So far this recession has not been as tough on workers as the previous one was. The last recession ran eight months, from July, 1990, to March, 1991, and nonfarm payrolls dropped 1.3%. By contrast, in the eight months from March, 2001, the beginning of the current downturn, to November, employment has declined only 0.9%.
Yet workers in the technology sector have taken a much harder pounding this time. Employment in the key tech industries--software and computer services, communications, and computer, semiconductor, and communications equipment manufacturing--peaked in March and since then has fallen by 3.3% (chart). In contrast, by the time the 1990-91 recession ended, employment in the tech sector had fallen only 1.7% from its 1989 peak.
Within the tech sector, software and computer services, for example, are doing much worse than last time. In the 1990-91 recession, software companies continued to hire new workers almost without interruption, even as the rest of the job market contracted. This time, however, software has stalled with the rest of the tech sector. Indeed, employment at companies providing computer programming services was down in October from the year before, the first such decline since the government started tracking the industry in 1988.
The one tech industry holding up surprisingly well so far is communication services. Despite all the turmoil, the number of communications jobs is up slightly since the recession started, led by a mild expansion of cable industry employment. This hiring, however, is not enough to offset the declines in the rest of the tech sector. Abnormally mild weather this fall made the U.S. recession milder, according to new calculations by economists at Goldman, Sachs & Co. Warm weather boosted construction spending at a time of year when it normally slows. That factor alone accounts for 0.6 percentage point of Goldman's upward revision in its fourth-quarter forecast for gross domestic product growth, says economist John M. Youngdahl in a Dec. 5 report. Goldman now estimates that the economy will contract at a 1.5% rate in the fourth quarter, vs. its earlier forecast of a 3.5% drop.
Youngdahl points out that every state in the continental U.S. had above-normal temperatures in November, according to the National Oceanic & Atmospheric Administration. States such as Minnesota, Wisconsin, Michigan, and Iowa had markedly warmer weather. "This is precisely the region of the country where cold temperatures can begin to depress unadjusted economic activities around this time of year," Youngdahl says in the report.
Moreover, in a Dec. 7 report, Morgan Stanley Dean Witter & Co. Chief Economist Richard B. Berner says the warm weather lowered heating-oil and natural-gas consumption by as much as 5%. That, plus the 25%-to-30% decline in oil and gas prices since September 11, means Americans will have an additional $35 billion to spend on things other than energy in the fourth quarter. That's about the size of the tax rebate. "If you combine warm weather with a recession," says Berner, "you've got a recipe for lower energy prices and a real buffer for consumers."
Of course, the news isn't entirely good. Much of the construction spending in the fourth quarter is being moved up from spending that would have occurred next year. There was a similar pattern in 1987, when mild temperatures in the last quarter of that year drove up nonresidential construction spending at a 12% annual rate, only to be followed by a drop at a 6% rate in the following quarter. The Japanese are much bigger savers than Americans and are thought to be much more community-minded. Yet, surprisingly, the Japanese seem to be less evenhanded and altruistic than Americans when it comes to leaving money to their children, according to a study by Charles Yuji Horioka of Osaka University.
His National Bureau of Economic Research paper is called Are the Japanese Selfish, Altruistic, or Dynastic? Selfish people, in the language of generational economics, leave money to children in exchange for receiving care in their old age or aim to spend all their money before they die. Altruists leave money to their kids no matter what, with the most altruistic leaving the most to the poorest offspring. Dynastic types make bequests to preserve a family business or name after their deaths, usually giving all or most to one child.
Using data from three surveys conducted throughout the 1990s, Horioka found that "selfishness" is well-entrenched in both the U.S. and Japan--but more so in Japan. Depending on the year, 77% to 91% of Japanese respondents said they were unconcerned with amassing wealth for the purpose of passing it on to their children, while 57% of Americans surveyed said the same.
The cultural differences between the countries were even bigger in a 1996 survey asking how people in each country would split the inheritance they did leave among their children. Twenty-nine percent of Japanese but only 3% of Americans said they would give more or all to the child or children who took care of them in old age (chart). That meets Horioka's definition of a "selfish" bequest motive because of the implicit quid pro quo. By contrast, 84% of Americans but only 44% of Japanese said they would divide the inheritance equally among their offspring, showing the difference in cultural norms between the two countries.