The Future of Work

Understanding the new rules
Wednesday, November 16, 2011, 12:05 PM

A growing number of workers are becoming increasingly concerned about the future viability of their jobs (if they have them) and, in many cases, that of their professions. Looking at a future increasingly defined by slower economic growth and higher energy costs, many are asking,

What is the future of work?

Given the "recovery’s" stagnant job market and the economy’s slide into renewed contraction, it’s a timely question. To answer it, we must first ask, What is the future of the U.S. economy?

In broad brush, the Powers That Be have gone "all in" on a bet that this recession is no different than past post-war recessions. All we need to do to get through this “rough patch” is borrow and spend money at the Federal level, and the household and business sectors will soon recover their desire and ability to borrow more and spend it all on one thing or another. We don’t really care what or how, because all spending adds up into gross domestic product (GDP).

In other words, we're going to “grow our way” out of stagnation and over-indebtedness, just as we’ve done for the past fifty years.

Unfortunately, this diagnosis is flat-out wrong. This is not just another post-war recession, and so the treatment—lowering interest rates to zero and flooding the economy with borrowed money and liquidity—isn’t working. In fact, it’s making the patient sicker by the day.

The best way to eliminate the signal noise of official propaganda (“The stock market is rising, so everything’s great for everyone!” etc.) and the high keening wails of Keynesian cargo cultists is to construct a model of the underlying fundamental forces that will shape the future.

The best way to do that is to glance at a few key charts.

Let’s start with debt. Clearly, the “growth” of the U.S. economy since 1980 is debt-based. Debt has exceeded growth by 136%. If debt had risen in tandem with GDP, then total debt would be a mere $22 trillion instead of $52 trillion.

The next chart reflects how every incremental increase in debt has had a diminishing effect on growth. Where $1 of debt once added 70 cents to GDP, now it adds basically nothing, or even reduces GDP.

We hear a lot of euphoric babble about households "deleveraging;" that is, paying down debt and thus setting the stage for the next ramp-up of household debt. But the reality is not quite so euphoric. Compared to the explosion in household debt since 1980, which we might term the debt elephant, the recent “deleveraging” reduction in debt is more like a mosquito.

Next, let’s look at jobs and employment. To make sure we’re getting the full picture, let’s look at several measures of employment as a reflection of the underlying economy.

This first chart looks like a steady onward-and-upward trend of job growth. The “jobless recovery” appears to be a modest bump in the road of ever-rising employment.

By other measures, however, employment hasn’t hit a bump in the road; it’s off the road and sinking into a bottomless bog. Here is the civilian participation rate, which measures how many folks in the civilian population are participating in the labor market in one way or another.

By this measure, the labor market has retraced to the level of the 1981-82 recession thirty years ago.

Next, let’s look at another, perhaps even more telling metric: private payrolls per capita, which is basically a measure of how many jobs there are per capita in the economy.

What this means is that beneath the glitter of a “rising GDP” and “rising stock market,” the economy is producing far fewer jobs per capita.

If we look at the total number of civilians and the total number of jobs, the chart looks even uglier. We are back to the levels of 1970s stagflation, just as women began entering the workforce en masse to compensate for declining household purchasing power.

This next chart is civilian employment per capita, which is similar to the previous chart of private payrolls per capita, but includes all jobs, including public-sector/government employment. Once again it shows that the economy is back to the levels of the mid-1980s, even including the rapid expansion of local and state government payrolls.

Another way to measure the real performance of an economy is capacity utilization -- how much of the potential capacity of the economy is being used. In good times, capacity is added because the existing capacity is running full-tilt. In recessions, there is not enough demand to use the economy’s full capacity, and therefore no reason to add to capacity with business investment.

I’ve drawn some lines to clarify what happened during each primary phase of the post-war era. During the stagflationary 1970s, capacity utilization see-sawed between growth and recession, tracing out a series of lower lows and lower highs. This downtrend reflected the reality that the economy wasn’t growing; it was stagnating, hitting new lows with every downturn, and never reaching its previous high-point during recovery.

After finally hitting bottom in the 1981-92 recession when Federal Reserve Chairman Paul Volcker vanquished inflation by jacking up interest rates to 18%, the economy entered a 30-year cycle of financialization (deregulation of the banking sector and the rise of debt as the engine of growth), globalization, and technological innovation that fueled a multi-decade trend of rising productivity.

The wheels fell off the financialization and dot-com boom in 2000, and the Federal Reserve and federal government created an even more extreme version of financialization that inflated a gigantic debt/real estate bubble. Like all financial bubbles, this one burst, and once again the Fed and federal government scrambled to inflate another debt bubble.

Since the household sector was tapped out and its primary asset, the family home, had lost a third of its bubble value, the Federal government borrowed $6 trillion to bail out the banking sector and spread trillions of dollars around as stimulus and giveaways like "Cash for Clunkers."

Unsurprisingly, this injection of trillions of dollars did boost capacity utilization. Roughly 11% of the entire GDP is borrowed and spent every year now by the federal government. But just as in the stagflationary 1970s, the decline reached a new low and the subsequent rise never got close to the previous bubble high of 2006.

Now that the economy is rolling over again, capacity utilization is also declining. 

None of this reflects a healthy economy. What it does reflect is an economy that has depended on ever-greater amounts of debt to power a diminishing trend of growth, and an economy which creates fewer and fewer jobs with ever-greater mountains of debt.

This is not a bump in the road; it is the exhaustion of the entire model of growth that we have depended on for the past 30 years. Once the debt saturation point has been reached, adding more debt subtracts from the economy rather than adds to it. This is reflected in the decline of employment by every metric: total number of jobs, civilian participation, payrolls per capita, and employment as a percentage of the total population.

We are past the point of debt saturation, and so we need a new model of employment, and indeed of “growth” itself. Sadly, as discussed in a recent report, the Status Quo financial witch-doctors have only prescribed more debt and more unproductive friction. 

Unfortunately, as the above charts abundantly illustrate, the patient (the U.S. economy) hasn’t been cured; rather, its condition has gotten worse. The stock market is like a sort of makeup that has been slathered on by the Fed to give the appearance of health, but the internal measures of jobs and income (both declining) show that both the “health” and the “recovery” are illusory.

So, the key question to ask ourselves is, Where will the demand for work be in a post-debt, post-"cheap oil" economy"?

In Part II: The Future of Work, we tackle this critical question and provide a framework for potential job seekers/switchers to use in positioning themselves for meaningful and dependable employment in this coming era. 

Click here to read Part II of this report (free executive summary; paid enrollment required to access).

Endorsed Financial Adviser Endorsed Financial Adviser

Looking for a financial adviser who sees the world through a similar lens as we do? Free consultation available.

Learn More »
Read Our New Book "Prosper!"Read Our New Book

Prosper! is a "how to" guide for living well no matter what the future brings.

Learn More »


Related content


Travlin's picture
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Outstanding report


Your report is outstanding. While your thesis is familiar to readers of this site, I am very impressed with how well you presented the issues in a clear, concise, and convincing manner. I will be sending this to people I care about who don’t yet understand why our current situation is unlike the past, and the “story” they are being told by other sources.

Your argument is thoroughly supported by hard data. What I find ironic is the source. It comes from the Federal Reserve itself; the very institution that is largely responsible for the mismanagement that created our dilemma and compounds it. They can’t claim ignorance, but the extent of delusional thinking by intelligent and powerful people is astounding.

Your contributions to this site are very helpful and welcome. Now I’m off to read part II.


Mark_BC's picture
Status: Platinum Member (Offline)
Joined: Apr 30 2010
Posts: 533
Both these articles were

Both these articles were great and offer lots of food for thought. Like Travlin, I also couldn't help but notice the irony of using the Fed's own data. In fact, if it is corrected using John WiIlliams' Shadowstats, then the trends discussed would be even more dramatic. A recent Archdruid report touched on what Travlin says, "the extent of delusional thinking by intelligent and powerful people". Basically, "what you contemplate, you imitate".


charleshughsmith's picture
Status: Platinum Member (Offline)
Joined: Aug 15 2010
Posts: 741
agreed, real trends are more pronounced

Thank you for the positive feedback and I totally agree, the actual trends are undoubtedly more pronounced than the official data.  I considered addressing that but decided not to get into a "debate" over data that might have distracted from the basic narrative.

evohep's picture
Status: Member (Offline)
Joined: Nov 17 2009
Posts: 10
Thanks Charles.

What a brilliant article.

I've been trying to explain to family and friends how our work will shift and align into more basic / fundamental survival activities.

Charles, you explained this with great intelligence and insight.

Many thanks.

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936

How far can I push this analogy?

The patient is in insulin shock.

  • shakiness
  • dizziness
  • weak feeling
  • sweating
  • nervousness
  • fast heart rate
  • pale skin color
  • hunger
  • difficulty paying attention or confusion
  • headache
  • sudden moodiness or behavior changes and
  • tingling sensations around the mouth

He needs energy. (Sugar for humans, oil for civilisations)

Didn't they use insulin shock as a cure for insanity?

straight's picture
Status: Silver Member (Offline)
Joined: Aug 25 2008
Posts: 103
the right to useful unemployment

 Hi Charles, great article.

I read your earlier articles on the future of work on oftwominds some time back, and LOVED them.

Have you read any Ivan Illich?  His brilliant book, 'the right to useful unemployment' looks at a useful existance outside of the industrial model.  The implications are profound for all levels of institutions, in that any institution claims a right to govern or control some aspect of life by professing to know better than you how to say build a house, so you cant build your own house because you are not a professional.  In a simular way you can not heal yourself.  

I am looking outside the status quo for solutions, and the more I look the more profound are the changes I see as being necessary, right down to the nature of every single institution on earth, every library, hospital, regulatory authority, corperation, and school.  

I love your writing, especially survival+

Keep up the great work.

Stewart, Brisbane

charleshughsmith's picture
Status: Platinum Member (Offline)
Joined: Aug 15 2010
Posts: 741

 Hi Straight:

Yes, I do have some of Illich's work, and he created an incredible wealthof ideas realting to work.  As you know, he saw elites of expertise as negatives, for example: "Medical nemesis: the expropriation of health."  If we follow this critique, then training more people to enter establishments that are actually negative for health, education etc., is not the solution the conventional wisdom holds.

Illich is such a rich source, I don't claim to grasp all his many insights.  Thanks for mentioning his work--I think we have much to learn from his insights.

mtmtntop's picture
Status: Member (Offline)
Joined: Nov 19 2011
Posts: 1
effect of military employment and underemployed

Thanks for the great job of consensing a real world situation into understandable terms that make us realize the propaganda machine that is actively working around us. 

I have wondered about 2 things. 

a glance at any help wanted section will revieal a large proportion of available "employment" really are ads for the military.  in your discussion ,you are showing civilian employment.  does this include the military, or is the military included in the non-civilian sector?  I believe that when the military is factored out of employment statistics, things may be far worse than we realize. 

a second factor I have wondered about is the effect of the underemployed.  Are the underemployed ( those working less than full time because full time work not available) assumed to be part of the civilian workforce?  A recent radio program I heard stated the number of underemployed was approximately equal to the unemployment rate.  If that's the case, we are seeing 18-20% of the population looking for work. 


jsuter's picture
Status: Member (Offline)
Joined: Feb 11 2010
Posts: 2

I like the quote from Arthur Miller "The task of the real intellectual consists of analyzing illusions in order to discover their causes."

But one cannot know ahead of time whether or not it is an illusion.  This could be why people in two camps attack the "illusion" of the other camp.  This week I heard Dan Miller musing about why oil company executives are unable to understand what climate change means for future generations.  "Don't they have children?"    

The psychology of climate change is still very incomplete, but the only ones who work on it seem to be pollsters or those who do surveys for consumer choices (Do I want a red car or a blue one?).  They are not looking at groups under stress - which we will be within a few years, no?   Banks do a stress test.   The military does war games.  There is no community that I know of that does a climate change stress test that might give us some insight into changing hearts and minds. 

Fennec's picture
Status: Member (Offline)
Joined: Jul 31 2011
Posts: 2
how true

 Although I fall asleep when I am inundated with so many graphs, I am more of a fundelmentalist, my intution agrees with your assesments completly.  We in this country and even the entire world have created situations that are unsolvable and are wasting time and kidding ourselves that this time is going to be like all the other times we have pulled ourselves out at the last minute.  The only way out of this is to evolve our thinking, and concepts and since evolution only works when it is not planned but adapted to anyone with any agenda with concepts of solution need to be ignored completly or we will continue over the cliff at an even faster rate.  Give chance a chance.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments