September 2010
According to 24/7 Wall Street, it has
become clear that jobs in some industries may never come back or if they do it
will take years or decades for a recovery. 24/7 Wall St. examined the Bureau of
Labor Statistics' "Employment Situation Summary" and a number of
sources that show layoffs by company and sector. The weakness in these sectors
will make it harder for the private industry, even aided by the government, to
bring down total unemployment from 9.6% and replace the 8.3 million jobs lost
during the recession. The losses in these industries have to be offset by
growth in others before there can be any net increase in American employment.
Some of the
industries are obvious. Detroit will never employ the number of people it did
five years ago. Domestic car sales hit 16 million in 2005 and 2006. That number
will be closer to 11.5 million in 2010. More cars and light vehicles are made
overseas now, in places like Mexico, to keep labor costs down.
Home
construction is another industry that will almost certainly not recover. Home
inventories are still extremely high and home prices have fallen to the levels
where they were in 2004. Prices in some markets, which include Las Vegas,
Florida and parts of California have dropped 60% to 70%. New construction in
those markets will not begin again in the foreseeable future.
Here is the
list of the ten jobs categories that will not recover based on 24/7 Wall St.
research:
1. Construction
Nationwide
construction unemployment was 17% in August, up from 16.5% in the same month
last year. Over the course of the summer, government statistics have shown
sharp drops in the construction of new homes and apartments. Building permits
are also down. Most large housing markets have more than 12 months of unsold
inventory on hand. There is also a “shadow inventory” of unsold homes – those
that have gone into foreclosure but have not been put on the market by banks.
Foreclosures and defaults are expected to rise another 3 million to 3.5 million
this year.
2. Automotive Manufacturing
General
Motors has cut over 100,000 people since the beginning of the recession in
December 2007. Ford has cut over 20,000 and Chrysler 15,000. This does not
include foreign car companies with workers in the US. By some estimates, every
car company worker layoff leads to three more layoffs in related industries
that supply the car and light truck manufacturing business. That includes
hundreds of car dealerships that have been closed in the last two years.
3. Realtors
The National
Association of Realtors reports that there were 1,370,758 realtors in October
2006 – the peak of the market. By the end of 2007, the figure was below 1.2
million. The number is below 1.1 million today, and has continued on a downward
trend. Home prices have dropped so far and so few homes are sold, that the
ability to make money in the business disappears by the day.
4. Pharmaceutical
This industry has bled workers for three years, and that trend is likely to
continue. The largest companies in the sector, such as Pfizer and Merck, have a
number of blockbuster drugs that have lost their patent protection in the last
decade. They have other pharmaceuticals that will lose that protection in the
next decade. Sales of most of these drugs will move to generic companies that
will sell them for far less, and erode critical revenue sources for the huge
pharma firms. Most companies in the industry admit that they cannot replace the
drugs that go “off patent” fast enough to keep their revenue high. The other
reason employment in the sector will stay down and may drop further is that big
drug companies are merging to save costs and most of those costs are people.
Pfizer has cut 30,000 people since the start of the recession. Merck has cut
25,000, and these companies and their peers expect that they will have to bring
down costs even more.
5. Newspapers
The layoffs in newspapers began in the 1980s as presses became more
automated and tens of thousands of pressmen lost jobs. More recently, the
changing habits of news consumption have increased internet readers and hurt
print, which has caused more job losses in press rooms. Reporters and editors
have lost work as print subscribers have stopped paying for what they can get
online for free. One recent study claims that the newspaper industry employee
base fell from 767,000 jobs in 1998 to 619,000 jobs in 2008. The U.S.
Department of Labor has forecast another 120,000 newspaper layoffs over the
next 10 years.
6. Airline Employees
The number of pilots, stewards, and ground crew workers is shrinking as
consolidation and the recession have hurt the industry badly. Mergers in the
last two years, between Delta and Northwest and United’s merger with
Continental, have decreased the number of large carriers in the US by half. The
Bureau of Transportation Statistics reported that the number of airline employees
in the US has fallen by 25% since 2001. And the latest merger firings have not
yet been announced. Jobs for pilots and flight engineers fell by 30.4% in the
third quarter of 2009 to 96,000 from 138,000 jobs in 2008, according to the
BLS.
7. Big Telecom
AT&T, Sprint-Nextel, and Verizon have passed their peak employment
levels. Employment in the sector will not recover and could shrink for two
reason: (1) the landline business is falling rapidly as home phone users move
to VoIP and (2) increased adoption of cellphones. The cellular subscription
business has been damaged by price wars meant to gain market share in the
wireless industry; one that has stagnated due to a 90% market penetration in
the US. Sprint made substantial cuts as it posted three years of losses. The
most recent was 2,500 people in November last year. In 2008, AT&T said it
would lay off 12,000 people. Verizon recently said it would fire 13,000
employees from its land line business, and its CFO said the downsizing is not
over.
8. State and Local Government Jobs
The level of unemployment in this sector continues to rise. Budget
imbalances in a number of states have already caused mass layoffs as tax
receipts have dropped sharply. A recent report by the National Governors
Association and the National Association of State Budget Officers found that 22
states furloughed employees and 25 laid off workers during fiscal year 2009-10.
As an example, California slashed its workforce has been reduced by tens of
thousands – some were laid off permanently and some are out of work and may be
recalled. Former eBay (NYSE: EBAY) CEO Meg Whitman, who is running for governor
of California, said she will cut the state workforce by another 40,000 and
sharply cut pensions for new workers. Forty-six states face budget shortfalls
that will total $112 billion for the fiscal year ending next June, according to
the Center on Budget and Policy Priorities. Municipalities face similar
difficulties as property taxes plummet.
9. Installation, Maintenance, and
Repair
A set of industries related to housing and commercial construction and
maintenance will also not generate new jobs. This is the employment sector the
government calls “installation, maintenance, and repair.” Jobs in this sector
are dependent on real estate. While many of the workers in these industries,
such as plumbers and electricians, are relatively well paid and many work on
homes and commercial buildings, some are mechanics who work on industrial
equipment, aircraft and plants. These industries will be more crowded as people
with training in related work leave the Armed Forces with the draw drawdown in
troops in Iraq, which will put downward pressure on wages.
10. Bank Tellers
Long before the recession, personal banking had begun to become automated.
Over the last decade, banks have provided increasing access to banking accounts
online, through call centers and at ATM kiosks. This technologically driven
shift has been and will continue to be the chief cause of bank teller layoffs.
According the the FDIC, since 2008, at the beginning of the recession, there
have been 283 banks closed. Compared to the period 2000 to 2007, when only 27
banks closed, that’s nearly 10 times as many bank closings in less than half
the time. And as of August 20th, state and federal regulators had closed 118
banks this year, making it on pace to exceed the 140 banks closed in 2009.
Although nearly all of these banks have been acquired by other financial
institutions, bank branch closings still occur – employees and locations are
consolidated. The single largest employee group at bank branches are bank
tellers, and they will bare the brunt of the continued cost cutting.
For more information visit:
http://247wallst.com/2010/09/07/the-ten-american-industries-which-will-never-recover/
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