2. We're worried about jobs
The effect of the Great Recession on career patterns is still emerging, but from what I've seen, it's a more profound change than what the Great Recession has produced in consumer behavior. My career pattern has certainly been very different from my Dad's. He stayed with one company all his working life, whereas I've changed employers more than once and even shifted industries two or three times. And it looks like the next generation or two shows another new pattern.
Two things seem to characterize work in the Great Recession. First, for more and more young workers, work consists of not just one job but of a number of jobs cobbled together into a whole. It may be handful of part-time jobs, none of which comes with benefits or any real security, but the two or three jobs during a regular working week add up to full-time work. There's not much sense that the whole is stable, and not much faith that any one of those part-time jobs will turn into a full-time gig.
A significant number of the younger workers I've talked with during the Great Recession are working two jobs (or more), even if one of those jobs is full time and does come with benefits such as health care. No job is permanent or very stable, and entire sectors of the economy seem to be in a state of constant upheaval, so the smart thing to do is to be constantly on the lookout for part-time work that can result in learning and then the demonstrated mastery of new skills.
The process of a career is no longer one of moving up the ladder inside a company or even in an industry, but instead one of aggressively adding related skills and experience because it is impossible to tell when a whole category of jobs will disappear or demand a new set of skills.
3. We have no retirement security
This finally leads to the last way in which I can see that the Great Recession has changed behavior. It's not just that jobs are less secure and job paths are less predictable -- although they are -- but also that the old advice on how to achieve end-of-career security seems so, well, irrelevant. Obviously, if you don't have a job that provides health care or a retirement plan, your future is less secure than those workers in my Dad's generation who could count on a defined company pension and company health insurance.
But the sense of insecurity goes beyond that generational shift. Until the series of bear markets that began in 2000, many workers without defined benefit retirement plans could believe that putting money away in tax-deferred 401k's and other defined contribution plans was reasonably likely to result in a reasonably secure retirement. For many workers, I think that faith, which had been eroded, was finally shattered by the Great Recession.
It's not just that the repeated bear markets of the last decade have eroded wealth (especially when you add in the effect of the global financial crisis on the value of the family home) but also that the nature of that crisis has convinced many workers that the game is fixed. They've watched their own wealth decline at the same time that the Wall Street folks, who bear a considerable share of the blame for the crisis, have not just escaped any kind of punishment but actually seen their wealth increase.
I think one of the biggest effects of the Great Recession is a sense that the game is stacked against the average guy or gal, and that the habits of saving and regular investing that were held up as the path to financial security are a cruel sham. We've all had black humor conversations around the water cooler (or the office printer) that work some riff on the joke that our retirement plan was to work until we die -- or beyond, if we can figure out how to do that.
I think this marks a huge difference between the Great Depression and Great Recession. As painful as the Great Depression was, it resulted in a program called Social Security that increased the financial security of the average worker. Many current workers fear that Social Security won't be around for them.
That wouldn't be quite so devastating if the 401k and other plans that were supposed to replace the traditional defined benefit retirement plan and to supplement Social Security were actually delivering as hoped. But if the Great Recession and the repeated bear markets of the last decade haven't totally dashed that hope, they have demonstrated that getting to a financially secure retirement will be harder than it seemed even as recently as the end of the 1990s.
We know from economic history that one result of this kind of macroeconomic insecurity is that workers react by saving more. That's only logical, and it's indeed a reasonable response to the Great Recession. Pay down debt. Don't take on new debt. Cut spending. If you can't count on high (or even decent) returns on your investment portfolio (and house) to get you to a comfortable retirement, then increase the amount you save.
For individuals, those are all sound reactions to the Great Recession. But unfortunately, the aggregate effect of those sound individual reactions is to reduce consumer spending just at the point when the economies of the developed world need more growth in order to escape the deep budget holes they've dug for themselves. If you're an Italy, Spain, France, Japan or United States looking to reduce the burden of government debt, you'd really like to see more growth rather than less. That's especially true as the developed world confronts an unprecedented aging of its population. (I'd also note that slower economic growth and a desire/need by older workers to work longer isn't exactly good news for younger workers.)
What's needed in a situation like this are programs like Social Security, or the various proposals to increase spending on the social safety net now in the talking stage in China, that provide increased security to make up for the increased uncertainty of the global economy. Unfortunately, I don't see those on the table anywhere in the developed world and certainly not in the United States.
One result is that while the Great Recession won't be as destructive as the Great Depression in the short run, the biggest effect could be a longer-lasting decline in economic growth than that of the Great Depression. (Especially if you assume, as I do, that the existence of nuclear weapons makes a replay of something like the economic stimulus that World War II provided to the U.S. economy impossible this time around.)
And the really cheery thought is that it's not absolutely certain that the Great Recession is really over yet.
Updates to Jubak's Picks
These recent blog posts contain updates to the stocks in Jubak's market-beating portfolios:
- Politics puts Lynas' ambitions on hold
- A golden age for glass
- Is fear keeping us from good stocks?
- Why Jack in the Box is worth watching
At the time of publication, Jim Jubak did not own shares of any of the company mentioned in this column in his personal portfolio. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not now own shares of any stock mentioned in this column. The fund did own shares of Apple as of the end of March. Find a full list of the stocks in the fund as of the end of March here.
Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.
Click here to find Jubak's most recent articles, blog posts and stock picks.
Stocks mentioned on the previous page include Green Mountain Coffee Roasters' (GMRC), ExxonMobil (XOM), Starbucks (SBUX) and Best Buy (BBY).
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