The Saeculum Decoded
A Blog by Neil Howe
Jul 302010

This article in USA Today draws some parallels to the 1930’s and today’s economy. Interesting to think about: The Dow first closed above 10,000 back on March 29, 1999.  That’s back when Bill Clinton  was still President, George W. Bush had not yet announced his intention to run for the White House… and three months before Lance Armstrong won his **first** Tour de France.  Now Lance is too old to keep up with the peloton.  And the Dow is still around 10,000.

Provocative Quote:

If history were to repeat itself and stocks are in the 10th year of a 16-year secular bear market, as Rosenberg believes, the Dow, which closed Friday at 10,097.90, could fall to 5000.

Jul 292010

More evidence of the onset of a W-shaped recession?  Or perhaps evidence that the recent recession never ended (the NBER has still not declared an end to the recession that started in December of 2007)?

For now, some affluent spenders are getting thrifty. Linda Stasiak, who sells high-end skin care products to retailers like Whole Foods, said that her biggest sales increase had been for a $15.95 tube wringer, made to get every last drop out of a bottle of lotion.  “During peak time, I don’t even really remember selling them,” Ms. Stasiak said.

Jul 212010

This article in the LA Times about Sean Combs seems to be a characteristic Generation X (born 1961-1981) evolution: Starting out with a desperate and edgy and alienated and violent image and gradually morphing into something nicer and funnier.  Diddy is following the path of Ice Cube, who went from NWA to “Are We There Yet?”  For slightly older examples, think of Eddie Murphy (actor) or Robert Rodriguez (director).  Anyone care to comment on the significance of this?  I’m wondering about parallels in the Lost Generation — Humphrey Bogart or Jimmy Cagney, for example, who definitely trended “nicer” from the 20s and early 30s to the late 30s and 40s.  Instead of just gunning other “mugs” down, Cagney even went back  to his Vaudeville roots and started singing and dancing.

Jul 172010

Last week there was a NYT feature story about a 24-year-old Millennial (born 1982-200?), a recent grad of Colgate University with a stellar academic record, who has been living with his parents (and grandfather) over the last six months sending resumes and looking for a job.  He wants an executive track corporate position.  A couple of months ago, he was turned down by an insurance company for the job he applied for—but was offered a lesser job as an insurance adjustor for $40K.  The Millennial turned it down, saying that the company made clear it was at least ten levels below the job he wanted.  The author interlaced the story with statistics on the severity of the current “Great Recession” for young adults.

The story lit up a firestorm of reader responses: no less than 1,487 comments thus far, and much larger echoes on the blogosphere.  Many of the commenters lambasted the NYT for suggesting that this privileged young man’s experience (he lives in a nice suburban home and his dad is president of a small manufacturing company) is in any way representative of the employment hardships most youth are facing today.  Even more excoriated the young man for turning down the $40K offer—and the family for letting him live at home while turning down such offers.  The most vicious remarks seemed to come from older (Generation X (born 1961-1981) and Boomer (born 1943-1960)) readers, who often cited their own tough, low-salary beginnings.  Apparently, they disapprove of this generation’s tendency to hold fast to long-term plans and dreams.  Be realistic, they insist.  Eat humble pie.  It will be good for you (to repeat what older Chinese now tell the rising “Little Emperor” generation) to “taste bitterness.”

Wow.  Stern stuff.  What’s surprising about all this indignation is just how vague these critics are about just what is *wrong* about what is going on in this story:

  • The Millennial himself is not complaining.  There is no whininess.  He disavows any legitimate comparison between his own situation and what the unemployed faced, say, during the Great Depression.  He’s looking forward to a happy ending–as are most unemployed Millennials (something we know from data from Pew and others).
  • The parents are not complaining.  The son gets along very well with his  (Boomer) parents and (G.I.) grandpa and runs errands for them.  The marginal dollar cost of the son living at home seems trivial and doesn’t really bother anyone—though admittedly the older folks worry sometimes about the young man’s career.  This is also typical.  The survey data indicate that today’s Millennials and Boomers get along much better in the same home than young Boomers and their own parents did 35 or 40 years ago—when many young Boomers report that they left home in anger… or that their parents simply kicked them out.  Take this trend (closer inter-generational households) and extrapolate it out over the next couple decades and you could be looking at a win-win solution to our unaffordable Social Security, Medicare, and Medicaid liabilities, a solution predicated on greater mutual dependence within families.  Our number one fiscal nightmare solved.  And this is a *bad* thing?
  • There is no evidence that this Millennial is selfish or anti-community.  In fact, he expected to enter officer training with the Marine Corps but was barred at the last moment due to childhood asthma.
  • The guy is clearly keeping busy, volunteering for the fire department, working for neighbors.  By the end of the article, the reader learns that he is no longer actually living at home at all, but living with brother (a guy who did get the $75 opening corporate job) to sub for a roommate who just moved out.  He is planning to temp for local eateries while there.  Totally “temp” work—as opposed to quasi-permanent “careers” that the young person does not really want—is also a typical Millennial strategy.
  • There is, finally, widespread agreement among labor market economists that taking a lower initial salary, while certainly a doable and often successful strategy for long-term success, is not the only strategy.  On average, it is likely to result in a lower salary trajectory for many years to come.  Millennials plan ahead and have long time horizons.  If an executive track is important to them tomorrow, they will plan accordingly today.

So let’s move to the bottom line here.

Should we feel sorry for this young man?  No, but then again he’s not asking for that.

Did he make an irrevocable career mistake by not accepting the $40K position?  Not as far as I can see.

Is it unfair that, over the course of the business cycle, youth who graduate into a severe recession are disadvantaged in their career paths relative to those who graduate into a boom?  Yes, it’s unfair, but no more so than a lot of the other vicissitudes of fortune that hit some people and not others.  Besides, the effects of these “cohort timing” differences, while long lasting, gradually fade over time.  As Glen Elder showed, the Great Depression’s impact on the young adults of the 1930s was largely forgotten by the time this cohort reached its peak lifetime earnings years in the late 1960s.  (By then, their salaries didn’t concern most of them nearly so much as their kids’ music!).

Would America be a better place if today’s young Millennials were eager to leave their parents at all cost, even if it meant taking a job they hate?  You’ll have to explain to me why.

To be sure, one might reasonably argue that not everyone, not even everyone with excellent college credentials, can hold out for a $75K salary.  True enough.  But not everyone wants to hold out for a high salary.  And many of those who do will ultimately change their mind.  Maybe even this young man.  So?

My question is: Why do the sober-minded, future-oriented career choices of today’s Millennials make so many Boomers and Xers jump up and down in agitated condemnation?

Jul 132010

Farrell pulls out all the stops in this histrionic, if not hysterical, overview of the America’s economic prospects.

Still, there’s no denying the mounting bad news: China has peaked, Europe’s in trouble, and the American economy has hit a “rough patch” at the very least.  The Dow is down seven straight days.  The fear about inflation is being eclipsed once again (as we always warned) by fears about deflation.  The long bond keeps climbing.  The gap between the TIPS (inflation-adjusted) rate and nominal rate keeps narrowing.  The Fed continues to pump reserves into the banking system (literally half of the money supply created in the U.S. over the last 234 years has been created in the last three years), but the velocity of money plummets because no one wants to lend… or borrow.  Initially, everyone said, well, we’re just too uncertain about America’s immediate political, regulatory, and economic future to want to lend.  Increasingly, potential lenders are beginning to wonder: If I just hoard my cash, will it be worth *more* a year from now than it is today?  Central bankers fear nothing more than the psychology of deflationary expectations.  They fear it even more than inflation.  It is the one monster against which they have no weapons.

Some (most notably Krugman) say we need a vast expansion in fiscal stimulus.  Keynes to the third power.  It is certainly too late for that for Europe.  (After all, they actually need to worry about a collapse in their exchange rate.)  But it may even be too late for that for the United States.  We’ve simply taken the “debt” cure too many times—its side effects now exceed its efficacy.  Farrell excerpts a good quote from the Economist: “Borrowing has been the answer to all economic troubles in the past 25 years. Now debt itself has become the problem.  A society built on consumption will have to pay more attention to saving. The idea that using borrowed money to buy assets” is over, “the debt-financed model has reached its limit. Most of the options for dealing with the debt overhang are unpalatable. … The battle between borrowers and creditors may be the defining struggle of the next generation.”

Jul 092010

OK, this is just one most good-news story about a turn-around middle school. But it’s interesting that time and again we notice the same ingredients for success whenever you read these stories.  There’s the fanatical emphasis on structure, even regimentation.  The nonstop checking to make sure every kid is accounted for.  The detailed scripting of lesson plans, including the use of “direct instruction.”  The constant use of testing-not for final evaluation, but to assess the exact extent of learning week to week.  The nonstop feedback to the kids themselves.   Every teacher checks to make sure that every student is accounted for, that every student is busy and engaged. Proper behavior comes first, then learning.  Bars on windows are replaced by bright colors.  And-here’s the Generation X (born 1961-1981) touch I really like-the school principal is fully in charge.  No one looks to “the system.”  It’s the principal who “owns” the school, is captain of the ship.

Principal: “”Children deserve the best, every day, now,” he said. ” ‘Can’t’ shouldn’t even exist in your dictionary. You have to find a way. That’s why we’re getting paid.”

Jul 072010

Creativity, risk, deception: These are the tools without which no Generation X (born 1961-1981) can get the job done right.  The conflict between this Boomer (flag officer) versus Gen Xer (field-grade officer) is something I have seen before.  This article simply offers another example of what the argument is about.  Sooner or later, thanks to generational replacement, Xers will win this argument.

Michael Oates, btw, is a late-wave Boomer.  But he speaks for his junior fellow officers.  No more than General George Patton or Francis “Swamp Fox” Marion, this is not a generation that cares much about the Marquess of Queensberry rules.

Speaking of Patton, I think everyone who saw the movie recalls that Patton himself was used (against his will) to deceive the Germans on several occasions, including the ruse of invading Greece rather than Sicily, which is mentioned in this article.