The economy is clearly not in good shape. We may or may not currently be in a recession, and while conditions won’t get nearly as bad as the Chicken Littles of the world would have us believe, they most certainly won’t improve either. Well, dramatically, anyway.
The economy has been under a three-pronged siege of falling housing prices, rising commodity prices and an ever weakening labor market. And each aspect of this siege appears inextricably linked. What makes the current situation so difficult is that all three of these issues are and will continue to have meaningful impact on the average American’s pocketbook. Rising food and fuel costs coupled with lower wages yields a cash flow problem that we will not be able to ignore. That is what makes our current situation so different than that of 2001. That recession, spawned by the “.com” bubble burst, saw peoples overall stock portfolios and retirement accounts diminish or disappear. But in all honesty, who pays any considerable attention to that? Thanks to an increasingly innovative financial market and its willingness and ability to redistribute risk, lenders were right there to lend. And borrowers there to borrow. Consumer spending barely dipped, mortgage applications spiked, and we spent our way out of the 2001 recession.
It seems, then, that the current downturn is much more an extension of the 2001 disaster than a unique, separate situation. Can you ever really exit a recession if you borrowed the money to do so? Our economic doldrums have been a long time in the making, providing a solid base for what figures to be an extended period of zero to slow growth. And that’s why things don’t figure to improve too soon.
To exacerbate all this, the lumbering political machine in Washington has begun talking about the economy, and, more specifically, increased regulation of financial markets. This will only make things worse. It isn’t that taxes and regulations are altogether bad, it’s just that Congress has little, if any, idea how to brandish these tools. What we should expect is a weakened ability for different industries to tap into investment capital, inhibiting their ability to rebound from their current crises, and weakening the outlook overall in financial well-being for fiscal quarters to come.
So which industries stand to improve? To answer this question we need to think critically about what glaring problems the current economic situation has uncovered.
The most striking of these problems is America’s source of and need for energy. As mentioned, oil prices are high and should continue to go higher. China and India, with their burgeoning economies and swarming populations, are now dominant players in the international demand for fuel. And supply isn’t even constant; it’s falling. Our reliance on oil is clearly a very, very expensive habit. Setting aside environmental concerns (which are important), we simply cannot afford to rely on fossil fuels as we once did. The industry with the most long-term growth potential, then, is the renewable energy category.
Renewable energy is comprised of dozens of sectors, each giving rise to yet more sub-sectors. Wind, solar, and hydroelectric power are all growing, not just in the US, but around the globe. Bio fuel seems the heir apparent to gasoline (just look at Brazil), and carbon emission legislation stands on the brink of being passed. Each of these areas, and there are many, many more, represents tremendous job opportunities with long-term growth. And what’s more, they call for a broad spectrum of backgrounds.
Scientists and agriculturalists are obvious. It will become important to devote time and money into research projects, such as ethanol yield from various crops (i.e., corn, sugar, algae, etc.), and what type of return we could and should expect from each.
Carbon emission regulation would force big business to manage a certain number of “carbon credits.” Carbon credits are simply an accounting tool businesses will likely have to adhere to, by law, in an effort to keep their carbon footprint in check. Companies expecting to exceed their carbon credit limit must buy additional credits from companies willing to sell them – companies, of course, who are expecting a carbon credit surplus. Therein lies a marketplace, much like stocks and bonds, where finance and accounting professionals will clearly be in high demand.
Most importantly though, as it relates to career paths and job opportunities, small companies will be born to capture different pieces of this emerging world of renewable energy. And these companies will need the same things as any other company. Human resources, marketing, administration, law, and management are all areas that will see growth – so long they’re within the right business – as these are professional areas that will always be in demand. Exactly how much depends more on a specific company’s positioning within the greater economic landscape than it does the actual current economy.
For my money, any company with a business model that incorporates forward looking thought regarding renewable energy will fare well in the short, medium and long term.
Aiden was born and raised in northern New Jersey. He attended New York University, where he graduated with a bachelor’s degree in Finance. He currently lives in New York City and works in the equities trading division of a large investment bank. –Aiden Quinn