It’s the (Social/Mobile/Cloud) Economy, Stupid (Part 2)

In Part 1, I outlined how the social/mobile/cloud economic expansion we’re experiencing will stimulate job growth, market gains, and consumer spending that will incite a sustained period of broad economic growth. So let’s talk about those jobs (timely, considering we didn’t really create any in June)….

>2.5 million jobs. Per year.

So we need people to build, manage, market, and support new broadband, mobile, and cloud infrastructures. And then there are all of those folks staffing all of those social computing departments. How many people is that? Meh. I really don’t know. But those new jobs alone probably aren’t enough to add up to the 2.5+ million new jobs per year I’m expecting, which would imply that tech won’t take us out this time - but it will.

The key is that growth in (especially) technology does not happen in a vacuum. It is the incremental ROI that social/mobile/cloud afford in other industries that (then) spurs growth in those industries as well.

The “smart” analysts already concluded that tech won’t provide enough jobs to sustain the recovery (i.e., they’re looking at each of these events as if they do not impact one another - but they do). As recently as September of last year, Business Insider declared that the tech sector won’t hire us out of the recession - noting that “the unemployment rate for ‘computer scientists, systems analysts and computer programmers’ is hovering around 6%.” Really? Perhaps they’re looking at the wrong types of developers. As a test I suggest trying to hire a Ruby developer in NYC or the Valley. You’ll have better luck hiring Lady Gaga to play your kid’s Bar Mitzvah (though on the plus side, she probably costs less - until Google or Facebook hires her to code). Fortune published a piece in February of 2009 entitled Supertech has met its match. The author diligently notes the stimulus (stimulus!) that chips, PC’s, and the Internet gave the economy in the 70s, 80s, and 90s. Only thing is, says the writer, there is no “next new thing” - which is true if you think Facebook is just another popular website… LinkedIn is just a neat job site… Groupon is a spammer… Zynga, like TV, is a fad… Apple, like Dell, is just another computer maker… Twitter is, well, who knows…. But I don’t agree with that (see past posts for why). And I think it’s now safe to say that the author’s point re venture funding for startups doing the “next new thing” drying up turned out to be inaccurate, to say the least. Interestingly, the article’s final point is it’s finest….[[MORE]]

Not everyone has written off the potential of the big tech idea. Indeed, the moment that conventional wisdom suggests that innovation is dead is probably the perfect time to go peeking inside Palo Alto garages again. As IHS Global Insight senior economist Luke Tilley reminds us, “When the personal computer came on the scene, someone surely said, 'Yeah, but how big could that be?’”

Wow - prescient.

So there is no next new thing, only there is. And venture funding has dried up for the next new thing, only it hasn’t. But this time the paradigm shift won’t spur crazy job creation… only, it will.

For reference and, more importantly, perspective, let’s look at job creation between 1993 and 2001, which includes the rise and fall of the dotcom economy. From 1993-1997, the US economy added 11.5 million new jobs (or almost 2.9 million per year); and from 1997-2001, 11.2 million (or 2.8 million new jobs per year). Lets not forget that in 1993 we were coming off a mild recession that knocked George H. W. Bush out of office (it was the economy, stupid). This time, the Great Recession that preceded the cycle was more profound, but that’s priced in (I call the market “coiled”) and companies are even leaner. Moreover, 1997-2001 includes both the Asian and Russian financial crises (and similar crises in South America and elsewhere) that caused mini market crashes and sharp decreases in (US) consumer spending and confidence. The period also includes the collapse of the dotcom bubble in 2000-2001. So it wasn’t smooth sailing preceding or on the way up the last time, yet we grew jobs about 2.5% per year. And that job growth wasn’t all from Amazon and Pets.com - rather, the move to the web stimulated employment and economic growth on a broader scale than just the tech sector.

Clearly it’s not a perfect parallel, but It’s hardly a stretch to suggest that we will have a comparable outcome this time.

(To come: NASDAQ 5K, consumer spending, and the cycle….)