We were at Borders books today as they liquidate the last of their inventory. They’re literally selling the furniture, including the local store’s commercial espresso maker for $3,000. The place was fairly busy, which goes to show robust spending is out there if the price is right.
It did make us ponder the state of the U.S. labor market as 11,000 Borders employees have already lost or will lose their jobs when doors finally close. This is not because of cyclical forces but the powerful structural changes that are taking place due to rapid technological advances. The internet, the Kindle, and the iPad are rendering the traditional bookstore obsolete.
According to the BLS,
Retail salespersons and cashiers were the occupations with the highest employment in 2010. These two occupations combined made up nearly 6 percent of total U.S. employment.
Imagine the impact on the U.S. labor market as mobile payment technology really takes flight. Coupled with globalization, the past twenty years has seen the hollowing out of the U.S. middle class with finance and technology at the high end and retail and healthcare at the low end. What is the “New Economy” for some is the the “McJobs economy” for others.
The current state of the two Americas is best characterized in today’s FT,
Steven Burd, chief executive of Safeway, a grocery chain, last month characterised the wealthiest 25 per cent of his customers as “recession’s over with, times are good, spending as they always did”.
But the other 75 per cent were “really very cautious and very concerned”. That is no surprise as they are stalked by falling house values, rising petrol prices, personal debts and job losses.
The structural changes taking place in U.S. labor market may or may not show up in the employment data to be released in a few hours. But one thing is certain, structural problems cannot be addressed with cyclical solutions. Doing so may create temporary and illusive wealth, but the consequences, as we are currently experiencing are painful and lasting.
(click here if chart is not observable)
Global Macro Monitor 
No doubt there is a long run structural unemployment problem but it seems to me that there is also a cyclical unemployment problem. When the unemployment rate moves from under 5% to 10% in two years (07-09) that kind of quick move suggests a rise in cyclical unemployment. I would expect structural unemployment to rise more slowly but steadily as worker’s skill sets become antiquated with the new technologies. Perhaps structural unemployment has been rising for some time but was not manifested in the unemployment rate until the financial crisis forced employers to cut back.