Jobs

Most predictions anticipate that the unemployment rate will continue to rise slowly, eventually going slightly over 10% before it starts to decline. This is based on the fact that some lagging industries are still reducing workforce and that leading industries are reluctant to increase hiring until the recovery pattern is clear. With slow hiring and new entrants to the workforce, the prediction is that unemployment will grow a bit more.

I think there are two factors that might prove these predictions wrong. Now, I don't see unemployment dropping dramatically, but I do think the prevalent view does not account for the increase in boomer retirements based on increase in equity values and the creation of jobs related to the entrepreneurial efforts of many of those who lost their jobs during the recession.

Many boomers have become retirement eligible but were unwilling to take the step as the value of their houses and equities collapsed last year. We have seen some significant recovery in the equity market and I believe it will continue, with minor corrections until the end of the year until the S&P reaches 1200 or so. In addition, we have seen the decline in home prices slow and start to reverse. Now, remember that prices are more deflated in some prime retirement areas than they are in the Northern States. Relatively speaking, if you have a house in the north, it is worth 20% less, but you can buy a house in Florida, Nevada or Arizona that is down almost 40%. As this fact becomes clearer to many retirement eligible boomers and they see that the monthly income they can get supports a good lifestyle, I believe the number of retirements will increase fairly dramatically.

The second factor is what I call the ingenuity factor. Many Americans are coming up with creative ideas on new business opportunities, and implementing them. As these ideas bear fruit we will see small companies start to build and hire. I believe a lot of this is already happening.

I know some of these trends will take time to develop fully, but I believe they have already started. I also think they are enough to keep the unemployment rate where it is now and will perhaps bring it down a few points.