What industries will drive job creation in the United States?

New ones that you and I haven't even thought of yet. They will be dreamed up and headed by the 20-somethings.

As a lover of economics (I couldn't be convinced to leave the college life until I'd taken every course 100-900 level)this recession has been facinating to observe. The reaction of business was typical on the down side - get more efficient. But on the up side, the reaction is something new to us. It's hold steady at this level and rake in the dough. This is a function of demographics. We have the oldest set of business owners in history. Most are on the verge of retirement and just lost a big chunk of savings. Now that business is improving they are in no mood for risk taking. They are too old for that. Instead, they will keep the current number of employees and as business improves they will take more money out for themselves. They will not hire; they will not invest.

We're seeing this already in reports that American businesses are healthier than ever. But unemployment remains nearly unchanged. New employment will need to come from new businesses not from current ones.

This means no amount of tax breaks for current employers will have any effect on unemployment. Instead rewarding risk, investing in startups and tax breaks for new businesses are needed. Historically we have not wanted to invest our tax dollars in these areas because it is much more risky. But demographics, say this is where we are today.

It will be interesting and exciting. I'm looking foward to see how parents have raised this generation, to see if they are risk takers willing to build new technologies and new businesses.

Rick - I was thinking about small businesses in my reply. Perhaps large public companies will hire some people, but it's small business that makes the world turn and provides job growth.

Scott, very interesting and thoughtful answer. However due to the nature of the US economy and the nature of innovation, it is not possible to tie job creation to innovation. Further, trying to disrupt old industries is best done by the market place, for example the disruption of the auto industry was better quality cars from Japan, which caused Detroit to downsize and improve their products, which took many years and is still not complete. The energy industries will be disrupted in the future by increasing prices of raw materials, such as crude oil and coal caused either by shortage or by carbon taxes. It will take us quite a long time to change our lifestyles in this country to emphasize energy conservation due to our large air conditioned homes and millions of SUV's.

While I did not discuss this above, I am also a believer in the fact that the dollar is overvalued in relationship with third world currencies. The impact when felt of devaluation of the dollar may in the short term be good for the basic industries but in the long run will cause considerable inflation in the cost of manufactured goods that are no longer made here.

I don't know if the Internet is a good example for the rest of our economy. Internet based companies can spring from almost nothing, and vanish just as quickly. They are based on consumer behavior, fad and whim. For example Social Networks, so big today, may become boring in a few years as new entrants with a different focus become popular. I am not sure what, if any, principles from the Internet would apply to the energy or manufacturing industries, or even other areas of technology such as semiconductors or cleantech. We should expect the market to sort this out. We need educated and flexible employees that can move from company to company as these ideas come and go.

Frankly, the only thing I can see that will result in significant job creation in basic industries is the aforementioned devaluation of the dollar which should make US goods more competitively both domestically and in export markets. This move of currancies should be gradual but unmistakeable so that participants can plan where to make the products that result from innovation. Just as Tesla has decided to make cars in California, we can reduce the cost difference between US and foreign countries.

You may all be missing the boat. Read on...

According to a report by The Solar Foundation, more than 50% of US solar employers have plans to increase their workforce in 2011.

The report, which includes data from more than 2,400 solar company survey respondents, was conducted by The Solar Foundation, with assistance from Cornell University and Green LMI Consulting.

Andrea Luecke, acting executive director of The Solar Foundation – a 33-year old non-profit organization that promotes the use of solar technology – indicates that, according to their 2010 census, jobs in the solar power arena are expected to increase by 26 percent next year, a figure that equates to nearly 24,000 new green jobs. The organization also highlights that the expected growth is significantly higher than the three percent job loss forecasted in fossil fuel power generation. It is also much higher than the two percent growth for the overall economy over the same period.

US secretary of Labor, Hilda L. Solis, states that, based on renewable energy investments made through the U.S. Recovery act, the solar energy sector is fast becoming a vital resource for job-seeking Americans.

This industry is a sleeping giant. With the Federal and State incentives in place now throughout the country, solar has become affordable. Demand for qualified employees is at a fever pitch, especially in the installation sector.

Rick makes great points about capital and IP intensive industries, although even capital intensive industries seem to be going offshore these days. And even IP oriented industries are problematic at this point - for all of the productivity improvements that Google and Facebook have provided, they really have not created a meaningful number of jobs. As an example, I suspect that Google could lay off 95% of its workforce and retain 99% of its revenues.

We should start with the premise that the United States will continue to be a leader in innovation, but a laggard in job creation. The real problem we face is combining innovation with job creation. It seems like a challenging proposition, but it's not too hard to imagine applying many of the principles that we've adopted on the consumer internet to massively inefficient industries like energy and health care. In fact, that's not a bad place to start - we should look for the largest industries on a global (as opposed to domestic) basis that are ripe for disruption and go disrupt them. Energy, transportation, and health care come to mind right off the bat.

And then there are a few policy oriented things that we would do well to think about. First, as Rick points out, education will be the key in the long run. That's the most intractable problem we face. Second, we have to figure out a way to protect the true value of the intellectual property that we create. A lot of the IP we create isn't fully recognized in an economy that is still built to recognize manufacturing output. Third, we need to figure out how to create a meaningful number of jobs domestically. Which brings us full circle - we won't solve this problem until have a well educated workforce.

I'm not suggesting that anything but the market take the initiative here. Private capital and enterprises need to figure out how to create a meaningful number of jobs in advance of dollar devaluation. Assuming we do want to go down that path (and that's a massively troublesome proposition given the risks it poses to our society), we are decades away from having a workforce that can compete with Asia today and Africa tomorrow on a cost basis.

But we should all line up behind the idea of having a workforce that is competitive on a skills and knowledge basis. I believe there's a lot to learn from Germany on this front. Of course, as you point out in your first answer, we need radical education reform to get there and that too seems like it will take decades to solve.

Finally, regarding my point on applying internet principles to other industries, we've seen real improvements in things like collaboration, transparency, and information accessibility because of the internet. I believe in those things in principle, but also as drivers of economic growth. Unfortunately, we've applied many of these principles to markets that are just not that meaningful at a macro level (your example of social networking being one case in point!). I'd like to see us (meaning entrepreneurs and the market) apply these principles to more substantive industries. I can't predict exactly what will happen on the jobs front because of this, but I suspect it will be better than what we have today.

I am not sure I agree that the older larger business entities are through with hiring, but I do agree that having taken the steps to reduce employment, they will be reluctant to hire until they are unable to get work done otherwise. But larger firms are still interested in growth and are somewhat forced by the public markets to seek share price improvement, so they just can't sit there.

Younger entrepreneurs will hire in time, but cannot absorb large numbers of workers without substantial outside funding, such as venture capital. If there are a large number of new companies, this will help, but inevitably many of these firms will fail. When one hits big, such as Google or Facebook, this can make a real difference.

We need to look at those industries that would offer a more 'ubiquitous' footprint than say a Facebook with most of its workers in one location. I still believe that sooner or later you have to BUILD something. If we can't compete on price, we certainly could on service, quality and innovation. The rebirth of our auto industry is one example. And, we need to be a little more nationalistic in our approach. Other countries certainly are.....

But, how many potential jobs are there in the SOLAR industry. Sounds like one with potential certainly but it won't come near the numbers associated with automotive, high tech, construction, health care, etc. We need them all.

Interesting, but I am discouranged by the fact that with the coming budget cutting that the upcoming congress and state will likely require, these energy credits may become a victim. Unfortunately, these green energy projects will not survive on their own without the incentives, as the paybacks, which I have examined on a few occasions, are painfully slow.

From an economic sense, the money spent on making solar and wind and the like affordable to the homeowner or small business could also be spend in more efficient ways to improve our energy infrastructure moving central generation to cleaner fuels. Solar and wind do not replace base power generation at times when the sun is not out and the wind does not blow.

So let's keep our perspective on clean technology and its job potential. With innovation, we may see reduced costs that would change some of the economics.

"Solar and wind do not replace base power generation at times when the sun is not out and the wind does not blow"

1. Sunlight is predictable. The question "What industries will drive job creation in the United States?" I have a job. A solar job.

PV Output Variability: the Sheep in Wolf’s Clothing
The Latest in Quantifying the Impact of Variability of a Fleet of PV Systems on Grid Operations
http://votesolar.org/Webinar_OutputVariability.wmv

2. Energy estimates are predictable. By using a solar shading tool or by using solar prospecting tools remotely, I can estimate the energy on an annual basis. Energy estimates are asymptotic, they can be predicted based on location.

The issue is the value of energy. How much is the energy worth a customer generates from, for example, sunlight?

I think if a substantial amount energy we require during the day comes from sunlight, ... would be a great start? What do you think?

"U.S. Solar Market Stats: Q1 2011 by the Numbers"
http://www.greentechmedia.com/articles/read/US-Solar-Market-Stats-Q1-2011-by-...

"Renewable electricity passes nuclear in U.S." ?
http://ases.org/index.php?option=com_myblog&show=Renewable-electricity-passes...