Do continuing job losses mean a greater economic shift?

You've probably heard terms before like "creative destruction," in which new technologies and ways of doing business can transform entire industries. But what happens if the entire economy is facing a generational shift? From a story in the New York Times:

Another 651,000 jobs disappeared from the American economy in February, the government reported Friday, as the unemployment rate soared to 8.1 percent — its highest level since 1983.

The latest grim scorecard of contraction in the American workplace largely destroyed what hopes remained for an economic recovery in the first half of this year, and added to a growing sense that 2009 is probably a lost cause...

The acceleration has convinced some economists that, far from an ordinary downturn after which jobs will return, the contraction under way reflects a fundamental restructuring of the American economy. In crucial industries — particularly manufacturing, financial services and retail — many companies have opted to abandon whole areas of business...

For American policy makers, such a reality poses fundamental challenges to the traditional response to hard times. For decades, the government has reacted to economic downturns by handing out temporary unemployment insurance checks, relying upon the resumption of economic growth to deliver needed jobs.

This time, argues Mr. Silvia, the government needs to put a much greater emphasis on retraining workers for careers in other industries.In the auto industry, for example annual American car sales have dropped from some 17 million a year a few years ago to 9 million now. Even if sales increase to 10 or 12 million, that still leaves a lot of unneeded factories...

Much the same can be said for financial services, which gave up another 44,000 jobs in February. During the housing boom, banks hired tens of thousands of well-compensated traders, analysts and marketers to sell mortgage-backed securities and other exotic flavors of investments. That industry is unlikely to return to anything close to its former shape...

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Job losses escalating worldwide

The good news is that we're not alone in this recession. The bad news is that escalating job losses elsewhere in the world are creating instability that the U.S. director of national intelligence claims is a larger threat than terrorism. From a New York Times article:

Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs. High unemployment rates, especially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria and Iceland and contributed to strikes in Britain and France...

Just last week, the new United States director of national intelligence, Dennis C. Blair, told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism.

“Nearly everybody has been caught by surprise at the speed in which unemployment is increasing, and are groping for a response,” said Nicolas Véron, a fellow at Bruegel, a research center in Brussels that focuses on Europe’s role in the global economy.

In emerging economies like those in Eastern Europe, there are fears that growing joblessness might encourage a move away from free-market, pro-Western policies, while in developed countries unemployment could bolster efforts to protect local industries at the expense of global trade.

Indeed, some European stimulus packages, as well as one passed Friday in the United States, include protections for domestic companies, increasing the likelihood of protectionist trade battles...

Millions of migrant workers in mainland China are searching for jobs but finding that factories are shutting down. Though not as large as the disturbances in Greece or the Baltics, there have been dozens of protests at individual factories in China and Indonesia where workers were laid off with little or no notice. The breadth of the problem is also becoming apparent in Taiwan, where exports were down 42.9 percent last month, compared with a year ago, the steepest plunge in Asia...

Calls for protectionism have resonated among a fearful public. In Britain, refinery and power plant employees walked off the job last month to protest the use of workers from Italy and Portugal at a construction project on the coast. Some held up signs highlighting Prime Minister Gordon Brown’s earlier promise of “British jobs for British workers.”...

Even India, whose startling rise to the forefront of the global economy was portrayed in the hit movie “Slumdog Millionaire,” has hit a wall. About 500,000 people lost jobs between October and December 2008, according to one recent analysis...

Many newer workers, especially those in countries that moved from communism to capitalism in the 1990s, have known only boom times since then. For them, the shift is especially jarring, a main reason for the violence that exploded recently in countries like Latvia, a former Soviet republic...

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