A casual conversation with a friend last week leaves me with lingering questions. We live on the Iron Range, you see. Like the rest of the state, nation and world, the Iron Range of northern Minnesota is experiencing an economic downturn. But things are always a little different on the Range where iron mining is still our dominant industry, partly because for decades we’ve been in a constant state of economic flux.
We as a collective people are accustomed to the uncertainty, probably to our detriment, but for the time being leaving us more comfortable than others with the possibility of continued and worsening economic woes. Something about this “crisis” seems less urgent than even the 2001 shutdown of LTV Steel, where a bloated steel industry was finally forced to reckon with 21st century reality. Today, though, no such panic exists. No such urgency.
“Why?” My friend and I wondered.
Unemployment and general optimism.
Right now hundreds, if not thousands, of Iron Range miners and mine-related workers are on layoff or about to be put on layoff. They will receive unemployment benefits and live off savings for part of the summer, if not longer. Why, then, is there no panic on the streets of the Iron Range? People here, fueled by strong statements from mining companies, believe the mines will be back in full operation sometime relatively soon … next fall maybe, 2010 for sure. That’s great. If it proves true, then not much changes in the red-tinted world of the Iron Range. Not now, anyway.
If it doesn’t, what happens when unemployment runs out? Whatever it is could happen fast and hard.
I take a contrarian view from all of the analysts on CNBC and Fox Business that keep saying the economy should start to heat up again towards the end of this year or beginning of next year. I just don’t see how it’ll make a sustainable comeback anytime soon and it has nothing to do with Obama, Bush, or any other politician.
We’ve simply come to the end of a huge economic boom that was focused first on technology and then on housing. Throughout the 1990’s and to a lesser extent the 2000’s, there was a huge demand for computers and technology that didn’t exist before. Now we’re at a saturation point where 90% of households in America have a computer. Then came the housing boom during the late 1990’s and first six years of this decade. Everybody could qualify for a loan and buy a house. Now it’s appearant that a significant percentage of the people who bought homes never should have gotten a loan. Because of that, there is a huge oversupply of homes on the market and there probably won’t be any significant building for a long time. There’s also been a ton of building going on in countries like India, China, and the UAE in the last 15 years. There will still be building in those countries, but not at the same level as before.
The development in the future is going to be in the high tech areas like electric cars, alternative energy, med tech, etc. This will require some use of products made of iron, but not anywhere close to the level of the building boom of the past decade.
I hope I’m wrong, but I don’t see the economy in this region making a significant recovery anytime soon.
I have to share Todd’s dismal outlook, and on top of the end of the boom he described add the existence of no ready source to create demand for the next new things. Post WWII demand came from all those GIs going to college and having families, then to sustain that standard of living women entered the workforce, after all the adults in a household were employed we used to debt to fuel our economic engine. I guess there’s a bright side to child labor-countries that use it don’t have much trouble with teen angst.
Don’t think the baby boom is the only generation with big numbers. More children were born in the US last year than in any year in history, including during the baby boom years. That is a trend that has been steadily building over a period of years. It may not be apparent in our community, but in communities with a high percentage of Latino, Asian and other immigrant populations, it’s happening. If the 50s were the beginning of a big economic boom based upon births, we may be sitting atop an even bigger boom and don’t even know it.
A greater concern to all of us should be inflation. Remember “Whip Inflation Now” in the 1970s on the heels of high deficit spending. Well, our spending now makes that look trivial. The coming inflationary bubble will likely benefit holders of commodities (i.e. owners of iron ore) but not necessarily the workers who produce it. Get ready. We’ve seen this cycle before. We know what’s coming, and we should all know what to do to get prepared for it. When it happens, it should not be a surprise to anyone. Least of all to the residents of the Iron Range who have the luxury of being at the tail end of each economic cycle, and who have the gift of being able, to some degree, to predict the future – if only to say it’s going to be what was happening elsewhere in the nation 8 months ago.