How bad was it ...

With the release of the January employment situation this morning, we get a better idea of what really happen to jobs in 2009 since the data have undergone annual revisions. But does that tell the whole story? (snarky comment: maybe referring to job loss as a "hole" story is more appropriate.)

Sure, the numbers show that 3.6 million jobs were lost in 2008 and another 4.8 million in 2009 for a total of 8.4 million jobs lost since the onset of the recession. But, what about the jobs not created if the economy was in growth mode? Using 2004-2007 as a basis, which averaged around 185,000 new jobs per month, in the 24 months of the recession, there could had been possible job growth of possibly 4.4 million if there was no recession. Therefore, the current employment economy could be down as much as 12.8 million jobs or more.

And you may have seen other information about the unemployment rate, which is still quite high at 9.7 percent but started to head in the right direction in January. In addition to the unemployed (around 15 million), there are those who are currently want a job but don't have one (around 6 million, depending upon the definition), and those who are working part-time for economic reasons (another 8 to 9 million). Simply adding those numbers together could be a little misleading since, among other factors, some of that count includes people who have returned to school in an attempt to make themselves relevant in the new emerging world of work.

But, those are the numbers. Politics aside, because regulators 'didn't tale away the punch bowl while the party was in full swing', certain sectors -- housing and financial services come to mind -- may have over expanded before they burst. So even factoring out the rise in jobs and subsequent fast decline and rising unemployment brought about by a bubble that possibly could have been avoided, there are still a many millions of jobs that will need to be filled and millions more people who will need to find those jobs.

As the employment economy approaches that corner to turn, it means that there will a lot of jobs and workers that will need to be put together. It really can mean very good times ahead for those in the employment services sector. Despite economists saying it will be some time before the employment economy recovers, here is some historical evidence that shows that the deeper the decline, apparently the steeper the rise. Here is a very interesting chart that shows that trend. (FYI, I first posted a tweet about this chart several weeks ago.)

Yes, there is such a thing as a free lunch ...

One way to keep on top of developments in these turbulent economic times is to pay closer attention to economic developments and indicators. Although this is another pitch to visit my Economic Indicators webpage, we are giving away a calendar marked with the dates of key economic and employment data releases throughout 2010.  We are publishing a 12-month calendar with key economic release dates and it should be ready very soon. If you would like a copy, just shoot me an e-mail or pick up the phone (wow -- that's certainly a radical idea to start the year with!) and call me at 571.482.9799, and I'll let you know when it's completed and available for download.

Good-bye 2009, we won't miss you at all ...

With the release of December 2009 employment and jobs data, we can see what really happened in 2009 (however, data are subject to subsequent revisions, but those revision are unlikely to change the general trend). While unemployment was worse in the second half of the year, the trend turned decidedly "less-bad" for jobs, which also could be said for the unemployment trend.

Unemployment started off in January of 2009 at 7.7 percent, risen to what hopefully will be seen as a peak of 10.1 in October (revised) and drifted incrementally down to 10.0 percent for November and December. Put another way -- it averaged 8.7 percent in the first half of the year and 9.8 percent in the second half. At the Federal Reserve's mid-December meeting of the Federal Open Market Committee, the participants expect the labor market to remain relatively weak for the undefined future: they "...generally expected unemployment to remain elevated for quite some time. The unemployment rate was not the only indicator pointing to substantial slack in labor markets: The employment-to-population ratio had fallen to a 25-year low... ."

The overall trends for jobs is more encouraging, especially if your business is highly dependent upon the overall jobs trends as is employment and staffing services. The monthly average job loss in 1H2009 was nearly 560,000 for a total of almost 3.4 million jobs lost for the period; in 2H2009 the monthly average loss was only around 134,000 and a total loss of only about 800,000 in the second half of the year. BTW, the previous reported loss of only 11,000 in November that was greeted with cheers was revised as a gain of 4,000. -- we suppose that more cheers are called for except December's loss was 85,000.

Yes, there is such a thing as a free lunch ...

One way to keep on top of developments in these turbulent economic times is to pay closer attention to economic developments and indicators. Although this is another pitch to visit my Economic Indicators webpage, we are giving away a calendar marked with the dates of key economic and employment data releases throughout 2010. We are publishing a 12-month calendar with key economic release dates and it should be ready very soon. If you would like a copy, just shoot me an e-mail or pick up the phone (wow -- that's certainly a radical idea to start the year with!) and call me at 571.482.9799, and I'll let you know when it's completed and available for download.

What's in store for next year ...

With the calendar year winding down, people tend to reflect on the past year and sometimes get downright nostalgic as well as make predictions and express their wishes for the coming year.

Since full 2009 employment data won't be released until next year, we'll refrain from reflecting on the past year in detail until all the information is in. We think it would be safe to characterize the economy for 2009 as starting out in very bad shape, going downhill from there, but going out with a bang (and we should clarify that's good "bang"). Last month (November), the  unemployment rate improved to 10.0 percent, the overall number of jobs lost was only 11,000 (which is the best performance since December 2007 when this whole mess began), and temporary help services job growth accelerated.

For those in the employment services market, although it's been very tough for the past couple of years, and the end apparently is in sight.

Activities around the country ...

Two days ago, The Federal Reserve Board released its Beige book, which is an anecdotal summary of economic and employment activity around the country. This current Beige Book contains a lot of very interesting information with specific commentary on and relevant to the recruitment, staffing, employment services and IT services sectors in each of the Board's 12 Districts -- too much to be included in this e-mail report, so we prepared a special webpage summarizing the pertinent comments. So head over to a special Excerpts from the Beige Book webpage we put together to see what the Fed is hearing and learn where "staffing firms reported improved demand for contract workers" and where temporary "Skills in greatest demand were IT, distribution center workers, sales and office support, and nurses aides/assistants."

Enjoy these "soapbox" comments?

Due to popular demand, an archive of the comments in this "soapbox" section has been created. Currently, it only includes comments from 2009, but we'll go back a year or two if requested (and we can find them!). View the 2009 archive now.

If the recession is over, then where's the beef? ("beef" being a proxy for jobs)

As GDP decisively entered positive territory in the third quarter (up 3.6%) and the employment economy continues to lose jobs, there will be a chorus of "nattering nabobs of negativism" (we pay homage to the late William Safire) exclaiming that this is a jobless recovery. We answer the chorus by using another Safire quote and tell the chorus not to be "hopeless, hysterical hypochondriacs of history".

It's an accepted economic principle that employment lags GDP. That's why you often hear of employment being a lagging indicator (and why unemployment was and still is rising when GDP was up in 3Q) -- economic activity picks up (companies providing more services and factories producing more products) before employers start to add workers. It will be some time before the economy consistently starts to produce great numbers of new jobs.

That's not to say that companies aren't adding jobs today. There will continue to be growing pockets -- pockets being both geographic as well as by sector -- of job growth and those pockets will be getting bigger as the recession gets further behind the economy.

Today's Wall Street Journal has a brief story saying that staffing giant Adecco's "pickup in demand for blue-collar workers in the U.S. and France helped limit the earnings decline [in the third quarter]. ... [and] that the improving market trend has continued into October." The story goes on to say that "Analysts and investors welcomed the results as a first signal of a potential job-market turnaround but warned that the coming quarters will remain challenging, as some market segments are still weak. Demand for permanent placements, meanwhile, remained slow, as did the hiring of specialized workers such as lawyers, financial advisers and medical staff."

Obviously Adecco must be seeing something good since temporary help services jobs ROSE last month; actually temporary help employment has risen for the past three months when revisions released this month are taken into account.

It ain't over yet folks, but the light at the end of the tunnel is likely the end of the tunnel and not a train coming the other way that will flatten you. This reminds us of another Safire quote: "Avoid clichés like the plague."

Is the recession "very likely over"?

And unlike his predecessor Alan Greenspan who raised obfuscation to an art form (perhaps cubism in which several sides are seen simultaneously?), people actually understood Fed Chair Ben Bernanke when he remarked in mid-September that the recession was "very likely over".

For the uninitiated, that may seem like a strange statement that one of the top officials who develops and guides the nation's monetary policy doesn't definitively know, but keep in mind that 1) it's not up to him to determine the turning points of economic cycles and 2) the body that does -- the National Bureau of Economic Research (NBER) -- does not do so until many months, sometime more than a year, after the cycle has changed direction. For example, the NBER didn't officially declare that the 2001 recession had started until it eventually determined that it was over. Specifically, they announced in November 2001 that a peak (interpreted as a recession starting) occurred in March 2001 but didn't announce until July 2003 that the corresponding trough (interpreted that the recession has ended) took place in November 2001. So don't wait for any 'official' announcement that the current recession has ended until well after the barn doors have closed, the farm sold, and new condos built on the site.

Bernanke went on to say was that ""it's still going to feel like a very weak economy for some time" and "Unfortunately, unemployment will be slow to come down. It will come down but it may take some time" and the moderate rebound will not produce many jobs for some time.

Why would the Fed Chair think this? One of the downsides of the recent run-up in home ownership is that people are less mobile and since housing sales are still rather anemic, they are not free to move for a new job, but if they stay where they are they may remain unemployed because the jobs that left them are not coming back. People are not as mobile as they were because they are saddled with a home. Earlier this year, the U.S. Census Bureau reported that "the national mover rate declined from 13.2 percent in 2007 to 11.9 percent in 2008 -- the lowest rate since the bureau began tracking these data in 1948."

So, is the recession "very likely over"? In a word -- maybe. The "third" estimate (previously labeled as the "final" estimate) for 2Q GDP growth and one of the major components that the powers that be look at to determine the economic cycle was revised upwardly earlier this week to only negative 0.7 percent. Advanced estimate for 3Q GDP growth will be released in about a month so it's certainly within reason that it turns positive. However, one monthly proxy for the quarterly GDP is the three-month moving average of the Chicago Fed National Activity Index, which is a weighted average of 85 indicators of national economic activity. It's been improving for the seven consecutive months, but the August value was still negative. For the latest value of this and many other indicators, visit our Economic Indicators webpage as well as our Twitter page.

You will be hearing pronouncements in the coming months that the recession is over and it is and will be in some areas ("area" in this usage means geographic as well as sector). But also keep in mind that the economy is not one big monolith. Some parts of the economy and sectors are likely in recovery now while others are still heading down. And as we discussed last month in this space, the economy will emerge from this recession quite different than when it went in so if there was a pot-o-gold in a certain area before, it may or may not return.

To sum up, it took a long time to dig this deep hole and it will take a fair amount of time to climb our way out. The labor market is more rigid now than at the end of past recessions due to problems people may have in relocating and their former occupations in former growth sectors will not be returning. Things are different this time around and quite frankly I find this all very exciting!

"When will things get back to normal?"

We concluded last month's podcast (see more detail in the callout box below right) by saying that the employment situation is improving but warning you not to "think things will be all sunny skies and cute puppies and kittens quickly ... ." We'll leave it to the politicians and policy wonks to assign blame if there is any, but the fact remains that the economy has found itself in a rather big and deep hole. It certainly appears that the digging has slowed and maybe stopped in some sections of this massive economic hole and may even be starting to fill in. But, it is a big hole and will take some time to fill it back in.

Probably one of the more common and regular questions that we and our colleagues are hearing from business owners is "When will things get back to normal?"  Our advice is that now is the time to figure out what the new "normal" will be because after a recession, the previous "normal" doesn't apply. Although all recessions are slightly different, there is one common element. By way of an automobile analogy, recessions occur when the economy shifts gears but loses some traction during the transition. That slippage is the recession -- when the economy shifted from a industrial to a manufacturing economy, from a manufacturing economy to a service economy, from a service economy to an information economy are all times when a recession occurred. Therefore, it is time for business owners -- especially those in the service providing sectors -- to stop looking to the future through the rearview mirror at customers that once were before the recession and look to the future to what will be. Some of our strategic planning tools help you do just that (see more detail below left).

What I said six years ago ...

As the employment economy is hopefully entering into its final down-trending phase, more attention is being paid to the leading indicator nature of temporary help services employment. As my first project out on my own, I conducted and wrote a brief analysis in June 2003 of this relationship entitled  "The Real Truth About Temporary Help Services" (click on title to download the original report) essentially contradicting, through a regression analysis, a commonly held belief at the time that temporary help services employment was a leading indicator; our conclusion in a nutshell was that temporary help employment is more of a coincident indicator meaning temp help employment trends occur simultaneously with the larger employment economy.  

In 2007, I wrote a short series of articles for a staffing industry publication that we called the "Mojo" series as in "Has Temporary Help Lost Its Mojo?" since it was declining while overall employment continued to grow. The regression analysis was re-run that basically confirmed the original contention that temporary help was no longer the 'canary in the mine' and we came up with some other interesting conclusions. You can download that article here: www.brucesteinberg.net/documents/Steinberg_mojo1.pdf

Six and two years after these reports were first published, a leading trade association recently published a report that essentially confirms our findings. Although our conclusions don't coincide completely, you can see an overview of those association's findings and their study that was published in June 2009.

To add to this discussion: I believe that temporary help services employment can be an early indicator with workers that are supplied are 'placeholders' until suitable full-time workers can be found or a new position justified. At one time, many companies did that but a lot of staffing companies abandoned that niche in pursuit of higher value business, which does not have the leading indicator aspect to it.

It's that time of year again ...

... when we dig up an old letter to the editor that was published several years ago and respectfully say, "I told you so!" Ours was one of only a few voices back in August 2005 saying the towering real estate market didn't have a proper foundation to support such lofty prices and the entire housing market will collapse. BTW, the letter also used the same reasoning / theory to explain the value staffing / recruitment services provide, the success of job boards, as well as why the IT bubble burst. The letter may give you some ideas to help reinforce the value your company provides to your customers and clients, so take a look here.

Yes, the situation is getting better ...

Last week the Federal Reserve Board released the Beige Book, its anecdotal commentary on the economic conditions in each of their 12 districts. It makes for good reading, if you are into that sort of thing. If not, here's a very brief summary ... "economic activity continued to be weak going into the summer, but most Districts indicated that the pace of decline has moderated since the last report [which was only six weeks prior -- ed.] or that activity has begun to stabilize, albeit at a low level."

And although the "labor markets remain slack, with most sectors either reducing jobs or holding them steady and aggregate employment continuing to decline, on net. ...", there have been some pockets -- both geographically as well as by sectors -- of activity that may call for some optimism that the dark clouds are starting to lift in some areas.

"Boston, Cleveland, Richmond, Atlanta, Chicago, St. Louis, and Minneapolis noted selective hiring, including attempts by some firms to take advantage of layoffs elsewhere to pick up experienced talent. Richmond, Chicago, St. Louis, and Dallas cited moderation in the pace of manufacturing employment decline since the last report, and New York noted some signs of labor market stabilization. But Atlanta reported further deterioration in labor market conditions and additional job cuts already planned for coming months."  The latest Beige Book can be found here.

As The Tide Turns ...

... sounds like a good title for a soap opera that is set on a waterfront, but it also seems to apply to the employment situation. Just as the recession began the recede, some numbers got worse. The bad news was that job losses picked up some steam last month; it was down 467,000 jobs in June. Even taking into account the government sector's loss of about 46,000 temporary jobs associated with the 2010 census, June's loss was still larger than the previous month. However, historically June is often weak in terms of job growth. Since the onset of the recession, the employment economy has lost nearly 6.5 million jobs. However, although the unemployment rate continued to rise, the good news is that it was at a much slower rate.

'Reselling the sold' ...

This e-mail employment report last month generated a number of comments and we appreciate all the feedback, even though we may not get back to you for a few days. A number of you seemed to agree with me that things were looking up.

This is from Carol Barber, EVP with Bernard HODES Group, which provides integrated talent solutions: "We see our clients projecting hiring, albeit very selective, out as far as mid-2010. Our focus has shifted to helping them, as I call it, 'resell the sold.' Big internal initiatives aimed at keeping those retained in happy frames of mind."

Sounds like sound advice to us -- time to re-cultivate existing and past relationships as the logjam that has been our economy begins to break up and starts to flow again.

Twitter thee, Twitter dumb, Twitter smarter ...

Is it  time?

Last month, I entitled this  section "Are we there yet?" and the month before "Is the end in sight?".  The good news -- okay, it's a stretch to call this good news, but  it  could be worse -- is that many aspects of the economy in general and  employment specifically are getting worse at a slower rate. Consumer confidence is  improving, several measures of overall economic activity continue to  decline albeit at a slower pace, and even some housing data  are  starting to eek out monthly growth rates.  Even in the dark hole that is  the employment economy, the dark forces are losing their grip and light  is actually escaping. It may be hard not to concentrate on the fact  that 6 million jobs have been lost, or 4.3%, since December 2007. But last  month only 345,000 jobs were lost compared to an average of more than  640,000 per month in the first four months of the year. That's a nice  improvement. And did you realize that in  March, even though there were around 590,000 more private sector job  separations than new hires, there were still almost 3.9 million new  hires?  And, despite a rising unemployment rate, employers had  almost 2.4 million specific job openings they are actively recruiting  from outside their company for work that could start within 30 days.  For a review of some of these  and more economic indicators, go to our Economic  Indicators page. So, is it time for growth to  return? Of course, we are all tired of this downward facing economy,  but it has flipped over on its back and is looking up. The problem is that  "up" is still out of reach for many companies, sectors, and regions.  Temporary help services only lost 6,500 jobs in May compared to a  54,700 loss in April. The economy first has to climb out of the pit it  has found itself in. That will begin soon.

Quick  reminder ...

Due to Friday, July 3rd being a  federal holiday, next month's employment report will be coming out on Thursday, July 2nd. Let's hope that there's something in that report to  celebrate besides a three-day weekend!

Are we there yet?

Last month, I entitled this section "Is the end in sight?" referring to the evitable end of the recession. The answer depends how farsighted you are, but the downward momentum is slowly on several fronts.

Although GDP was down a serious -- serious as a heart attack serious -- 6.1 percent in 1Q:09, that's an improvement of the negative 6.3 of 4Q:08; initial jobless claims "improved" by 34,000 to 601,000 last week; the CFMAI-3 (a sort of monthly GDP) improved for the second consecutive month although still in definite negative territory; and the slide in housing prices has seemed to stop. For a review of some of these and other economic indicators, go to our Economic Indicator page.

Overall job losses in April improved by 160,000 to negative 539,000  (it was negative 699,000 the previous month).  But, unemployment continued to rise and will likely to do so for some time.

Since the economy's peak in December 2007, the total job count is down an astonishing 5.7 million, or nearly 4.2 percent. But as the chart in the right column below shows, jobs losses -- while still in negative territory -- are easing up. But, it's taken some time to get to the bottom and that bottom is quite deep so it will take some time before the employment economy breaks back through the surface.

Is the end in sight?

We suppose we first need to say "end" to which that refers. The end of the world as we have known it or just the recession? We'll limit our remarks to commenting if the recession is coming to an end.

All recessions -- and this one is no exception -- eventually end. It may seem obvious, but before it ends and economic and employment growth returns, things have to bottom out. Although some economic indicators are improving, they and the economy are still underwater and have a way to go before it breaks back through to the surface. Last month, the employment economy lost another 663,000 jobs last month and that brings the total since the beginning of the recession to more than 5.1 million jobs lost, or 3.7 percent. Those jobs will not come back over night, but they eventually will. But those returning jobs may not be in sectors or companies where growth was occurring before the recession hit. The employment economy is not a monolith with every sector moving in unison.

The first quarter of 2009 is already over, which means that we are just that much closer to the end of this economic nightmare. It's not too early to prepare yourself and your business to thinking about how to return to a growth footing and take advantage of new opportunities that will come about as surely as the sun will rise. Although one can calculate exactly when the sun will rise tomorrow, it's a little more difficult to see where the job opportunities lie when the economy turns. We have to look hard but even now some sectors are adding jobs while the losses in other are decelerating.

And a little IRS humor to lighten your day ...

With the tax filing deadline just around the corner, we recently heard a customer service-centric motto that sounds perfect for the Internal Revenue Service, "We're not happy until you're not happy."  Happy April 15th everyone!

And the word from the Fed is ...

not good. The Federal Reserve Board released their anecdotal recap of the state of the nation's economy this past Wednesday. The period in the latest report covers January to late February.

The "Beige Book", so named because of the color of the cover, reports on business activity in each of the 12 district banks. Perhaps the Fed should adopt the scale used by the Department of Homeland Security, which rates the terrorist threat level by green (low), blue (guarded), yellow (elevated), orange (high), and red (severe), for the report cover color.

Below is an excerpt that details developments in sectors that many of our readers have business interests in:

Demand continued to fall for professional services such as business consulting and accounting services, legal services, and other professional services in various Districts. However, Dallas noted a modest increase, albeit less-than-expected, in demand for legal services due to increased bankruptcy proceedings. Providers of information technology (IT) services in the Boston District saw a drop in activity on average, although some firms have sustained strong revenue growth; activity among providers of IT services was reported as stable to up in Kansas City, and Minneapolis reported that some IT services firms have seen solid demand from companies that are intent on using the technology to reduce costs. Demand for staffing services weakened considerably. Boston reported that outcomes for providers of temporary staffing services were "dismal," with revenue declines in the range of 20 to 50 percent compared with twelve months earlier. Chicago and Dallas also reported sizable declines in activity by staffing firms, and New York noted that activity by a major employment agency has "virtually ground to a halt."

But, not all the developments were so negative. For example, the district that is overseen by the Federal Reserve Bank of Richmond (VA), reported the following from the staffing sector (point of clarification: when an "agent" or "contact" is referenced, they are referring to someone with a temporary help service):

One agent reported that although business was slower than last year, the past two years were particularly strong, and hiring had continued in the life sciences, pharmaceutical, professional services, and IT industries. A contact from Raleigh, N.C., was optimistic that demand would be stronger over the next six months with new business in the area, recent company acquisitions, and lifted freezes on hiring. In addition, when business improves, the contact expects many companies to hire workers on a contractual rather than a payroll basis, thus increasing demand at staffing companies.

When will the bad news end?

Poof! ... and another 598,000 jobs evaporated in January. And 2009 is off and running ... running for the hills!!

Employment contracted by 3.1 percent before it started to recover during the 1981-82 recession, which was the worst in recent history. If this one follows that same basic trend, the job loss this go around would need to reach around 4.3 million before it recovers.  Since December 2007, the employment economy has lost almost 3.6 million jobs, or nearly 2.6 percent. So does that mean that there's only three quarters of a million to go? At the rate jobs are dropping off the skeleton of what's left of our economy, that means less than more months of jobs losses at the current rate.

Unfortunately, I don't think there are too many people out there -- myself included -- that think that this will all be over in the next two months. We would love to start to ruminate what kind of recovery is in front of us -- if employment will come back slowly or with a vengeance; will consumer spending explode due to pent-up demand, etc. -- but it's too early for such wishful thinking. Just remember that "It's always darkest before the dawn." I'll continue to try and be your flashlight to help you see what's ahead.

And now, a word or two from our Blatant Self-promotion Department ...

Yesterday I did a radio interview with KNPR's State of Nevada weekday public affairs program with Dave Berns. Along with local private and public employment service professionals, we discussed the employment situation in the country and the Las Vegas market, which is hurting worse than in many other parts of the country, if that is possible. If you are curious what was said, listen in. Please don't get our segment confused with the interview with the transvestite master of ceremonies of Cirque du Soleil's ZUMANITY, but feel free to listen to that as well if you are really curious!