Maybe the pessimists are wrong. Maybe the so-called economic recovery will gather steam and turn out to be robust. Maybe prosperity is about to leap from its hiding place and shout, "Hey! I'm back!"
But planning your future around maybes leaves little margin for error, and it looks as if the Great Recession is morphing into the Great Hangover. Even though economists believe the recession is technically over, the unemployment rate is likely to hover near 10 percent or higher well into 2010. Businesses have slashed costs, but with sales still weak, they're in no mood to start hiring. The Congressional Budget Office predicts that the unemployment rate will stay above average until 2014 at least. Allen Sinai, an economist at Decision Economics, foresees a "difficult, probably crisis situation in the U.S. labor market that goes beyond the recession and any fledgling recovery."
A prolonged shortage of jobs is bad news for everybody. It depresses incomes, limits mobility, and lowers living standards—even for those who are working. Here are some ways to adapt to the profound changes taking place in an unforgiving economy:
Don't wait for lost jobs to return. Chances are they won't. In prior recessions, many job losses were temporary, and laid-off workers were often called back. But this time there's a lot more going on than just a recession. Jobs that can be done more cheaply elsewhere have been migrating overseas for years, and that hasn't stopped. The low cost of doing business on the Internet is transforming industries like retail, banking, media, and business services. And some industries, like autos and housing, seem likely to plateau at far lower levels of sales and employment than they had a few years ago. Waiting for a company or industry to bounce back to the levels of the boom years is a long-term gamble you're likely to lose. Better to target other industries that are growing and learn new skills or even move if that's what it takes to get closer to the action.
Don't count on big companies. They've gone to a lot of trouble to cut costs and weed out workers, which is the main reason corporate profits have held up reasonably well (and the stock market has enjoyed a historic rally). For the most part, big companies that have gotten lean want to stay that way. Many have outsourced IT work, administrative support, product development, and even sales and marketing to other firms. Some of those jobs will return, but they might be with middleman firms offering their services to bigger companies on a contract basis. So in addition to the usual corporate names, job hunters should target lesser-known firms, even if they seem like glorified temp agencies. And even professionals should be prepared for contract work until companies feel confident enough to commit to a plumper payroll.
Become entrepreneurial. Some laid-off workers have no choice but to start their own businesses, since there may be no other jobs where they live. Starting a business is often harder than it seems, and the scarcity of credit these days doesn't help. But entrepreneurs love working for themselves and reaping all the rewards of their work. And in a stutter-step economy that will probably be increasingly fragmented, the most valued workers will be those who know how to create value in whatever business they're in. Even those working in a larger company can get ahead by proposing new ways for the company to bring in revenue or reach new customers. At heart, that's what entrepreneurs do.
Juggle jobs. The old either-or paradigm—either work for somebody else or run your own company—is becoming outdated. It might make sense to do both. The Web is making it easier to write a blog, launch a hobbyist site, or start a business in your spare time while holding on to your day job and that regular paycheck. And in this economy, it's a much bigger risk to chuck it all and do something you love, since your old job may no longer be there if your plan doesn't work out and you come limping back. And many people starting a full-time business will have to do freelance work or odd jobs to bring in cash while the business takes root. It can be mentally challenging and exhausting to juggle two jobs (or more), but those who learn to do it will outlast those who don't. And remember: Complaining about the workload won't boost your paycheck.
Hold on to your dreams, but adjust your expectations. With real estate prices falling, many homeowners trying to sell are shocked to learn that their house is worth a lot less than they thought. To some extent, that's happening in the job market too. A glut of unemployed workers means that pay will come down in some industries, and the next job you get may pay less than the last one. The sense of backsliding can be maddening. But the value of any good—including your labor—is what it will fetch in the marketplace, nothing more. Just because you earned $20 an hour three years ago doesn't mean that's your value today. If you're a motivated worker with relevant skills, odds are you'll earn back the difference once you're on the job, helping your company succeed. If your skills are out of date, either sharpen them or settle in at the back of the line, since such workers are typically laid off first and hired last.
Downsize everything. Your car, your home, your appetite, and most importantly your debt. Maybe you'll be one of the lucky ones whose lifestyle escapes the ravages of the Great Hangover. But lower expenses and more manageable responsibilities will increase your wiggle room if something goes wrong. You might need to dip into savings to help fund a side business, since bank loans are hard to get. Fewer financial commitments might help you get a loan in the first place. Lenders have gotten ornery, and the less beholden to them you are, the more freedom you'll have.
Solve problems. The United States has an Underdog Economy right now. We've lost more than 7 million jobs over the last two years, a huge setback. China, India, and other countries are growing much faster. A host of other problems threatens our prosperity. Those circumstances place a higher value than usual on innovation—the ability to come up with new and better ways to solve problems. That includes everybody, at every level: checkout clerks who can make the line move faster, engineers who can squeeze more mileage from a gallon of gas, financial geniuses who can figure out how to pay down the $12 trillion national debt. Solving problems that others can't sets you apart, raises your value, and earns the gratitude of people whose lives you help improve. These days, it doesn't get much better than that.