-a-decade manufacturing sector.

Dian L. Chu, Oct. 12, 2010

 


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Thu, 10/14/2010 - 00:33 | Link to Comment IAmTheStig
IAmTheStig's picture

Here's a good way to reduce unemployment:  buy all of those foreclosured houses at 50 cents on the dollar (hell, Fannie and Freddie "own" them already, might as well speed it up); hire the unemployed construction workers to level these houses.  Presto, you have just taken years worth of inventory out of the market, cleaned up the bank's balance sheets, and gotten some money into people's pockets (who will actually spend it instead of giving it to banks to earn 25bps at the Fed).

Next problem....

 

Thu, 10/14/2010 - 23:49 | Link to Comment chunkylover42
chunkylover42's picture

And then what do you do with the workers who just knocked down the houses?  Once they are done, they have no work to do.  Should they build new houses then?  Well then what was the point of knocking down the old ones?

This is Bastiat's broken window fallacy, or cash for clunkers.  You are paying people to destroy a perfectly productive and useful asset, in this case a home (notwithstanding those that are uninhabitable, but I don't think that's what you're getting at here).  This is hardly economic progress and does nothing to fix the problem in the long-term.

Wed, 10/13/2010 - 23:57 | Link to Comment Bear
Bear's picture

The only way to make green energy plausible is to have $200+ crude prices ... Oh maybe green will be there sooner than you think. Windmills in Washington may be a great play ... hot air is "drivin those turbines" even faster these days. Obama alone could light a city.

Wed, 10/13/2010 - 20:13 | Link to Comment gwar5
gwar5's picture

Global warming a fraud? Yep.

350 milion years ago it was called the Carboniferous Period for good reason. 3500-5000 CO2 ppm then, and is only 386 ppm CO2 now. We are in a period of all time low CO2 in the planet's history.

In 1989 the greenies ditched 75% of the 6000 global thermometer data -- all from the cold areas of the planet. Viola -- in 1990 they declared there was global warming without resetting the baseline average.  The cheating only got far more blatant and worse from there.

We all want a nice planet but if the greenies are really serious they will go to China, Russia and Brazil and bug them. Their efforts to shut down the West are counterproductive and only forces exploration go to the dirtiest places.

We have the cleanest regulations, if we shut down, what was the point? Greenies are merely proving they are punitive to the West for nefarious reasons.

 

 

 

Wed, 10/13/2010 - 20:12 | Link to Comment CEOoftheSOFA
CEOoftheSOFA's picture

I have a problem with this comment: 

"Meanwhile, the economic structure of the U.S. has been evolving from manufacturing-based into one that’s high tech and services oriented (for example, Info Tech, unconventional oil and gas, digital oilfield, and defense).

This statement is  not only wrong but it has the situation backwards.  The evolution to a "service economy" is not a natural evolution.  It is only happening because the manufacturing sector has been hurt by increasingly high taxes over a 5 decade period.  The only game left is the service sector.  Unfortunately, the nation cannot survive with only the service sector.  The service sector, whether it be hamburger flippers or Wall Street money managers, simply plays with old money which was accumulated during the manufacturing era.  Manufacturing is what the economy was built on because it has the highest value added.

And since when does the economy depend on unconventional energy resources?  Don't the jobs in conventional energy resources count?

It should be a red flag if we are relying on politicians to determine where the economy should grow.  What are we, communists?

 

 

Wed, 10/13/2010 - 20:06 | Link to Comment mechawreck2
mechawreck2's picture

As someone who works in the energy sector, it continually amazes me how otherwise "libertarian" government-spending critics suddenly find themselves convinced that government can make it happen here.  The Feds can screw up absolutely everything else, from taxes to the DMV to health care but, by God, those genius Congressmen are right as rain in nationalizing the allocation of capital in the energy sector.

Renewable energy, were it actually cost-competitive instead of 5-10x more than natural gas, for example (a domestic product btw), would be a nice luxury.  Instead, it places the equivalent of a huge, economy-crushing tax on tax- and rate-payers (and they both pay).  Massively counterproductive... if you can't understand how this works, forget (just for a moment) the atmosphere and imagine building a bunch of solar+wind+storage so you can keep the lights on all the time, or build one natural gas plant to generate the same exact power ... and then tax people so 1000 people can be paid to dig and refill holes every year. 

Wed, 10/13/2010 - 19:58 | Link to Comment gwar5
gwar5's picture

Green energy jobs are a fraud, like the global warming fraud.

Spain is the failed and discredited socialist central planning model for all of this, insofar as they are 7 years ahead of us and it's been a disaster. Yet, greenies insist we continue down this cul de sac. 

Our central planners have tried to hide Spain's green failure the same way they've tried to hide the failure of the European socialist model. It's all collapsing in the EU despite decades of enjoying the US military subsidy.  

The global warming scare and energy tax is a desperate attempt at propping up the deficit spending model another generation. Drill baby, before it's too late.

 

 

 

Wed, 10/13/2010 - 20:24 | Link to Comment Concentrated po...
Concentrated power has always been the enemy of liberty.'s picture

I too am a global warming denyer and will not be conscripted as an acolyte to the gaia cult.  Instead of government subsidies for pork filled cash cows in the form of earmakrs for votes we should drill in the gulf and anwar and all over the place.  I like incandescent light bulbs, and I don't like the mercury filled flourescent bulbs.

Wed, 10/13/2010 - 19:09 | Link to Comment RecoveringDebtJunkie
RecoveringDebtJunkie's picture

This is exactly the short-sighted mentality that got us here in the first place, IMHO. The amount of decent paying jobs created by alternative energy development is just an added benefit to the much more important benefit of making our economic systems less dependent on fossil fuels (in the short term!)and preventing climate change.

"I have not even begun to discuss the supply security and environmental risks associated with rare earth metals -- of which China controls 97% of the world's supply. These are essential and have no substitution in many alternative and renewable energy sources."

As opposed to the supply security and environmental risks associated with fossil fuels?? Please.

We could keep misallocating resources into industries in their growth & mature phases, and then watch that capital disappear just as it is doing in the industry which grew the fastest in recent years - finance.

Or... we could enter our own mature phase and start thinking about long-term sustainability, which would also lead to security and some jobs.

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