Political Actions and Inactions
Restraining Economic Growth
Oceanside, CA – The government shutdown and the debt ceiling debate have played out as we predicted in the September column: both political parties played a game of chicken, and the can was kicked down the road to January 15th for the next shutdown, and to February 7th for the debt ceiling. A side effect of this standoff was the delay of economic data from the government in terms of housing starts, retail sales, job creation and more. Such actions create more uncertainty about which direction the economy is headed.
Consumer and Business Confidence Falls
Consumer and business confidence dropped in September as most taxpayers anticipate higher health care costs, tax increases to start 2014, and uncertainty due to the fighting between political parties. Retailers have lowered their expectations for the Christmas shopping season.
Meanwhile, U.S. households struggle to maintain enough income just to keep up with rising costs and facing a future potentially dominated by growth in part-time jobs. “There are now some economists questioning whether the recent gains in housing can be sustained next year, given the recent direction and tone set by policy makers,” said Frank Chow, chief economist for Trade Show Executive Media Group. “If there is to be a real chance for an economic revival, education along with other structural reforms such as infrastructure, tax systems, regulations, and energy policy must take precedence on already crowded policy agendas,” he said.
Trade Show Performance
Despite the political turmoil — and because exhibiting decisions are made months in advance — trade show growth strengthened as the year progressed. Table 1, compiled from Trade Show Executive’s Dashboard of Monthly Trade Show Metrics, tracks the three growth metrics [net square feet of exhibit space, number of exhibiting companies and total attendance figures] and provides a blended growth average of all three metrics each quarter this year. The analysis reveals that during both the Second and Third Quarters of 2013, trade shows bucked economic uncertainties and political power struggles to grow more than double that of the First Quarter trade shows — by a blended average of 2.8% vs. 1.3% in Q1. Will the growth continue? TSE’s Exposition Forecasting Board members are mixed in their outlooks, but collectively, they are forecasting growth rates of about 2.3% for 2014.
The Role of Education in Economic Growth
Since the start of the recovery, Chow has forecasted years of slow growth for the U.S. unless we (the government and private sector) reprioritize our investments to deal with the country’s many structural problems. Last month, he suggested education should be the top priority in revitalizing our economy. “Not only will this establish a better foundation for the future, but it explains partly why jobs growth has been so anemic recently,” Chow asserted.
For over three decades, Americans have heard that their kids are lagging behind the rest of the developed world in education. “Now we have proof,” said Chow. “Although there has been some improvement in the proficiency tests scores in the past decade, the U.S. has fallen further behind other developed counties. Chow cited a few studies and government reports reflecting this setback:
- The U.S. invests more in K-12 public education than many other developed countries, yet students remain poorly prepared compared with global peers, based on international tests by the Program for International Student Assessment (PISA), which measures the performance of 15-year-olds in reading, mathematics and science every three years.
- A recent report by the nonprofit testing organization, ACT, found that only 22% of U.S. high school students met “college ready” standards in all of their core subjects. Even among college-bound seniors, only 43% met college-ready standards.
- Contrary to popular belief, 25% of high school dropouts are not qualified to serve in the military. Surprisingly, 30% of high school graduates still lack the basic math, science, and English competency to pass the Armed Services Vocational Aptitude Battery.
- According to the Organization for Economic Cooperation and Development (OECD) research, after World War II, the United States had the No. 1 high school graduation rate in the world. Today, it has dropped to No. 22 among 27 industrialized nations. Also, among 34 countries, U.S. students rank 25th in math, 17th in science and 14th in reading. “This means by the end of the 8th grade, U.S. students are about two years behind their peers in other countries,” Chow pointed out. Also, a recent report by Harvard University’s Program on Education Policy and Governance found that more countries were improving at a rate significantly faster than the U.S. for the period 1995 to 2009.
“Even the business community says recent graduates lack the skills necessary in today’s world,” Chow said. Here are some findings from various reports:
- More than 75% of employers report new employees with four-year degrees lacked “excellent” basic knowledge and applied skills.
- The Business Roundtable found that despite sustained unemployment, employers are finding it difficult to hire Americans with the skills their jobs require, and many expect this problem to intensify. Nearly half say recent overall high school graduates are “deficient.”
- A March 2012 McKinsey Global Institute Report lists skill mismatches and educationally unprepared applicants as chief reasons why millions of jobs go unfilled in America every day.
- “The percentage of jobs in the U.S. economy requiring a college degree will increase to 63% in the next decade,” Chow pointed out. “This will require 22 million new employees with college degrees.” At the current pace, Chow said the nation will fall at least 3 million short.
“Decades of deficient education has led to the anemic jobs growth during the recovery,” Chow said. Economists say a highly-skilled workforce is the key to economic recovery. As of July 2013, there were already 3.7 million U.S. job openings that companies are having difficulty filling. “This number has been rising during the recovery despite high unemployment,” Chow said. “Many companies must look overseas for skilled workers — from machinists to programmers.”
To be clear, it is not a matter of lack of funding, Chow said. The OECD found the U.S. spent more than $22,700 per student in 2010 across all levels of education, by far the most among the 18 industrialized countries reviewed. Once they have 10 years of experience under their belt, U.S. secondary school teachers earn some of the highest salaries among developed nations. The federal government has made hefty financial commitments to education including the implementation of No Child Left Behind signed into law on January 8, 2002. Recently, about $89 billion in stimulus dollars were used to prevent teacher layoffs.
“Attempts to remedy its economic malaise have focused on short-term solutions, with little policymaking devoted to structural deficiencies,” Chow said. The longer these problems are ignored, the more drag on the economy. “The Great Recession was a wake-up call for decades of structural neglect that has yet to be heeded,” Chow said. “The longer our leaders in Washington squabble for political reasons and give just lip service about job growth, the more business executives should expect the same economic results.”
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