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This is an edited collection of the introductory commentaries from past
Monthly
Employment Trends Newsletter that we internally refer to as the "Soapbox Statement." Although every
effort has been made to keep the links to outside sources / references current,
some may have expired. Take note that the figures presented may have been
revised in subsequent data releases.
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2012 |
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January 2012
(published February 3, 2012) return
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What is the "real"
unemployment rate?
There is little disagreement that one reason that the unemployment
rate has fallen recently is because the labor force has stopped growing and is
contracting. But if one concludes that the declining unemployment rate is solely due to
the labor market tightening, that conclusion is subject to interpretation. Many believe
that because of the poor economy, many have simply given up looking for work so
the labor force has shrank (and the unemployment rate declines). The
official unemployment rate, which is widely reported, only tells part of the
story.
And how does the contraction of the labor force impact GDP, or gross domestic
product, which is the broadest measurement of the health of the economy? (We'll
leave that discussion for another time, but by one estimate, if the "missing"
workers were to quickly move back into the ranks of the employed,
that it would add about two percent to GDP.)
Actually, the federal government does report what it labels as "Alternative
measures of labor underutilization" (government-speak for "unemployment
rate") with six variations; the official unemployment rate is just one of them.
When
discouraged workers are calculated in, the unemployment rate rises by a little more than one-half
of a percentage point; add in all persons who are marginally attached to the
labor force (those who are neither working or looking for work, but say they
want a job and are available) and another percentage point is added to the
unemployment rate. And persons working part time for economic reasons would
account for another five or more percentage points.
Therefore, by the
broadest measurement of labor underutilization, or U-6, the quasi-unemployment rate in
January 2012 was 15.1 percent, compared to the official rate of 8.3 percent. A year earlier,
U-6 was 16.1 percent and the official unemployment rate was 9.1 percent, so the
situation has improved. In comparison, in June 2010, when the recession
officially ended, the unemployment rate was 9.4 percent and U-6 was 16.5
percent.
But there are a number of reasons why people are no longer active members of the
labor force and this inflates the alternative measurements of unemployment.
Because of the widely reported skills gap, many who can't find a job because of inadequate skills have gone back to
school to be re-skilled, re-educated, and re-trained.
Some government programs, albeit well intentioned, have become de facto early
retirement programs for those unable to find work, or "acceptable" work.
To what extent have the unemployment compensation extensions artificially
inflated the number of unemployed workers? How many workers, unwilling to invest
in new skills, claim to be looking for work to receive the benefits rather than
simply retire?
The labor force participation rate, which we report every month in this report, is now 63.7
percent-- five years ago it was 66.4 percent. And a similar number, which we
also report, is the employment-to-population ratio. In January 2012, it was 58.5
percent and five years ago it was 63.3 percent.
With so many no longer counted as part of the labor force, but would like to be
members of the labor force, is also why that when the economy starts to markedly
improve, the official unemployment rate may actually rise because people who
have been on the sidelines (and therefore not counted as part of the labor
force) may jump back in the labor pool. But, they don't all get jobs right away, so
if the labor force expands and the unemployment rate may rise as well.
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2011 |
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December 2011
(published January 6, 2012) return
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That was the year that
was ...
Although the employment and jobs data are subject to subsequent
revisions, this seems as good as a time as any to sum up what
happened in 2011.
In January 2011, the country started out with 130,328,000 jobs, unemployment was
at 9.1 percent, and there were 2,206,100 temporary help services jobs. By
December, there were 131,900,000 jobs, unemployment was at 8.5 percent, and
there were 2,303,700 temporary help services jobs.
Therefore, overall jobs grew by 1,572,000, or 1.21 percent, unemployment
declined by 0.6 percent, and the year ended up with 97,600 more, or 4.42
percent, temporary help jobs than it started with. Clearly temporary help
services grew at rate about four times faster than overall jobs.
As impressive as temporary help services' performance was compared to overall
jobs, 2011 was not as good as 2010 was for the sector. The average monthly rate
of change of temporary help jobs in 2010 was 1.02 percent but less than half that in
2011 at 0.36 percent. But there is some reason for optimism for 2012 since it
appears that temporary help job growth sped up as 2011 wound down. Sequential
quarterly growth for temporary help jobs in Q1 2011 was 2.50 percent, only up
0.69 percent in Q2, but recovered nicely to 1.42 percent growth in Q3, and
growth slightly accelerated to 1.50
percent in Q4. In January 2011, temporary help jobs were 1.69 percent of all
jobs and by December its market share was 1.75 percent.
Gross domestic product, or GDP, grew 0.4 percent in Q1 2011, increased 1.3
percent in Q2, and was up 1.8 percent in Q3. The advance estimate for Q4 GDP
will be reported on January 27, but the strong holiday retail season will have a
positive impact on the Q4 figure. Kiplinger estimates 2011 annual GDP growth at
around 2.3 percent, which is much better from 2011's estimated 1.8 percent growth.
If you recall, the recovery sort of stalled mid-year and "that the rather
lackluster performance of the economy lately is the result of several one-time
-- although they could always repeat -- natural and geo-political events and
factors," to quote from our own June 2011 employment report. We went on to say,
"In plain English, the second half of 2011 should be better than the first
half."
By many measures, the second half of 2011 was indeed better than the first half
and the year went out on a high note ... whether growth accelerates remains to be seen. But it seems fairly certain that both the
overall economy and the employment economy will continue to move forward into
2012.
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November 2011
(published December 2, 2011) return
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As 2011 winds down ...
Some pundits are characterizing the
increase in sales on Black Friday and Cyber Monday / Week as a
possible jump start to re-energize the economy. And there is some
truth to that logic since personal spending is currently around 70
percent of GDP (this figure is subject to some debate depending upon
how government health care spending is accounted for).
However, we feel that a single event
such as a healthy retailing season will cure all our
economic and employment woes is as likely as Thanksgiving Day being
officially renamed as National Penultimate Black Friday Day. Many
feel that consumer spending at 70 percent of GDP is too high for a
balanced and sustainable recovery; it should be in the mid 60s
percent range based upon historical averages.
U.S. consumer confidence is up
handsomely as well as some other national economic indicators are
showing signs of improvement and this is good. And the coordinated
move by world's major central banks, including the U.S. Federal
Reserve, to provide more liquidity into the global financial system
is designed to calm fears and a restore confidence in the world's
financial markets and economy.
It was no great surprise that the so-called "Super Committee"
("Stupor Committee," anyone?) failed since it was born out of another failure,
the standoff over the debt ceiling. Unfortunately, the mathematical
rule of two negatives making a positive doesn't apply here. Without
going into the complicated politics of it, the committee's fate may
have been doomed from its formation. "If you try to fail and
succeed, then which have you done?"
Some believe that the now automatic
budget cuts will likely have little effect on U.S. economy growth -- some
experts put the now planned budget reduction for 2013 (the cuts are scheduled
to begin in January 2013) at between 0.5 percent and 0.7 percent of projected
GDP.
But others are of the opinion that
with the economy on autopilot, legislators will have to make significant changes
to programs and policies to avoid the economy from crashing and burning. The Super Committee's inability to
come to an agreement is just one more manifestation of the entrenched deadlock
in Washington, which will do little to restore confidence in the United States or
its economy in the eyes of the world.
Regardless, some areas of the country -- especially local economies that are
highly dependent upon military spending as well as the metro Washington area --
could experience major impacts.
The good news is that all of this uncertainty during what appears to be an
improving economy plays quite well into the hand that the staffing industry
holds. Businesses are experiencing more demand for their products and services,
but because of the uncertainty, employers are reluctant to add to their
full-time payroll burden. So, they bring in temporary workers and / or view the
growth more as project work, which staffing firms can fulfill, than a new,
sustainable level
of business activity. And the data seem to bear this out with the number of
temporary help services jobs continuing to experience gains.
Two days ago, the Federal Reserve released the last Beige Book of the year and
and confirms continuing strong demand for temporary help services. To read our summation of it that highlights
information relevant to recruiting, temporary help services, labor markets, IT services, and other
sectors of interest to the staffing industry, click here. If you want to receive
early notification when our Beige Book summations are posted, there is a simple
sign-up form on that webpage, subscribe to
our Twitter feed, or
shoot me an email.
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October 2011
(published November 3, 2011) return
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Now, where were we
before ...
we were
rudely interrupted by some disturbing macro-economic pronouncements?
If you recall,
last month in this space we addressed some major bad news, or
should we say predictions, about the economy -- mainly, a
well-respected economic consultancy as well as statements by Fed
Chair Bernanke that the sky is or will be falling. Well, since then, the only big
crash was in the form of snow-laden trees and branches in the
mid-Atlantic and New England because of an early season snowstorm. The economy actually improved in Q3 with GDP growth of 2.5
percent, which was an improvement from Q2's 1.3 percent growth and
Q1's 0.4 percent gain. In early July (in the June employment
report), despite some very discouraging signs at the time, we said
that the second half of the year would be better than the first. And
despite the Fed lowering their forecast for economic growth earlier
this week from their last forecast in June, we
still stand by our statement.
Our original scheduled subject for this
space was to discuss what could be done to create job growth. There
are no easy answers and no single answer.
Glenn Gutmacher,
founder Recruiting-online.com, e-mailed us and said, "Everyone calls
this a 'jobless recovery,' but that's wrong: plenty of new jobs are
being created by American companies, but increasingly overseas ..."
and that's where labor is cheaper and there are plenty of college
educated workers with technical degrees, many of whom got their
education in the U.S. He went on to say that those with those
advanced degrees used to "stay in the U.S. where they saw more
promise for their lives than back home. ... these high-value workers
fueled U.S. economic growth in the ever-important
mathematical/technical/scientific areas."
No doubt that improving economies in
many students' home countries are creating a bit of a brain drain
here and those "brains" contributed to generating some U.S. domestic
jobs. However, many in Europe complain they can't set up a
technology business because of the critical mass advantage of the
U.S. The U.K.'s Silicon Glen in Cambridge (a.k.a. the Cambridge
Cluster) is one of the biggest in Europe but is a pale imitation to
California's Silicon Valley.
Not to totally discount the argument that jobs shifting overseas is
due to cheaper labor, there are other factors in play: "what
used to be a tactical labor cost-saving exercise is now a strategic
imperative of competing for talent globally. ..." according to a
study on the next generation of offshoring by Duke University, Fuqua
School of Business.
Nearly every day, we read reports that employers cannot fill
domestic jobs because the workers who are available do not have the
right skills and / or education and training. We should point out
that when employers complain they cannot find qualified applicants,
they may really be saying they 'cannot find qualified applicants at
the wages we are willing to pay' and, understandably, do not want to
disrupt established, company-wide pay structures. We're pretty sure
that staffing companies can fill those vacancies -- albeit at higher
rates. After all, adjusting pay rates to fill shortages is what they
do.
Regardless of the unwillingness, or inability, of employers to offer
higher wages to attract qualified workers, some of the current
unemployment is due to structural factors, or in the word of Fed
Chair Bernanke at a news conference two days ago, ""Mismatches
between worker skills and job opportunities, loss of skills ..."
Higher education, especially community colleges, have recognized
this and are able to create programs -- often in partnership with
local employers -- to re-train workers. But colleges may lack
the resources to create the programs and the unemployed often lack
both the money and the time to take advantage of those opportunities
to be trained for the "new" labor force.
In addition, the housing / financial crisis has drastically reduced
the mobility of the workforce -- many people cannot afford to sell
their house and move to a location where the jobs are available that suit
their skills. Or in the words of Fed Chair Bernanke at Wednesday's
news conference: "... geographical mismatch ... "
Every month, more than 2,500,000 job
openings remain unfilled. IMHO (in my humble opinion), getting
workers into those openings would certainly be a move in the right
direction, but even if all of those openings were filled in one
month, the unemployment rate would only drop by about 1.5 percent.
The financial crisis cannot be resolved overnight, a fortnight, or
even many fortnights, but it must be fixed if the economy is to make
anything more than baby-steps forward.
We've "mobil-ized"
Ever needed to know what is the
unemployment rate before going into a presentation (or to settle a
bet)? How many jobs were there last month and what is the current
GDP growth rate? Well, other than that last one should be easy because we
just told you in the first paragraph, we've created mobile / smartphone versions of several of our more popular webpages. Nothing
too fancy -- no flaming logos, dancing babies, or angry birds --
just solid information. Check our our mobile home page at
m.brucesteinberg.net as well as a mobile version of several
important economic indicators at
m.brucesteinberg.net/Economic_Indicators.htm. Even this monthly
employment report is now available on smartphones everywhere at
m.brucesteinberg.net/Jobs_Report.htm. If you would like to see
mobile versions of any of our other information,
let us know. You do know know that
our monthly employment podcast is on iTunes, and has been since
February 2006?
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September 2011
(published October 7, 2011) return
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If they say it, will it happen?
We
originally planned to discuss some of your ideas of what needs to be
done to generate more jobs and grow the economy as our commentary
this month. Some of you sent in some great ideas, which we are
saving for next month unless the sky collapses, which we will be
compelled to report on.
But, it
appears that the economic sky started to crack since our last
report, which is an event we just cannot ignore. As we all learned
as children, ignoring bad news does not make it go away. But, is the
news really that bad? Some think it is.
Last week,
a highly regarded economic consultancy cried "Wolf!", or should we
say "Bear!"? The Economic Cycle Research Institute, said "U.S.
economy is indeed tipping into a new recession. And there’s nothing
that policy makers can do to head it off." Although ECRI's full
report is only available to its members, their published summary is
quite chilling and you can read it for yourself
here.
Then this
past Tuesday, Federal Reserve Board Chairman Ben Bernanke declared
that the economy is "close to faltering." Although those words were
not in
his prepared testimony, his formal statement wasn't much more
encouraging. It included the following: "... recent indicators,
including new claims for unemployment insurance and surveys of
hiring plans, point to the likelihood of more sluggish job growth in
the period ahead."
But
sluggish job growth does not equal jobs being removed from the
economy. Let's face it, job growth has been sluggish for most of the
recovery. FYI, later that same day, The New York Times
reported that Ford Motor Company "agreed to add 12,000 jobs and
invest $6.2 billion in its United States plants." That's
nice to hear.
Although
one cannot completely dismiss financial developments in Europe and
their affect on the U.S. economy (as well as our economy's affect on
theirs), what is really quite bothersome is how our domestic
politics are affecting the economy. As we discussed in this
space last month, "polinomics" have taken root and are
flourishing. Unfortunately, the "stuff" coming out of Washington is
serving as the fertilizer.
Many see
the weakness in the employment economy -- employers not wanting to
add jobs -- due to a 'crisis of confidence' in the future, which is
exacerbated by politics. If employers don't know what the future will
bring in terms of the economy as well as regulations, then they don't
want to make a commitment to increase their payrolls. Since it
certainly appears that politicians would rather squander the time
away and fight each other about how to best stimulate business to
create more jobs and not address the skills gap and help workers
prepare for the jobs that are available today (and will be
tomorrow), we may fall back into recession.
However,
this situation could develop to be very beneficial to temporary help
services. Employer uncertainty and lack of easy-to-locate qualified
workers really accentuates the benefits of utilizing temporary help
and staffing services. Next year could be a fairly good year for
staffing companies if some level of confidence returns to the economy. But with
even minor issues facing Washington collapsing into acrimonious,
partisan childish non-cooperation, it may be some time before
confidence in nation's economy is restored both domestically and
internationally.
To grow in
2012, staffing executives will likely need to shift their marketing
focus as well as their potential customers. Some sectors will do
very well in 2012 -- the key is in knowing which ones.
SPECIAL SERVICE
ANNOUNCEMENT .................... SPECIAL SERVICE
ANNOUNCEMENT
The week after next, the Federal Reserve Board
will be publishing a new Beige Book on October 19th and we will be posting our
summation of it emphasizing developments and trends in staffing,
recruiting, labor markets, IT staffing and services, and the sectors affecting
them. Inasmuch as we don't want to be sending you
unwanted e-mails, it you want to see our summation, just sign up
here to receive notification when it is posted.
There's also a link to our summation of last month's Beige Book to
give you an idea of what it contains. BTW, there's no charge -- it's
just our way of staying in touch.
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August 2011
(published September 2, 2011) return
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Where does the
economy go from here as we enter the Age of "Polinomics"?
Earlier this week, the White House
announced a new nominee to head the Council of Economic Advisers. Austan Goolsbee left to return to the University of Chicago Booth
School of Business, ostensibly to preserve his tenured professorship
since he has been marked absent for several years and "The school
rarely allows professors to take more than two years of leave,"
according the The Washington Post.
Although the nomination of Alan Krueger
has not been without criticism, the Princeton labor economist is
just that -- well known as a labor economist and academician who has
done a significant amount of work about unemployment.
Regarding the political aspects of the nomination, David Wessel,
The Wall Street Journal economics editor, says that "all the
academics who come to chair the Council of Economic Advisers are
reluctant to become cheerleaders for the economy because -- or
cheerleaders for the administration -- because [sic] all of them want to
go back to academia and have some kind of credibility ... you don't
hear anybody in Washington talking about how the economy is really
good if people would just recognize it. ..."
Wessel believes that the question remains
if 1600 Pennsylvania Avenue will present a jobs agenda / proposals
that the White House believes is in the best interest of the economy
but can't get through Congress or compromise and present something
Congress will go along with.
And this brings up our contribution
to this discussion ... as we get closer to the national election, it
will be increasingly difficult to separate politics from the aptly
named dismal science known as economics about what the country needs to do to address the jobs and
unemployment situation. As the debt ceiling debacle (whoops, we
meant to say "debate") demonstrated, policymakers, a.k.a.
politicians, from both sides of the aisle are too fixated on
attempting to buy votes with tax cuts and spending programs targeted
at their respective bases rather than address the real problems.
(see the "Letter to the Editor" from The Washington Post,
below left.)
As "polinomics" (politically influenced
economics) undoubtedly will increasingly come into play, our view is
that the country will be well served through public policy that
creates a decisive sense of confidence in the future and the
economy. The challenge is to create policies that do just that. If
enough of you
let us know what you think about this, next month we'll address what we
think is necessary to move the employment economy in the right
direction along with your thoughts.
SPECIAL SERVICE
ANNOUNCEMENT .................... SPECIAL SERVICE
ANNOUNCEMENT
Next week, the Federal Reserve Board
will be publishing its latest Beige Book and we will be posting our
summation of it emphasizing developments and trends in staffing,
recruiting, labor markets, IT staffing and services, and the sectors affecting
them. Inasmuch as we don't want to be sending you
unwanted e-mails, it you want to see our summation, just sign up
here to receive notification when it is posted.
We just couldn't
not pass this on ...
This "Letter to the Editor" published after the east coast earthquake in
The Washington Post speaks for itself:
"After the sorry performance by our
elected officials in Washington this year, they certainly needed to
be shaken up. Unfortunately, they were out of town. What a waste of a good earthquake."
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July 2011
(published August 5, 2011) return
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Now that the debt
ceiling standoff has been temporarily settled ...
will business start adding jobs? The
argument goes that employers weren't adding jobs because of the
possibility of the nation defaulting on its debt obligation. Even if
-- and that's a big if -- employers have been waiting to build up
their workforces until Washington settled that issue, it's not going
to happen overnight, or even a fortnight or even several
fortnights. We've said it many times before, but the lack of strong
employment growth is the confluence of several factors including,
but not limited to:
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Structural changes in the economy.
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Growth in the overall economy has been
quite slow. GDP in Q1 2011 was only up 0.4
percent and still weak in Q2 2011 at only 1.3 percent growth. At
least it is moving in the right direction and we stand by a previous
assertion that the second half of the year will be better than the
first. (Incidentally, the recent revisions to GDP data went back to
2003 and generally show lower figures.)
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Workers who are available for work not
having the proper skills, education, experience, etc.
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Workers, who worked in construction and
manufacturing and were fairly highly paid, continue to hold out for
those same, or similar wages and benefits so their period of
unemployment is extended. Although the jobs they could get today in
the service sector may pay lower wages, they continue to wait for
the "old" job to return, which isn't going to happen.
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Companies are more willing to invest in
capital improvements to improve efficiency in order to complete in
the global economy rather than human capital.
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The Federal Reserve Board released its
latest Beige Book last week that reports on local economic activity
and labor conditions and found a very mixed economic picture. One
district Bank found that "Employment agencies specializing in
temporary workers noted modest improvements in demand, with several
adding that recent uncertainty about the direction of sales was
causing their clients to postpone hiring full-time employees." Yet
another district Bank reported that "One staffing agency described
'almost a stop to new [excludes replacement] hiring orders in the
last three weeks.' " And from anther: "Staffing agency contacts
continued to experience high demand for temporary or contract
workers. According to reports, demand for qualified, higher skilled
candidates is robust, especially in the technology sector." Our
summation, which cites passages that are relevant to the staffing
and IT services sectors, is
here and that page
includes a link to the full report if you are so inclined to study
the entire report.
File this under "We told you so
department" ...
It was six years ago next week -- August 11, 2005
-- that we publicly labeled the so-called real estate boom a Ponzi
scheme. There were very few saying that at the time and any fool
could make money in the midst of what proved to be a housing bubble
that -- as we all know went, well, "boom" and brought the rest of
the economy down with it. Or, to use the original wording from 1587,
"a foole and his money is soone parted." Our tip-off was not a proverb from the 16th century, but rather a more modern Nobel
Prize winning economic theory of how asymmetrical information
influences economic markets. That sound economic theory also
explains why employers should use staffing services. To read my
original treatise, which was published in the Financial Times,
click here.
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June 2011
(published July 8, 2011) return
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Two years into the
recovery people are asking, "Where's the beef?" ...
The economic news hasn't been so great for the past
several months and it has a lot of people wondering if the recovery,
which is actually two years old now, has stopped and the situation
is backsliding.
In a word, no. Experts seem to be in agreement that
the rather lackluster performance of the economy lately is the
result of several one-time -- although they could always repeat --
natural and geo-political events and factors. In plain English, the second half
of 2011 should be better than the first half.
Nature's contribution to the slow growth included the
earthquakes in Japan that created a dent in the auto industry and a
short in the high tech sector, which cascaded throughout
the world and U.S. economy. In addition, the massive floods and wild
weather throughout much of the country certainly removed some steam
-- albeit not necessarily a powerful head of steam to begin with -- from the GDP
locomotive.
Then there is the fairly delicate world economy that,
in addition to being impacted by Japan's near meltdown, is coping with
slowing growth not to mention Greece's debt crisis as well as
similar issues in other countries. And this of course brings up America's
own debt
ceiling problems that politicians from all sides seem
to be playing a massive game of "chicken" with to see
which side will blink first. Oh, and let's not
forget that gasoline prices exploded in the first half of 2011 that
knocked the blocks out from under consumer confidence. Although the
role of the U.S. stimulus programs played in shoring up the U.S.
economy and its ultimate benefit will continue to be debated,
there's no argument that the nation is now trying to shift away from
a stimulus-supported economy.
All of the uncertainty constrains consumer spending as well as business investments in the
future since the future contains so many unknowns. Companies are not
going to create new jobs if they don't know what the future holds
and have a good feeling that
consumers will be able to afford their products and services. Or as
The Economist recently reported, "Companies are currently
sitting on piles of cash because they are wondering how strong
economic growth will be. Politics gives them more reasons to sit on
their hands rather than investing and hiring immediately, providing
a boost ... ."
Some pundits
will look at the unemployment rate and say that things aren't
getting any better. What they fail to either realize or publicly say
is that many people simply gave up looking for a job back when
things were bad and therefore were no longer considered unemployed
or part of the labor force since they stopped looking for work. But
they jump back into the labor pool as conditions improve; if they
have not found a job, this affectively increases the unemployment
rate. And while the number of new jobs the economy is generating is
nothing to write home about, this is, in part, due to the structural
shift the economy has undergone. In many instances, it's not a case
of not new jobs, but workers who are insufficiently skilled to fill
the what new jobs companies are creating.
Take a look at our summation of last month's
Beige Book from
the Federal Reserve Board that provides some detail as
to the scope of that problem. Staffing companies that learn to
identify what skills are needed in their local market/s and what
sectors are hiring will do very well.
More than 20
years of temporary help services ...
We've received a number of requests to expand our
monthly chart of Temporary Help Services' performance. We will
continue to include our 13-month chart in this monthly employment
report, but it is now being supplemented by an interactive
presentation of temporary help services performance on our website. Click on over to our
Historical Performance
of Temporary Help Services from 1990 to the present
and
let us know
what you think of it.
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May 2011
(published June 3, 2011) return
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Challenging times ahead for
employment services ...
We've
made the case several times before that the recent recession was fundamentally
different (for an archive of these opening commentaries, go
here) and therefore, this is a fundamentally different recovery. The
difference of the recovery has wide-reaching implications for the labor force
and, by proxy, the staffing sector.
Employment among men, especially low-skilled men, declined more during the
recession and is not expected to come back. That is certainly a strong statement
and you should not take it at face value. The rationale is complicated -- and
too complex to get into in this space -- but is made clear in a recent The
Economist article entitled
"Decline of the working man"
(April 30th-May 6th 2011 edition, pp. 75-77).
Two
statements in The Economist story are especially illustrative of this
point ... "less-educated men are disproportionately likely to work on building
sites [construction] and in factories, where lots of jobs were lost in
2008-09." The Economist report goes on to say what we've said one way or
the other in this commentary for several years, "The main reason why fewer men
are working is that sweeping structural changes in rich economies have reduced
the demand for all less-skilled workers. Manufacturing has declined as a share
of GDP, and productivity growth has enabled factories to produce more with fewer
people. Technological advances require higher skills." The article goes on to
detail how and why the current situation developed in America and compares it
with Europe and proffers some potential policy prescriptions.
The
decline of low-skilled jobs in the economy has several ramifications for
staffing services. Although low-skilled work and the need for workers to fill
that need will never disappear completely, it will be a thinning portion of the
economy and the labor force. There are several strategies for staffing companies
that depended upon this niche to pursue: 1) locating and servicing -- and very
successfully in some cases -- those ever-shrinking pockets of low-skilled
activity and specializing in it, 2) move into new niches, those that are growing
and will need growing numbers of workers, and 3) up-skill the current pool of
available, but not properly skilled workers for the "new" jobs.
Although
the low-skill niche will diminish further, the economy will always need workers
to fill low-skill positions so it's certainly a valid approach to the market.
The second is probably the best for the long-term health and growth of a
staffing service but may require a different strategic plan as well as market
data.
Is the
last one -- essentially re-training workers with inadequate skills -- the
responsibility of the staffing industry? Throughout a good part of the 1990s,
the unemployment rate was steadily declining and a supply of workers who met job
order requirements were increasing difficult to find. If staffing companies
wanted to fill those orders, they needed to train the workers. Some figured out
a way to do it efficiently and still make a profit. Much of the training taking
place in the 1990s was "cross training" -- often taking a worker who was
experienced in one set of skills and train them to similar set of skills.
Although the adage "what's old, is new again" sort of
applies here, the situation is different this time around -- the "new" jobs not only need a different skill
set, they require education, and a different education at that. There are active
programs (also discussed the aforementioned The Economist article) that
attempt to connect education and work; these efforts also include training
programs offered by community colleges, which could be a contributory reason for
the strong growth in community college jobs and job postings (see "Free
Employment Trends Report" from HigherEdJobs below, left).
The
entire situation relates to the end of an adequate "apprentice" mechanism for
which workers can obtain the knowledge and skills for jobs for which they do not
have adequate education or experience. But that is another subject for another
time. Have a great summer y'all!
Free Employment Trends Report
...
We recently completed the Q1
2011 employment trends report with HigherEdJobs, which is visited by more than
two million times a month by 900,000 unique visitors, mining their job postings
data along with an analysis we conducted of relevant BLS data. The report, which
helps position HigherEdJobs as the leading source for jobs in academia, unveiled
some very interesting trends in higher education and included a special
supplement this quarter looking at the trends for fine and applied arts faculty
job postings. This link --
Higher Education Employment Report - Q1 2011 -- will lead you to a quick
overview as well as to the full report and a news release.
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April 2011
(published May 6, 2011) return
to top |
|
When does supply
not equal demand?
Has the
law of supply and demand been repealed? Although it has many corollaries, in
brief, it generally results in an equilibrium where products or services
demanded at a price are equaled by products or services supplied at that price.
But
that basic reality gets infinitely more complicated when discussing labor supply
and globalization. At one time -- a generation or two ago -- increases for
domestic production, mainly manufacturing but not limited to it, could be met
with an increase demand for and employment of U.S. workers. That is because that
increased demand could be satisfied with low and semi-skilled workers, which
were in great supply. If there were a shortage of domestic professionals, such
as health care providers along with engineers and scientists, that shortage
could be made up via immigration.
A
decade ago we could attract the best and the brightest through immigration. But
now, first, with rising incomes in developing countries, there is less incentive
to leave and, secondly, increased xenophobia sometimes masquerading as national security
has made immigrating more difficult. They now go to other countries (Canada
being one example) where the policies toward educated and skilled workers are
far more accommodating.
Domestic production today is being filled via globalization via China, Inc.,
India, Inc., etc. leaving the U.S. with a glut of domestic workers who may not
be qualified for many of the specialized jobs that the current economy is now
creating. Unfortunately for both the economy and the labor force, the
development of human capital that is needed to fill the new jobs that the
economy is creating takes time. Furthermore, it is unclear if this issue is
genuinely being addressed. The lack of properly skilled workers could be one
contributory reason why the economy only grew 1.8 percent in Q1 2011 (see our
Economic Indicators page).
The
shortage of an adequate domestic supply in the form of skilled workers is
constraining the economy and changing who and where the current demand is being
filled. Some economists feel this problem will persist well into the future.
Although the overall unemployment rate is now 9.0 percent, the rate for college-graduates is half that at 4.5 percent. We leave it to another time
or to social scientists to say if America is developing an underclass.
This is
also likely one of the major reasons that new job growth during this early part
of this recovery is lagging compared other recoveries. The new demand for
workers that cannot be fulfilled domestically is being filled via globalization
(read: not in this country). The supply of labor at lower price is overseas so
expensive locals are out of work, which is the heart of the political hot potato
of import controls. So, the law of supply and demand persists; and here's
a corollary: the law of supply and demand is not working for the benefit of
the U.S. or the American labor force at this time.
But is the problem really just the
lack of an adequate supply of workers or cheaper labor overseas? Yes and no --
the problem also lies in the rigidity of the labor supply to meet quickly
changing demands and an economy that appears to be increasingly straddled with
structural unemployment. That rigidity comes from many sources. People are not
willing to move because some much of their personal financial worth is tied up
in their homes and we all know how healthy the housing market is.
And as the labor force ages, a greater percentage of those who are out of work
would rather pursue a futile path and try to find a job with their
current skill-set than to make the
investment and re-train themselves for another job and the future.
The
opposite of rigidity is flexibility, which has always been a flag that staffing
services fly high. This confluence of factors including the mismatch of skills
of available workers with jobs being created, can be of benefit for employment
services that have a deeper understanding that these market forces are in play.
Just as some people are hoping that the improving economy will bring back their
old job, staffing executives waiting for the types of job orders that were the
backbone of staffing sector growth before the recession may be time wasted; both
groups are likely "Waiting for Godot."
Did you miss it?
For those who may have missed our free recap of the latest
Federal Reserve Board Beige Book, which is a
collection of anecdotal
research reporting on local economic conditions , it can be
found
here.
Our summation pulls out passages relevant to staffing, recruiting, employment,
and IT staffing services. There is also a link on our summation page to the full
report for those of you who prefer to labor through the entire report.
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March 2011
(published April 1, 2011) return
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Employment economy is moving
forward ...
It's not a cruel April Fool's joke
that the employment economy is moving forward so slowly, perhaps more so in
perspective of how far it's fallen. Although we've discussed this point before
-- that the past recession (it's nice to say "past recession") is
different than previous ones -- let's flip it around and also see why this
recovery (it's even more pleasant to say "this recovery") is developing
differently than previous ones.
In previous downturns, which were not as
long as the recent one, companies would keep employees on longer than perhaps
they had financial justification to do so for several reasons -- probably the
main one being because they wanted them to be around when the economy came back.
This development was manifested as a decrease in productivity data as seen in
past recessions; after all, when a company roughly has the same number of
workers but is producing less, productivity drops. And, if the recession was
short in duration, that approach was justified.
But, as we've said before, this past
recession was different in several ways as the economy underwent some systemic
shifts not to mention the collapse of the housing market that brought the
financial services sector down with it.
And then something interesting
happened ... productivity rose as companies -- aided by technology -- learned to
operate with fewer workers and then they cut their workforce drastically and
stopped hiring. This was the first recession in which ERP systems (Enterprise
Resource Planning) were in place and refined to the point of being able to measure
productivity more quickly and accurately than ever before. In addition,
management was able to produce Key Performance Indicators promptly and people
could be laid off earlier in the cycle if the figures didn't add up.
Moreover, the prolonged downturn
prevented employers, if they were still so inclined, from continuing to hang on
to workers. For the first two-thirds of the recession (the first 12 months to December
2008), employers cut a total of 3.6 million jobs, or about 300,000 per month.
But for the last one-third of the recession (January to June 2009), they cut a
total of about 3.9 million jobs in half the time, or almost 650,000 per month.
In the later part of the recession, the economy was losing more than 800,000
jobs a month.
As the employment economy now
recovers, high productivity continues to temper overall job growth as many of
the lost jobs will not need to be replaced for myriad reasons. And technology
plays a role here as well -- at least some of the institutional knowledge once
held by long-time employees is now captured in the ERP systems.
But there is good news here as well.
The unemployment rate likely will continue to decline -- and providing
psychological benefits that should not be discounted -- as more and more baby
boomers age out of the workforce. However, there is another wildcard here. The
recession has left many of those baby boomers financially unable to retire on
schedule.
Yesterday, an Associated Press story
discussed some of these trends in greater detail and also compared the situation
on a global basis, including the role that temporary help has played in the U.S.
It can be accessed here. These are indeed interesting times in
which we live, which is a variation of a reputed English translation of a
Chinese proverb as well as a curse.
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February 2011
(published March 4, 2011) return
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Recovery moves forward, albeit
uneven ...
Several times a year, the Federal Reserve Board climbs out of their ivory tower
and publishes a document commonly referred to as the "Beige Book," which is a
amalgamation of anecdotal conversations officials from the 12 Federal Reserve
Banks around the country have with local business people in their respective
districts. Clearly not the most scientific method to take the economic pulse of
the nation, but very useful nevertheless. The current report, which as released
Wednesday, runs more than 17,000 words and is a fascinating account (okay, maybe
fascinating is a bit of a stretch -- let's say quite interesting)
glimpse into the how the economic recovery is unfolding. We're not suggesting
that you pore through the entire 17,000-plus words. However, we did so you don't
have to!
Here's a link to our less than
3,000-word summary. We summarized points about the labor market in general
and specifically about staffing, IT staffing and services as well as mentions
about sectors of keen interest to all employment services.
And to whet your appetite, here's a little summary of our summary: seems that demand for temporary workers by manufacturers is up in
some, but not all areas of the country. Staffing companies in other areas of the
country are experiencing growth in temporary-to-permanent business as well as
perm business. But the trends
are not uniform and one District reports that some employers "maintained a
preference for hiring temporary staff." And there are several pockets for
growing demand for high-skill workers. A District in the South reported
"Staffing firms reported continued strong demand, particularly for high-skilled
IT positions" while a western District reported "Sales rose significantly for
providers of technology services,... ." We also include a link to the full
report in our summation.
Who's the "ultimate consultant's consultant"? (spoiler alert -- IT'S
ME!)
"Bruce is an invaluable resource to me in working
through the strategic planning process with my clients in the staffing
industry. Bruce consults with me on each engagement and customizes his
deliverables accordingly, exceeding my expectations each time. He
expediently gathers and compiles the data I need and delivers it in
user-friendly reports which make the analysis portion of my job easy.
Because with Bruce's assistance I can make strategy recommendations with
confidence and accuracy, my clients benefit greatly in turn. He is the
ultimate "consultant's consultant." --
Amy Bingham,
Bingham Consultant
Professionals.
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January 2011
(published February 4, 2011) return
to top |
|
Going into 2011 with a ...
bang or a whimper? On balance, the best answer probably is that the economy is
'moving forward at a pace that won't get it a speeding ticket, but it will
probably stay on the road.'
Gross domestic product (GDP) has pegged the economy of growing at 3.2 percent in
the 4Q2010 and 2010's GDP was up 2.9 percent, which was considerably
better than the decline of 2.9 percent in 2009 (data subject to revisions).
That's not a bad performance, but not a great one either.
As the world's economic leaders gathered in at the World Economic Forum in Davos,
Switzerland, last week, it was a little disheartening to hear U.S. Treasury
Secretary Timothy Geithner say, "... It’s not a boom. It’s not an expansion
that’s going to offer a rapid decline in unemployment,” according to Bloomberg
News. You can click on the following link for the full story, but we think the
previous quote and following headline pretty much tell the whole story:
"Geithner Says U.S.
Economic Recovery Still Too Weak to Reduce Unemployment".
On the surface, Geithner's comments can seem a bit discouraging, especially for
those in the employment services business. But should it be? Of course, if
employers need to ramp-up their ranks quickly, which seems unlikely for the
near-term future, employment services are the perfect partners to help them ...
but then what? Of course, there are plenty of opportunities for staffing
services in a booming economy, but what about a slow and steady build up? That
can be just a good, perhaps better, for staffing services this go-around.
We've said it before and we'll say it again, the economy that emerges from the
ashes of the Great Recession will be quite different. Attempts to turn back the
clock and reinstate lost jobs have been largely ineffective. Much of the job
losses are the result of "dislocations," a clinical term that means simply that
unemployed workers lack the skills that employers are now seeking.
We're hearing that plenty of jobs are remaining unfilled because the candidates
aren't the right candidates. But is it really much different than in the early 1990s when
that recession displaced many workers and reeducation and retraining were the
hot topics? Not really ... what was old is new again. Apparently, another more
powerful salvo
is being fired in what McKinsey & Company labeled in the late 1990s as "The War for Talent."
And this means that the staffing services sector will also need to reinvent
itself to reclaim its role as a significant player in the employment economy. As the economy retools,
businesses will have more difficulty in locating, or even identifying, employees
with the "right stuff." It may not work for staffing services to try and
find success in the same markets with the same methods of the past.
The staffing services "recovery" has been occurring for over a year now, so, if
you are in the staffing industry, now would be a good time to figure out if you
are taking part in it or just getting pushed along (and, coincidentally, we have
two strategic planning tools to help you do just that!) ... see further
descriptions below, left column. Those that lose will holler louder than those
who gain -- the gainers are too busy working.
Shortages looming ... and opportunities abound
Politics aside, the President's recent State of the Union address emphasizing
the need to support math and science education can also be seen as underscoring
the need for and shortage of workers with math and science knowledge and skills.
This past weekend, CBS Sunday Morning did a great piece on
"America's Brain Drain" and
worth the seven or so minutes for anyone in the IT staffing and solutions
business. This story is certainly consistent with what we've been hearing about
the increased demand for IT professionals, which is supported by data that show
low unemployment rates for workers in those occupations.
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2010 |
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December 2010
(published January 7, 2011) return
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Ready to wrap-up 2010? ... not yet ...
Since 2010 employment data won't be
finalized until next month with the year's annual revisions, we will resist the
urge to wrap-up 2010 since the numbers will undoubtedly change. Preliminary
estimates show that overall jobs will be revised downward; however, some sectors
such as Professional and Business Services likely will be revised upward. (For a more
thorough discussion on this subject, see our
October 2010 commentary.)
So, what to comment on? It should
come as no surprise that more new jobs are on everyone's agenda in 2011. Regardless of
the reasons why the employment economy has not been pumping many new jobs into
the economy as most would like, that situation will likely change for the better
as business continues to expand, albeit at moderate rates. Just this morning,
Fed Chair Ben Bernanke told Congress, "... we have seen increased evidence that
a self-sustaining recovery in consumer and business spending may be taking hold.
... Overall, the pace of economic recovery seems likely to be moderately
stronger in 2011 than it was in 2010." He went on to testify that "...conditions
in the labor market have improved only modestly at best."
The
unemployment rate will decline as businesses expand
their payrolls, but likely not as dramatically as it did in December (see
below), which is good for staffing services as businesses utilize
temporary employees first and / or move forward via one-off projects. More people who had been
out of the workforce because there were no jobs will venture back into the pool
but many are ill
prepared and trained for some of those new jobs -- also good for staffing
services when they can deliver on the promise to furnish properly skilled
workers.
The economy -- as manifested via GDP -- has expanded in each of the five
quarters since the recession was officially declared as over and hopefully will
continue to do so for the foreseeable future. (In contrast, it contracted for
five of the six quarters in the 18 months of the Great Recession.) But,
not unlike a psychologically-scarred person, there are still a lot of issues
this economy has to work through as it tries to move forward but with a lot of
baggage holding it back. Don't forget that the economy is not one giant monolith and some
sectors and geographies will do well as others will continue to languish.
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November 2010
(published December 3, 2010) return
to top |
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Ready to wrap-up 2010? ...
Although employment data for the last
month of the year won't be out until next year, now in early December seems to
be a good time to review the year past. (Data for 2010 won't be finalized and
published until February; in January, we'll look forward into what to expect for
the new year.) The employment economy started out 2010 with about 129.6 million
jobs in January and in November there were 130.5 million jobs. You don't need an
advanced degree in statistics to figure out that was a gain of almost 1 million
jobs. That may not sound like much (frankly, it isn't when the economy is in
growth mode), but let's put it into perspective.
For the same 11-month period in 2009,
the economy lost more than 4.6 million jobs (averaging a loss of about 420,000 jobs a
month) and in 2008 there was a loss of more than 2.9 million jobs (average of 270,000 jobs
lost per month). So, although the current employment trend may not get you giddy
with excitement, 2010's average gain of around 85,000 jobs a month seems downright
stupendous. Remember, an object in motion must stop momentarily before changing
direction. The employment economy has changed direction but it will be years
before it gets back to where it had been. Learn to capitalize on the trend.
One of those trends -- regardless if
their job loss was due to cyclical or structural changes in the economy -- is
that people
may need some supplemental education and / or training. Even for people who had
relevant skills before they lost their jobs, they may have been out of work for
so long that their skills have become outdated. Therefore, jobseekers,
employers, and organizations who are aware of this trend and realize that there
is likely a need for some updating of skills and education will be the most
successful in getting a job or attracting the better candidates.
Our
holiday greeting to you, ...
It's a tradition for businesses and individuals that at this time of year to
send out holiday cards, wishing you holidays greetings and wishing you a Happy
New Year. It's been a tough couple of years, but we've all made it through
and that's reason to celebrate. Religious considerations aside, we think that a
quote from Garrison Keillor is appropriate: "A lovely thing about Christmas is that it's
compulsory, like a thunderstorm, and we all go through it together." However you celebrate this time of year, enjoy!
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October 2010
(November 5, 2010) return
to top |
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May be a bit arcane this month...
Here's advance warning about
something that you'll probably be hearing more about early next year when the
U.S. Bureau of Labor Statistics publishes its annual revisions. Okay, we accept
that
revisions to employment data is a subject that probably doesn't float your boat.
But with the changes in the political make-up of the U.S. Congress, this fairly
obscure development may be source of a more than the usual rhetoric and
political posturing that accompanies the release of the monthly employment
situation every month when the revisions come out
early next year.
Don't get us wrong, we take the data revision
very seriously; it's just the political rhetoric and interpretation afterwards
that we have little patience for (and don't tell us we shouldn't end a sentence
with a preposition; we did it, we like it, just get over it). And the revisions do offer a good
glimpse into how the employment economy is shifting and possibly how and where the changes
in employment are structural rather than cyclical.
Actually, BLS published some aggregated preliminary estimates last month that
show total private-sector employment will likely be revised downward by 0.4 percent, which
translates to 371,000 jobs. In plain English, the economy didn't produce as many
jobs as previously believed and reported. While some sectors will likely show
larger downward
revisions, others may show upward revisions.
From a percentage perspective, Mining and logging will likely be revised
downward the most, but since it is a relatively small sector (only about 750,000
total jobs), the anticipated downward revision of about 20,000 is a fairly
inconsequential development in the grand scheme of things. Incidentally, that grand scheme is
total private-sector employment of about 108 million; throw in the 22 million
jobs in government and total non-farm employment is about 130 million.
But Construction is expected to be
revised downward by about 1.2 percent, or about 60,000 jobs. Considering how
much of the current economic situation was brought about by the failure of the
housing market, this could mean this sector has not begun to recover as much as
previous thought. And Manufacturing will also likely be revised downward by 1.0
percent.
Nevertheless, the revisions will
likely show other sectors were stronger -- as manifested by showing greater job
growth -- than previously reported.
Topping the list for upward revisions will be Professional and business
services. This is the sector that incorporates Employment services as well as
Computer systems design and related services along with many of those sectors'
clients.
These revisions are important for at least two reasons. The obvious is that it
sets the record straight. The second is a bit more complicated.
The "formula" for estimating the monthly data includes what is called a
"birth-death model" which takes into account new business creation as well as
companies that close. The revised data are more accurate because that process uses tax
records that are filed by essentially every employer. Therefore, the revisions
will provide another piece of information regarding either the cyclical or
structural nature of recent job losses as well as job growth.
So come next February, take a look back at this column and let's see how
accurate we were. No need to save this e-mail. We publish all of our past
commentaries for all the world to see
here.
Good national trend round-up ...
The Federal Reserve
Board published another Beige Book last month. It presents what the officials at
the Board's 12 local district bank are hearing throughout their districts.
We excerpted portions of special relevancy to the recruitment, staffing,
employment services and IT services sectors.
Clearly the Book tells a story of uneven economic growth, but there are a few
gems that sound encouraging to those in the employment services market and learn
more about some employers that are, "reluctant to add permanent employees,
continuing to use temporary hires instead ..." and where "several
high-tech firms reported stronger demand."
If you want to read the whole Beige Book, you are welcome to -- and we include a
link to it right at the top of
our summation.
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September 2010
(October 8, 2010) return
to top |
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The real truth about the high unemployment rate...
One truth is that the monthly employment data have become a political issue --
and, as such, a source of fodder for politicians and pundits to toss at one another.
Unfortunately, common sense and the real meaning of some employment data become
the first casualty. The unemployment rate appears to be "stuck" in the high
position -- we've said ourselves. But, at this stage in a post-recessionary
economy, this development is more than expected -- it's pretty common. Add to that development
that employers may be delaying hiring until after the election, high
unemployment rates are not likely to change any time soon. But that doesn't mean
the situation is static.
The unemployment rate is a ratio of two figures: 1) the number of the people in
the labor force who are not employed and 2) the size of that labor force. Pretty
simple stuff. But, things aren't always what they appear.
The complication is how "labor force" is defined. Essentially, an individual
has to be looking for work to be considered part of the labor force. For
example, a college
student who graduates and starts to look for a job becomes a member of the labor
force, regardless if they find a job or not; one who decides to take a holiday and travel Europe is not. If
someone had a job, losses it, and is looking for work, they are a member of the
labor force -- first as an employed person and then as an unemployed person, but
still part of the labor force. Now, here comes the interesting part. If that
person stops or takes a recess from looking for a job -- perhaps because nothing
is out there -- they are no longer a member of the labor force.
And that's what happens during a recession. Since jobs are not available, some
people stop looking for them and hence are no longer considered part of the
labor force.
But, when the recession ends, those same people who stopped looking for a job
to paint their house and finally had the time to read Proust's À la recherche du temps perdu (translates, appropriately enough,
as In Search of Lost Time), decide to jump back into the labor pool. So
the labor force expands, but since many of these returning workers don't find
jobs right away, they are also part of the unemployed labor force. So the
unemployment rate stays high after the recession ends, even as more people get
jobs. And since this recession
saw a loss of so many jobs, it will be some time for all those workers to be
reabsorbed into the employed side of the equation.
Now you know why we report the unemployment rate in conjunction with its
underlying components. In reality, the government reports several other
measurements of unemployment, which it calls "alternative
measures of labor underutilization" and include those who are "marginally attached to the labor force."
Read the latest Fed report -- reduced by nearly 80
percent!
Shortly after the previous employment report was released, the Federal Reserve
Board published its Beige Book, which summarizes what the officials at the
Board's 12 local district bank are hearing throughout their districts. You can
read the nearly 17,000 words, but perhaps you may want to review
our 3,700 summation here
(that's a reduction of more than 13,000 words, or 78 percent!).
We excerpted portions of special relevancy to the recruitment, staffing,
employment services and IT services sectors. It's hard to make any
generalizations since reports about the same sectors varied depending upon the
district, but some staffing companies are seeing some resistance from their
clients regarding the hiring of full-time employees and there seems to be "a
strong preference for increasing existing staff hours and using part-time or
temporary staff" according to a contact in the Sixth District (which is the
southeastern U.S.). This sentiment was echoed in the Twelfth District (the
western and Pacific area of the country) "that most businesses remain
cautious in their approach to hiring and continue to rely on improved
productivity rather than increased employment as a means to expand output."
If you want to read the whole Beige Book, you are welcome to -- and we include a
link to it right at the top of
our summation.
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August 2010
(September 3, 2010) return
to top |
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And now, something a bit different ...
Normally in this space we present our
thoughts on the general economy and employment trends, but this month we depart
from that (for an archive of all of those musings from the past several years,
go here) to
present what we hope is not a trend, but disturbing nevertheless. For those who
don't know my background, I've been in the staffing industry from the time before
it was called the staffing industry -- back in the late 1980's, that term wasn't around
and it was called temporary help services and, dare I say, permanent
placement on the other side of the office. But in the past 20 years, it's not
just labels and definitions that have changed. It seems that customer service
and sales is
a concept that some no longer understand. Although this real
example is from the staffing industry, it really applies everywhere!
The names have been changed to
protect the innocent, the stupid and naive, but mainly myself.
A friend, who I've known since my
early years in the staffing biz and has almost double my years of experience, recently left for something a bit different.
Let's called this friend of mine Izzy because, in addition to being the name of
my dog, it's a non-gender specific name. Izzy's new job is director of market
development for a commercial equipment sales & service company and, because of Izzy's past
staffing industry experience including being a national sales and operations
trainer, is also the company's de facto HR department.
Since Izzy really understands the benefits of using a staffing company and
had (and continues to have) more than a half a dozen openings for
semi-tech/skilled people in several states to fill due to rapid growth, Izzy called several staffing
companies to fill these openings. Here's a brief recap of what Izzy encountered:
Staffing company "1": Izzy called the
local office of his former staffing company/employer, which is a large national
company. No answer, no answering machine. My friend, who knew for a fact that
it's an active office since it's in his home town and the third largest city in
this very populous state, tried several times and
eventually called the corporate headquarters. Knowing the company and who needed to respond to this request, Izzy asked
for the head of branch operations.
Initially the receptionist at corporate had no idea who to refer the
call to, but eventually Izzy got the name and number of the head of branch operations,
called, and left a message. Izzy never received a returned phone call and moved on.
Staffing company "2" (another
national company): Izzy makes an appointment with a sales rep who was 'very
nice, very affable." But when Izzy queried as to how workers are recruited,
tested, etc. in order to help evaluate the quality of their candidates, the
sales rep responded, 'All of that is handled in the office, I don't know, but
I'll find out.' The sale rep did follow-up with adequate answers, and then Izzy
had some follow-up questions regarding insurance coverage (self-insured or
otherwise?) and asked for a quote. Sales rep responded 'Don't know about the
insurance coverage, but I'll find out and I have to call the home office for a
quote.' Although the proposal eventually arrived and was well done, Izzy felt
the 155% payroll mark-up was a bit steep in this economy and decided to move on. Izzy
judged this company as inflexible and it lost major points about responding in
a timely fashion.
Staffing Company "3" (a regional
staffing company with offices in all locations): Izzy called a local sales
person who said they were sending an e-mail to the regional sales person to call
Izzy. Izzy never heard back from them. Staffing company "4" (one of the biggest,
international staffing companies): Salesperson made a presentation, but it was
obvious that they never did any research on Izzy's company. Since some driving
is involved in the job description, rep responded 'don't know if we can do this,
we may have to use another division because of insurance concerns.' Izzy was
informed that the proposal would be delayed because the rep's laptop was broken
and worked out of their house. NEXT!
Staffing company "5" (a regional
staffing company): The first certificate of insurance this company sent had
expired two years ago and included a heavy workers' comp rate, which Izzy knew
(recall Izzy is an experienced staffing executive and had already received
several proposals) was wrong. Does anyone actually look at the stuff they send
out? NEXT!
Izzy eventually contacted each
state's employment service that immediately put the jobs up on their respective
websites and Izzy is successfully filling them. Although the initial order was
for a half a dozen openings, Izzy's company's client is the preferred vendor for
a very large retailer and wants them to possibly provide service in all 50
states. But the staffing companies never found this out because they never knew
enough to ask!
Izzy's final comments ...
"It was very
frustrating because half the time I never received calls back. I got started in
this industry as an inside customer service rep and learned that function ...
learned what the customer really needed. Eventually, I got to meet the clients
and eventually graduated to sales and marketing and by that time you knew the
skill capabilities in your office staff. Today, they just seem to 'throw it
against the wall and see what sticks.' I felt the sales reps were more concerned
about filling out the number of sales calls for their weekly activity report
quota as opposed to focusing on making a sale. Everyone in the staffing industry I dealt
with were orders takers and had an attitude they I would be lucky to do business
with them! Not once did they try to sell themselves as a solutions provider or
even feigned interested in learning about my business or needs. It's really pitiful.
Perhaps because things were so good for so long ..." and Izzy's voice trailed
off in disgust.
The moral of the story? Come on,
let's be serious ... do I really need to wrap this up with a moral?
|
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July 2010
(August 6, 2010) return
to top |
|
Not so random
thoughts on the economy ...
In this space last month, we published a longer-than-usual missive of the state
of the economy (if you missed it,
here it is), so we'll make it brief this month but point you to more
information if you want to know more about recent economic developments. Last
week, the Federal Reserve Board published it's most recent commentary on current
economic conditions and it was a somber but not quite depressing read. In a
nutshell, economic activity increases were "modest" and "the pace of economic
activity had slowed recently."
It doesn't take a roomful of economists to see that the employment economy is
not roaring ahead with a full head of steam. As a matter of fact, at this stage
of the recovery, it is barely chugging along and if it could talk, it would
probably be saying, "I think I can, I think I can, but I hope there are no steep
inclines ahead because I may not be able to make it."
Manufacturing appears to be relatively strong in most sectors and districts and
IT activities appear to be on the increase. [A
story on WSJ.com reports how the electronics industry is experiencing
chronic shortages and trying to ramp-up production.] In regards to staffing specifically,
the Fed reports comments ranged from "A major NYC employment agency,
specializing in office jobs, reports that hiring activity has picked up since
the last report, as demand from the legal sector remains brisk and financial
sector hiring has picked up in recent weeks" to "Temporary employment agents
reported slow, but steady increases in hiring by small or mid-sized businesses
-- especially in manufacturing" in the Fifth District (MD, NC, SC VA & WV) to
"... capital spending on equipment and information technology continued to
steadily grow" in the Seventh District (IA, IL, IN, MI & WI). If you don't want
to read the entire 16,000+ word report, we've posted excerpts relevant to labor
markets, staffing services and their interests, and IT
here.
Did you know department?
That we can also know the employment trends by occupation down at the market
level? Well, we do and were able to show how tech employment (and, by proxy, the
IT sector) in the DC-area "outpaces rest of
nation, other local industries." Take a look -- and we can do this for just
about any sector and any market you want.
|
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June 2010
(July 2, 2010) return
to top |
|
Not so random
thoughts on the economy ...
Recently a staffing company executive asked us to predict the change in GDP (gross domestic product, which
is an accepted proxy for the entire economy) for the next few years. Well,
trying to predict the strength of the overall economy can be a fool's errand
since so many variables are involved. And since many of those variables (just one
being the overhang in the housing market and how well the banks and the federal
budget can handle it) are in uncharted territory, making a prediction out to 2013,
or even 2012, is really only a guessing game. Further, it's very
difficult, no matter what anyone says, to separate aspirations from
expectations.
With that said, it would be safe to say that 2010 will likely see GDP growth something in
the lower-mid 3 range, say around 3.2. Although the recession is likely over, it
remains that if the 5.6 percent growth seen in Q409 is the best we'll see for the
'traditional' rapid GDP growth after a recession is over. And there is a growing
view that with such weak economic growth, we could easily slip back into a
recession. There are too many unknowns out there and not a lot of
confidence in Washington about having the ability to know what the right thing
to do is. Without sounding redundant, we don't think anyone really knows
what the right thing is at this time since this economic cycle is fundamentally
different.
So the question remains -- will the following years will be stronger or weaker than
2010? Certainly a significant portion of growth in the second half of 2009 and thus far in
2010 is by 'artificial means,' meaning government programs (credits for
first-time home buyers, the
cash-for-clunkers programs, etc.) with limited time frames. And who knows what
else Washington will bring to the table if the most recent growth proves not to
be self-sustaining and 'organic.' More importantly, the longer term
ramifications of what they have done and any new programs they come up with in the future is a big
unknown. Obviously,
future growth has three options -- about the same, lower than 2010 or higher
than 2010.
Quite frankly, we think the expected pent-up demand and associated inventory
build-up may fail to materialize and create any great movement of the needle for
both sociological as well as financial reasons.
First, people may have learned to do without, similar to my parent's generation
who grew up in the Depression. (It should be pointed out that was indeed a different time since it was
fairly soon after the first World War nor did it follow 50 years of relatively
stable economic prosperity.) Although consumer spending recently stalled, it
generally has picked up again, and if one subscribes to the notion that the economic cycle's trough
was last summer, that means we are already a year into the recovery. Some --
it remains to be seen how much -- of that pent-up demand may already have been met.
We tend to think that the employment economy has a long way
to go before it ends up back at the point that this whole mess began. Therefore, the
immediate future, 2011, will likely see either the same or slightly less growth
for GDP. As for 2012, it depends how well and fast the employment economy
recovers ... with many of the jobs lost from the recession not coming back. Because of the fundamental, structural changes in the overall economy, it takes
time to retrain workers for jobs in the 'new' economy. Certainly, some parts of
the economy -- and associated job growth -- are doing fine now and will continue
while others will languish and perhaps wither away. We depart from the consensus
here and think 2012 could be better than 2011, especially if 2011 growth is
relatively weak. And let's not forget that
2012 is an election year -- the economy is not independent of politics -- and there may be a new president in January 2013.
And, of course, in today's interconnected global economy, the health of the
world's other economies also affect our own GDP.
One of the challenges of predicting the future is that something could come
along to completely upset the trend. So, for example, just before the turn of
the century as people were moving into urban areas and before the automobile,
government statisticians empirically predicted -- based on the rate of growth --
that the cities would literally be buried in horse manure since the dominant form of transportation was via equine. But then the automobile came along and changed
that trend line completely. There's a joke somewhere in that pile of horse manure
and government predictions, but we'll leave it to you to dig it out for
yourself.
What is behind the IT-staffing acquisition binge?
Another staffing executive asked us our thoughts regarding what could be behind the recent
increase in IT-staffing acquisition activity.
Beyond values being down since business has been down, the "big fellas" see an
opportunity to buy market share in a sector they obviously like on a go-forward
basis. We all realize that IT is a sector where job growth is occurring and is
expected to continue into the foreseeable future. Acquisitions are simply a
reflection of the confidence in this niche -- and it bodes well for the future
since that confidence is being expressed by the leaders in the employment
services industry. A lot has been said how the jobs that were lost during this
recession won't be coming back -- but new, different jobs are being created and
IT jobs are certainly part of the new generation of jobs for the future.
A very experienced staffing executive agreed with us and added he "suspect[s] since companies see huge cost savings and
information gains from ERP, the sector is flying. Our company is constrained by
lack of contractors, not orders. Second, the move to Social networking is driving
marketing like crazy so there is huge activity there." |
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May 2010
(June 4, 2010) return
to top |
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Improving -- yes, but still a long way
to go ...
If you need further convincing
that this recession has been very bad for jobs, just take a look at
this chart comparing job losses for post WWII
recessions. We cannot recall seeing a more dramatic presentation that shows what
a deep hole the employment economy is in. Okay, we'll pause a moment while you
take a look .... welcome back. This is the reason we will continue to report the
percentage of job losses from the peak even as the number of jobs is growing.
In May, the employment economy gained 431,000 from the previous
month, but was at level that was 5.4 percent lower than its peak in December
2007. But take out the 411,000 temporary jobs added by the government last
month to conduct the 2010 Census and May's private-sector job gain was a weak
41,000. And although the unemployment rate appears to have improved to 9.7
percent in May from 9.9 percent the month before, this improvement is also
likely -- at least partially -- a result the 400,000-plus temporary census
workers added in May. Last month, we reported in
greater detail how these temporary census workers are distorting the
unemployment rate and
that discussion can be read here.
An interesting report ...
We recently completed the first quarter employment trends
report for HigherEdJobs, which is the
leading source for jobs in academia with more than 2 million visits a month, by
conducting an analysis of their job postings data along with relevant BLS data.
This report, which we've been producing for a year now, assists in
maintaining
HigherEdJobs as the premier source for career information and job listings
in their sector before a broad range of stakeholders. This link
Higher
Education Employment Report - Q1 2010 will lead you to a quick overview as
well as to the full report and a news release.
Spoiler alert: the hiring trends in higher education are
good.
|
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April 2010
(May 7, 2010) return
to top
|
|
Has
the 2010 Census clouded the employment picture?
There is no doubt that the employment economy continues
to improve. However, the jittery financial markets, regardless of the
computerized sell-off likely caused by a typo that was responsible for
yesterday's Dow meltdown, have the potential of making employers and consumers
wary about adding jobs and spending.
But the big question still is how fast and how many jobs are being created and unemployment reduced.
Unfortunately, the 2010 Census hiring of
well over a half a million of workers could be acting as a bit of a smokescreen so we
can't get a clear picture of the current employment situation.
Obviously, the employment statistics
will be affected by
about 635,000 temporary census takers who started to knock on doors May 1 to
conduct personal interviews with millions of households that did not return completed census forms. But exactly how the employment picture
has and is being affected
is a bit of an unknown for a few reasons. These new census workers, by
definition, are now counted as part of the labor force regardless of their
status before they were census workers and that essentially is the problem with
trying to adjust for them. Were they unemployed members of the labor force? If
they were unemployed, then their new status as employed would lower the
unemployment rate. If they were already working and this is a second job for
them, then the unemployment would not be affected.
And if these census takers were considered not in the
labor force -- which includes some people who currently want but do not have a
job as well as retirees -- then the labor force grows along with the number of
people employed. In a nutshell, the problem with trying to take into account the infusion of
around 635,000 new workers in a short period of time and adjust the current
employment statistics is that it is not known where they came from. The fact is
they come from all walks of life and different situations. Gosh golly, they spend the time and money to
fingerprint all those census takers -- what would it take to find out what a
census taker's employment status was before they were hired so we all would have
better granularity for our nation's employment picture?
And is the temporary help services jobs number impacted
by the census? The answer is not as simple as you may have heard ... see the
temporary help services roundup below for more on this subject.
Those jobs are not coming
back ...
We've been saying that this recession is different and
many of the jobs lost will not be coming back for some time (click
for the archive of these opening statements from this employment report
going back to 2006). As this recession ends and growth returns to the
economy, you will be hearing more about this subject; and
here's an article on this subject that "gets
to the heart of the matter" as one of the quoted sources mentioned to me.
...THS & the 2010 Census:
The U.S. Constitution mandates that a census be conducted by the government and this has
been strictly interpreted as only government workers. Therefore most of the
temporary census jobs associated with the decennial census are direct government
hires and not supplied by staffing companies. But, the census is a huge project
and uses outside contractors for some tasks and it is likely those outside
contractors would need more people on a temporary basis.
Or as a BLS official mentioned to me, "the
Census Bureau like most government agencies, also relies on private contractors
for some tasks. With an operation as big as the census, it doesn't surprise me
that some of those contractors would have to hire more people." Obviously, if
those contractors (for example, according to
The Washington Post, Lockhead Martin was awarded a "roughly $500 million
contract to collect and automatically scan the responses") sourced some of those
additional people from staffing firms, then some of the recent run-up in
temporary help jobs may be due to the 2010 census. We may know the answer in a few months if
I see a spike in temporary help services employment in the market areas where
the processing centers are located.
|
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March 2010
(April 2, 2010) return
to top |
|
What was old, is new again ...
What you are hearing regarding the current
employment trends -- it's pretty much all been said before. Especially to those
with a few years of experience under our belts (I've been in the staffing
industry since the late 1980s), experts' media-attracting sound bits and
pronouncements explaining the current labor market trends ring familiar. It's
all been said before. Or in the
words of Mark Twain, "History doesn't repeat itself, but it rhymes."
For example, a
story in The
Washington Post earlier this week reported how increased
productivity made during this recession could be holding back new job creation.
According to the Post, "Federal Reserve Chairman Ben S. Bernanke
said at a hearing last week in which he described the productivity gains as
'extraordinary' and acknowledged he had not foreseen them." The Post
article goes on to postulate that, "potential explanations [of increased
productivity but not jobs] raise the possibility that the job market could
experience more of a rebound over the coming months than forecasters are now
expecting." [emphasis added]
And back in November 2003, another Fed official said, "One hypothesis
[regarding a surge in productivity] is that some of the increase represents a
temporary rise in the level of productivity reflecting a view that an unusual
amount of caution is leading businesses to press workers and facilities to a
greater degree than can be sustained over the longer haul. By this hypothesis,
as that caution dissipates, employment growth will pick up ... ."
Do you recognize the torturous language pattern? Yup, that was then Fed Chair
Greenspan speaking at the annual meeting of the
Securities Industry Association. [emphasis added]
All of this bodes well for the near-term future of the staffing /
employment services sector. But, unlike the recovery period following a
recession, 'all boats will NOT rise' this go-around since this recession has
been different. For example, 1) many sectors / industries will not be coming
back because of fundamental, structural changes with the economy and 2)
long-term unemployment is at unprecedented levels and it will take time before
those workers "re-tool" themselves (often involving going back to school) for
skills relevant in the emerging new economy. Finding success in today's
employment economy is all about retraining to fit into a changing world.
Buckle your seatbelts and hang on -- it's going to
be an exhilarating ride. Already some are now predicting
a
looming labor shortage.
|
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February 2010
(March 5, 2010) return
to top |
|
Temporary workers & the manufacturing sector ...
For staffing companies
-- specifically, temporary help services -- that service, or are contemplating
servicing the manufacturing sector, we have something that may be of great
interest. And as hiring in that sector begins to pick up, a study by the Federal
Reserve Bank of Chicago revised just last month (February 2010) may provide some
direction for current and future marketing efforts. It examines how a
manufacturing facility's "... use of temporary workers is associated with the
nature of its output fluctuations and other plant characteristics."
In other words, it looks
at the several variables that affect a plant's use of temporary workers. It
should come as no surprise to staffing professionals that "a plant in an
industry that is highly unionized seems to use fewer temporary workers, possibly
because unions are successful in resisting the use of nonmembers’ labor."
The paper supports a long-standing staffing industry held contention that
"... temporary work arrangements facilitate flexibility in a firm’s use of labor
and allow it to accommodate output fluctuations at lower cost."
Common sense often lead
staffing executives to devote more marketing efforts to facilities where jobs
are being added under the premise that they need workers and temporary workers
can fill that bill. That may be the case for a temp-to-perm service line, but
the empirical evidence suggests "... that a plant chooses temporary workers
over permanent workers when it expects its output to fall ..." Therefore,
depending upon the circumstances, it may worth the effort to alter marketing
plans and what specific staffing services to pitch depending if the target
customer is growing or waning.
But, a few caveats: 1)
the data analyzed (from 1998-2001) is from a different economic cycle than the
one we are in now, 2) even the authors told me that they realize the "paper
looks at the topic only from one angle. We didn't look at dynamic nature of the
use of temps", 3) and as the auto industry says, "your actual mileage may vary"
so it's important to view this paper's results within the parameters of your own
business plan.
There is indeed a fair
amount of wording devoted to explaining the statistical modeling utilized, but
if you wade through those parts, we're confident that you'll find a fair amount
of useful, actionable information. The 49-page study can be
downloaded from here.
For example, this study
may help you decide that larger plants may be better customers for temporary
help services ("... results generally suggest that bigger plants are more
likely to use temporary workers, and if they do, the temporary worker share is
greater than smaller plants."), plants employing higher wage workers may not
be ( "... higher wage plants may use fewer temporary workers."), and if
older facilities are better or worse as a potential customer ("The
likelihood for plants built pre-1975 to use temporary workers is 8.2 percentage
points smaller than newer plants.").
And, if you need to pinpoint what industries in your local
market are growing or failing in order to concentrate your marketing efforts,
take a
look at our strategic planning tools specifically designed for the staffing
sector.
Staffing, IT activity, & labor market roundup ...
Earlier this week, the
Federal Reserve Board published it widely followed Beige Book, the Fed's
anecdotal summary of economic and employment activity around the country. We've
excerpted several passages relevant to the staffing and information technology
sectors for your review and determine if reading the entire 17,000+ word report
is worth your time. Among some information you may find of interest is hiring
freezes have been lifted in the software and technology sector in the northeast
and temporary help services are reporting increased activity in several
sectors and geographic areas of the country.
Our summation is here along with a link to the full report for your
convenience. |
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January 2010
(February 5, 2010) return
to top |
|
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.
|
|
2009 |
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December 2009
(January 8, 2010) return
to top |
|
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.
|
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November 2009 (December 4) return
to top |
|
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.
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October 2009 (November 6) return
to top |
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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."
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September 2009 (released October 2) return
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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!
|
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August 2009 (released September 4, 2009)
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"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.
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July 2009 (released August 7, 2009)
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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.
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June 2009 (released July 2, 2009)
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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 ...
I've started Twittering a little more
than a month ago but with a bit of a different twist than many of the other
twits on the social networking / micro-blogging site. I provide a brief (is
there any other kind when you're limited to 140 characters?) comment on the
latest economic indicators. If you visit our
Economic
Indicators page, there is a direct link to my Twitter page. I plan only
to include employment and economic related items and not to tweet that I am
going out to pick up a gallon a milk from the store or my dog just pooped. But I reserve the right to blog about something so off-topic
and so ridiculous it may bring a smile to your face.
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May 2009 (released June 5, 2009)
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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!
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April 2009 (released May 8, 2009)
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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.
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March 2009 (released April 3, 2009)
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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!
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February 2009 (released March 6, 2009)
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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.
Not to put lipstick on this pig of February's
employment report from the Department of Labor's Bureau of Labor
Statistics, there were a few not-so-glum developments ... perhaps not the
green shoots of Spring that everyone is hoping for, but a few
positive developments. |
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January 2009 (released February 6, 2009)
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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!
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2008 |
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December 2008
(January 9, 2009) return
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What kind of recession are we in?
(hint: a bad one)
As
expected, the December employment report showed continuing job losses and rising
unemployment. The unemployment rate shot up 0.4 percent to 7.2 percent.
For the year, 2008 ended with nearly 2.6 million fewer jobs than it
started with and this amounts to a drop of 1.9 percent. And those job losses
accelerated as the year progressed -- down 247,000 in 1Q, down 214,000 in 2Q,
down 597,000 in 3Q, and down 1,531,000 in 4Q.
How is this
measuring up to past recessions? The 2001 recession, whose following period was
labeled as a "jobless recovery" since job growth languished for almost two years
after the recession was officially over, ultimately saw a loss of 2.7 million
jobs, or 2.04 percent, before job growth returned. The 1990-1991 recession
resulted in a loss of 1.6 million jobs, or about 1.5 percent. But the granddaddy
of recent recessions (1981-1982) experienced a job loss of more than 2.8 million
jobs, or 3.1 percent. If the past is a predictor of the future, the current
recession could very well become a great-granddaddy.
For the
past year or so we have been defining the term economic recession in this space
to prepare you for what was coming. It may be too soon to start to define an
economic depression; actually, it may not be too soon -- it's just too
depressing. Seriously, we don't think it will come to that as the infusion of
hundreds of billions of dollars into the economy will likely stop that
development.
A technical
note: 2008 employment and jobs data will be benchmarked next month with the
release of the January employment report. Preliminary estimates are showing that
the jobs numbers for a number of sectors will be below than previously reported.
In other words, the entire river is lower than previously thought.
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November 2008 (December 5, 2008) return
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The recession has arrived ...
Actually,
to be more accurate, we should say "the recession had arrived." As we said in
this space many times before, it was only a question of when a recession would
be declared. By marking December 2007 as the peak of the business cycle earlier
this week, the National Bureau of Economic Research (NBER)
has essentially declared all of 2008 as in recession. Although they use several
economic indicators before making their determination, December 2007 was also a
peak for employment, which has declined every month since then. And the data in
this month's jobs report (see below, right) are the most dismal we've seen in
about 15 years.
In its
November-December 2008 issue,
staffdigest magazine will publish an article we submitted the end of
October exploring the relationship between recessions and employment in detail.
As the NBER did this past Monday, we focused on the fact that December 2007 was
a peak for employment and went further by describing an "employment recession."
Although some new as well as updated data have been subsequently released, the
original thesis of the article is sound and shows, we're afraid to say, that the
we still have some distance to go before this current employment recession is
behind us.
Let
us know if you would like
a copy of the article and we'll make sure that either staffdigest
or I get it to you.
Thoughts for the new year ...
People
often ask me 'when will things get better?' Earlier this year, I would often
reply, 'in the second half of the year, I just don't know what year.' One thing
you can do is to keep a close eye on a variety of economic indicators and be
flexible in both your thinking and operations. For the former, we maintain a
page of
economic indicators; for the latter, we've developed a set of
employment research tools
that will assist you in understanding what is going on in your markets beyond
your present view.
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October
2008 (November 7, 2008) return
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|
Election Day is past ...
We have
said it before, but it bears repeating -- please don't shoot the messenger.
The bad
economic news keeps coming. The GDP has slipped into negative territory -- down
0.3 percent -- in 3Q. Coupled with other weak
economic
indicators, many believe it's only a question of when the National Bureau of
Economic Research (NBER) declares that the
nation is in a recession. Wisely, the committee that marks the peak and troughs
of the economy only determines those points retrospectively because it waits
"until sufficient data are available to avoid the need for major revisions...",
some pundits believe it has avoided marking the business cycle in order not to
be accused of influencing the election process. Well, the election is over and
the economic data have been consistently weak for some time, so it really
is only a question of when, and not if, a recession is declared to had already
started.
Employment continues to tumble ...
We suspect
you've seen the announcements about job cuts stepping up amidst a growing
environment of falling demand, wilting output, and tight credit. Just in the
past few weeks, Motorola announced it is disconnecting 3,000 jobs, GlaxoSmithKline Plc plans to cut about 1,000 U.S. sales jobs, Yahoo
said 1,500 workers will need to search for new jobs, Merck is prescribing pink
slips for 7,200 jobs, PepsiCo is fizzling out
3,300 jobs, Mattel won't be playing with 1,000 jobs, 5,000 jobs are circling the
drain at Whirlpool and will be flushed away by the end of 2009, more than 2,600
jobs will be hitting the road at Ford, and the list goes on. These developments
do not bode well for a quick recovery.
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September 2008 (October 13, 2008) return
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A Columbus Day parable ...
As we
celebrate Columbus Day, our thoughts turn to an eerie parallel between
Christopher Columbus and today's economy. Let's face it -- today's economy is
sailing in uncharted waters and in a direction that is opposite of where it
should be headed.
Perhaps
you've heard the joke that, 'he embarked on a voyage not knowing where he was
going, did not know where he was when he got there, and returned not knowing
where he had been. And did it all on borrowed money.' More precisely, Columbus
headed in the opposite direction (he went west to end up to the east) that
conventional wisdom at the time dictated.
The only
difference between Columbus and today's economy is that he was able to borrow
money. But then again, there were no such thing as credit default swaps or
derivatives back in 1492, so if Columbus never made it back, Spain's King
Ferdinand and Queen Isabella loss would have been limited to a few ships and not
put the economy of the entire world at risk. But the world was much smaller then
-- the total population was around 500 million back then; today, it's about 6.6
billion. |
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August
2008 (September 5, 2008) return
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|
When the Fed reports that
economic conditions are "weak, soft, or subdued," this is ...
not good. From the
latest Beige Book, which summaries anecdotal comments from around
the country, "the pace of economic activity has been slow in most" areas
around the country. The Fed districts that include "Cleveland and St.
Louis reported some weakening since their last reports while Boston and
New York noted signs of stabilization. Kansas City reported a slight
improvement." Of note is that temporary help services were stable in the
Dallas district and mixed in the Boston and Richmond districts. The Fifth
District (Richmond, VA) reported that "High-level IT, biotech services,
life sciences, sales, and administrative support were among those skills
most highly sought after" by temporary help companies.
Yes, there is such a thing as
a free lunch ...
Recently we discussed the apparent return of certain manufacturing
activities to the U.S. brought about by increasing shipping costs and a
weakening dollar. That was the subject of a story we provided to
staffdigest
magazine that is appearing in their August/September 2008 issue. If
you would like a copy of this story that rethinks offshoring,
shoot me an e-mail and I'll send the article to you for free. If
you want, you can buy me lunch. (Heh, I didn't say that the free lunch was
for you!)
And now, news from the
Self-Promotion Department ...
On Monday, September 8, I will be in Chicago giving a presentation at the
Fall Congress of the International Association of Employment Web Sites (IAEWS).
My crystal ball will be traveling with me as I give my view on where the
economy currently is and could be heading, what it all means to the
employment economy, and what sectors have thus far escaped the slowdown.
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July
2008 (August 1, 2008) return
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Did the R-word start in 4Q2007?
Although
GDP, or gross domestic product that is widely considered the definitive
macro economic indicator, for 2Q2008 came in at up 1.9 percent, most economists
are still pessimistic on the state of the economy. That is because previous GDP
figures were revised downward causing some to say that the crevasse the economy
fell into is deeper than previously theorized and therefore, it will take longer
to climb out of the abyss. And since 4Q2007 GDP was revised to negative 0.2
percent (had been reported as + 0.6), some have theorized that if
-- many think it's really only a question of when -- the National
Bureau of Economic Research (NBER) marks the current cycle as a recession, it
may have started the end of 2007 or early this year.
As for the
apparent good news of 2Q2008 GDP coming in stronger than 1Q, it was less than
expectations and probably is too early to pop those champagne corks. Actually,
2Q2008 growth would have slipped into negative territory if not for exports. And
exports have been given a boost from a weak U.S. dollar that makes U.S. produced
goods cheap. That development -- a weak dollar causing growth in U.S.
manufactured goods -- has been a positive development for some staffing
companies that services that sector. As this report discussed last month, some manufacturers -- especially
those who make "big stuff" such as furniture that is expensive to ship -- are
seeing growth due to "inshoring."
A time for reflection ...
or in other
words -- boy, was I correct.
Under the
concept that no one knows how good you are unless you tell them, it has been
three years this month (August 11, 2005, to be exact) that I pontificated in a
Letter to the Editor published in the Financial Times how the then
real estate boom would end. If you recall, real estate prices were still
climbing at very healthy rates at the time. Unfortunately, I was right but did
not see -- in all fairness, neither did anyone else -- the immense complications
and fallout of collapsing real estate values. If you want to see what I said
back then, including an explanation of why the IT bubble burst, the letter from
2005 is
here.
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June
2008 (July 3, 2008) return
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When
everyone is zigging, is it time to zag?
Here's an
interesting thought -- the high cost of oil could revitalize American
manufacturing. And since manufacturing has been such an important sector for
staffing companies, this could be an opportunity that staffing companies may
have long ago abandoned.
One
overlooked contributing factor to the boon in offshore manufacturing has been
the relatively inexpensive shipping and transportation costs to get the finished
goods back to these shores. But, the rising price of fuel along with other
increasing costs as these nations become more prosperous, offshoring is
starting to lose the cost advantage. According to ABC News, the cost to transport a
shipping container from Shanghai to New York has risen from about $3,000 to
around $8,000.
Although
one month does not make a trend, the Institute for Supply Management reported
earlier this week -- quite to the surprise of experts -- that manufacturers
increased production in June, the first time since January. And there have been
anecdotal reports that U.S. companies that had products manufactured overseas
are now switching to local manufacturers because of the rising
costs. Although this development has yet to be reflected in official U.S. Bureau
of Labor Statistics (BLS) data, some manufacturers -- for example, furniture makers
in North Carolina -- are hiring because their wholesale customers are no longer
purchasing from China, Inc.
This may be
an anomaly or the start of a new trend -- it's really too soon to tell. It may only be a
question of how high the cost of transportation needs to get before domestic
manufacturing starts to return to these shores. Perhaps at one
time in the future
some Pittsburgh steel mills will re-open, especially if domestic steel production can combine its transformation into a high-tech manufacturer with
energy-efficiency.
Recession -- properly defined
Many people
are under the impression that a recession is two consecutive quarters, or six
months, of declining economic activity as measured by GDP, or gross domestic
product. A colleague pointed out to me this past month that is not true. The
National Bureau of Economic Research (NBER) is generally considered the definitive source
in identifying economic cycles and the unofficial
authority
to say when recessions begin and end. It "does not define a recession in terms of
two consecutive quarters of decline in real GDP. Rather, a recession is a
significant decline in economic activity spread across the economy, lasting more
than a few months, normally visible in real GDP, real income,
employment, industrial production, and wholesale-retail sales."
Note that those four indicators are reported monthly -- not
quarterly.
Well, real
GDP, while still in positive territory has declined in growth; real income is
still growing, albeit greatly assisted by the Economic Stimulus Act of 2008,
a.k.a. the tax rebate; employment and jobs have been down for several months;
industrial production has been down for three of the first five months of this
year; and wholesale-retail sales have slowed considerably. You decide if the
country is in a recession.
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May
2008 (June 6, 2008) return
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Brother,
can you spare a gallon of gas?
I wrote the
above headline to start a brief discussion in this space of how the high cost of
energy may be affecting the economy and jobs. Then, being the infinitely curious
fellow I am, my mind started to wonder (or wander, take your pick) about the
price of a gallon of gasoline back yonder when the song was first published. As
you may know, Brother, Can You Spare a Dime is a song that became a
sort of anthem of the Great Depression. Then, I stumbled across an interesting and eerie
relationship.
The song
came out in 1932, which was the same year that the federal government levied a tax
on gasoline. Coincidence or a vast conspiracy by the oil companies and the
government, a.k.a. Big Brother? Of course, I'm kidding and in case you are
wondering, the price of a gallon of gasoline in 1932 was 18 cents.
Although
the nation is not in an official recession, there is little doubt that many
sectors and markets are experiencing tremendous losses. Despite some other
economic indicators released earlier this month that indicated the situation was
not as bad as it could have been, the May employment report was quite dismal.
The unemployment rate rose 0.5 percent to 5.5 percent in May from 5.0
percent in April. The number of unemployed persons grew by more than 860,000
while the total number of employed persons dropped by 285,000. Clearly,
the situation is not improving.
Current economic and employment data can be found
on our
Economic Indicators page. You can sign-up for a free service to be
informed when the data are updated.
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April
2008 (May 2, 2008) return
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Will it
be a long, hot summer?
The
advanced Gross Domestic Product (GDP) -- which is subject to revision for the next couple of months --
was up by a slim margin in the first quarter (0.6 percent). But some of the
components that make up GDP such as private investment and final sales declined,
which suggests there may not be enough fundamental demand to support ongoing
economic expansion at this time. GDP didn't dip into negative territory in Q1
because exports and business inventories continued to grow. Therefore, if
companies do not continue to build up inventories, the economy likely will
contract in 2Q.
The
official arbitrator of naming the business cycles won't determine if the country
is in a recession now until some time between this and next summer. But many
employers -- as well as Wall Street financial gurus -- aren't waiting until then
to say that the only things that will grow this spring and summer will be in a garden
because the country is in a recession now. As some consumer news stories have
reported, growing your own
vegetables indeed is one way to cope with a declining economy.
Current economic and employment data can be found
on our
Economic Indicators page. You can sign-up for a free service to be
informed when the data are updated.
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March
2008 (April 4, 2008) return
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Nothing
good in the March employment report ...
When thing
go bad, they really go bad. The unemployment rate rose 0.3 percent to
5.1 percent in March (it was 4.8 percent In February). While the size of the
labor force grew by 410,000, the number of unemployed increased by 434,000 as
the number of employed persons declined by 24,000.
And developments in the business
community were not any better. The number of jobs plummeted by 80,000 in
March that resulted in the economy losing 232,000 jobs in the 1Q2008.
It breaks down that 76,000 jobs were lost in January, that same amount in
February, and now 80,000 in March; it appears that the job loses are
accelerating.
If that's
not enough bad news, the number of discouraged workers -- people who have
given up looking for work because they could not find any -- is up. Not
to mention that involuntary part-time workers -- those who would prefer a
full-time job, but can only find a part-time job -- continues to rise as well.
All the current data can be found
on our
Economic Indicators page. You can sign-up for a free service to be
informed when the data are updated.
Satirist Stephen Colbert seemed
to sum up the employment situation very well last month. His "essay" entitled
The Word - The Audacity of Hopelessness was quite accurate -- at
least in regards to the technical details -- and definitely entertaining.
Unfinished business from last month ...
We started
off our comments in this space last month with "Please,
don't shoot the messenger..."
One reader replied: "I don’t know why we can’t shoot the messenger!
Who else are we going to shoot?" Obviously, conditions are getting increasingly
worse and people are getting tense. Since that e-mail, we have acquired a
large dog with a truly loud and menacing bark! Consider yourself warned. BTW,
in respect to environmental issues, he's a recycled (adopted) hybrid.
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February
2008 (March 7, 2008) return
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Please,
don't shoot the messenger ...
The bad economic news still keeps coming, but it's not all
bad. Productivity was revised up in 4Q to 1.9 percent (that's good), but labor
costs were also revised up to 2.6 percent (that's not good).
Perhaps the not-so-dim news -- don't really want to call it a bright spot with
so much dark economic news around -- was that planned layoffs may be tapering
off; they dropped by 14.2 percent in February from a year earlier and even
were down slightly (3.9 percent) from the previous month.
Also, the number of initial claims for state
unemployment benefits (a.k.a. jobless benefits) fell more than expected last
week (that's good), although the total number of workers receiving jobless
benefits is still high (that's bad) and at the highest level since September
2005 (post Hurricane Katrina).
But, the rise in labor costs could help staffing
firms, if they play that hand carefully by continuing to manage their own costs
vigilantly while using the development as a marketing strategy. If businesses
are wary of rising labor costs, perhaps they can be convinced to mitigate that
risk by engaging the services of a staffing firm?
The Federal Reserve Board's
Beige Book -- essentially, a summary of anecdotal reports from businesses and contacts
outside the Fed -- came out this past Wednesday and it reported mixed activity
among staffing firms around the country. Staffing firms reported activity
weaker in certain areas (Boston, New York, Richmond, and Atlanta
districts); stable in
others (Cleveland, Chicago, and Dallas districts); and an increase in demand from
certain sectors (biopharmaceutical and aerospace sectors in the Boston
district and IT, engineering, and
oil-related services in the Dallas district). Note that these locations are the district
names of the 12 Federal Reserve Banks. For the recap of what the Fed
found out about staffing, go to the eight (8th) paragraph in the above link.
As for this month's employment data, even most
economists didn't have much confidence in their own forecasts since there is
much uncertainty about the state of the economy. The actual number showed that
the number of jobs had declined by 63,000 in February. Consensus estimates had
predicted weak growth of only around 25,000, but those estimates ranged from a decline of 110,000 to a gain of
100,000.
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January
2008 (February 1, 2008) return
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Where
will the economy lead us? ... only the Shadow knows (and he's not telling)
What a difference a month makes.
Just 30 days ago, few economists would go on the record saying the current
economic woes would actually lead to a recession and now you cannot get them to
shut up on the subject. The difference is that there has been a slough of bad
economic indicators that have come out and some of them flashing "Caution:
Bridge Out Ahead." If Homeland Security were in charge of the economy,
the recession threat level to the economy would be orange,
which is "high", and they would preparing to elevate it to red -- the highest
level, which is "severe."
Let's hope that Washington's solution to spend our
way out of our current economic woes will work by giving every man, women and
gerbil cash, but some have their doubts since it really doesn't address the
underlying causes or is a long-term solution. Actually, consumer spending -- but with borrowed
money backed by unrealistic evaluations of assets -- is kind of what got us in
this situation in the first place, didn't it?
No recession is standard, and this one --
if it should occur -- will be fairly unique. One is related to a
subject that we mentioned in this space back in September 2006. At that time, we
tried to make the argument that so-called "normal" job growth that
occurred during of
much of the 1990s no longer applies. In addition to tremendous
productivity increases during the 1990s, overall labor force growth is
slowing now for two major reasons: 1) baby boomers are aging out of the workforce and into retirement
and 2) the work force participation rate of women -- which had been growing --
apparently has peaked.
All of this begs the question, what would the
employment economy look like during an economic recession when there is a
large
number of people leaving the labor force, many of whom are experienced workers
and cannot be quickly replaced with those who need jobs? Some workers will
get promoted up and create openings further down the skills chain. And many unfilled jobs could remain open since the labor force available for them
may not
have the necessary experience. This could all be an opportunity for the staffing
industry if they know where to look for those open, unfilled jobs.
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2007 |
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December 2007
(January 4, 2008) return
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A
new year is upon us ...
again
Let me start off by wishing us
all a healthy and prosperous 2008 and one that is filled with great adventures
both near and far. And considering the fluid state of the economy, it will indeed
be an adventure to make 2008 a prosperous year.
Although few economists are willing to go on the
record saying if the current economic slowdown will lead to a recession, most
are in agreement that we have yet to see the worse from the credit crunch
itself as well as the subsequent impacts from it. You can't hardly start
reading a newspaper or news website about how company executives are concerned about
the economy and are anticipating cutting back on their spending and hiring plans
in the immediate future.
Despite plenty of real reasons to be
troubled about near-term economic developments, all the news is not bad for
those in the staffing sector. Although the low unemployment rate
remained relatively stable until last month, this is likely due to a shifting demographic of the population and the labor
force rather from any encouraging macro economic trends. To that ends, we maintain a
selected set of
economic
indicators to give you a brief idea of what is going on in the economy.
Check it out regularly to stay current.
As previously mentioned
in this space, the staffing industry -- particularly traditional temporary
help services -- has suffered, which could be due more to the inability of staffing
companies to adapt to the changing times. We have tried to show in a
brief series
of published articles that the employment trends in the industries and the types of workers
customarily serviced and provided may have changed for the staffing industry. And we have
developed a suite of tools
to enable you to easily identify local employment trends to exploit as well as
determine your position in your local staffing marketplace.
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November 2007
(December 7, 2007) return
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Earlier topics worth re-visiting ...
Two days
ago the Wall Street Journal's Real Time Economics blog discussed the perplexing jobs situation and the apparent disconnect between
jobs growth and the economy. The
entry by a WSJ staffer and featured views from Carl Camden, president
and CEO of Kelly Services also included the idea that "GDP and temporary employment
growth -- once strongly correlated -- seem to have decoupled."
Regular readers of this e-mail employment report may
recall that we first broached that subject this past summer (July and
again in August). Our thought was that temporary help employment was no longer
a leading indicator of overall employment or the economy and presented a few
explanations. The concept was expanded to a
two-article series for a staffing magazine asking if temporary help services
has lost its Mojo.
"Mojo"
stories available for free ...
The first -- "Has Temporary
Help Services Lost Its Mojo?" -- about the apparent disconnect
between the overall employment economy and temporary help services jobs
created so much interest two months ago that we did a follow-up that was published last month. "Staffing's
Mojo is Still Here. It's Just in Different Places" will help staffing
executives understand what is really happening and providing some guidance where
to find growing staffing markets. Through a special arrangement with the publishers, you can
receive free copies of those stories by visiting and filling out a simple
form on this
Staffing Mojo series
webpage.
Although learning about the national trends
regarding staffing is interesting and can provide you with the macro view of
trends, all staffing is local and there's help. We have developed a set of strategic
planning tools for staffing companies benchmark their local operations against
local staffing industry market conditions and trends as well as identify new
local opportunities.
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October 2007
(November 2, 2007) return
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Mixed indicators continue to
abound ...
Despite consumer
confidence falling more than expected, personal consumption expenditures growth
slowing to 0.3 percent in September, oil hitting record highs, a continuing weak housing market, havoc with companies exposed
to the credit crunch as well as disappointing corporate earnings in other
sectors as well, not all the
news was that bad. The Fed cut its benchmark fed funds rate a quarter of a point,
which can be interpreted as
not-so-good news because the economy needs stimulation but with the
expectation that the problems in the financial markets won't bleed over to the
rest of the economy. The advance GDP estimate for 3Q2007 was up 3.9 percent
adding credence to the opinion that the overall economy is healthy. However,
the combination of several of the negative factors may create a
dismal retailing season and lead to further deterioration of the economy.
But, the employment economy is in reasonably good
shape. The unemployment rate is steady and held at 4.7 percent in October. And
new jobs -- 166,000 last month -- continue to grow in many sectors, although we
are only now starting to see the impact of the housing/credit crunch on
employment levels in related sectors. It remains to be seen how far those
problems will reach into other sectors. Even temporary help services employment
grew in last month; it was up 20,200 jobs, or 0.8 percent, from September.
Is this a
declining economy with some strong areas or a strong economy with a
few weak spots? Instead of arguing if the glass is half full or half empty,
at this point the most accurate statement would be that it's an eight ounce
glass with four ounces of water in it. Many of the measurements discussed
above are reported on a
special economic indicators webpage in order to help our readers stay up-to-date
with the latest macro economic data.
Second staffing "Mojo"
story available for free
...
The feature story I did for a leading staffing
industry magazine -- "Has Temporary
Help Services Lost Its Mojo?" -- about the apparent disconnect
between the overall employment economy and temporary help services jobs
created so much interest that we have done a follow-up story. Entitled "Staffing's
Mojo is Still Here. It's Just in Different Places", this next
installment will help staffing
executives understand what's really happening and providing some guidance where
to find growing staffing markets. Through a special arrangement with the publishers, you can
receive a free copy of those stories by visiting and filling out a simple
form on this
Staffing Mojo series
webpage.
Here's a brief preview of the second Mojo story:
it should come as no surprise that office and administrative support occupations
shrank in terms of their piece of the staffing employment pie while several
areas that saw growth are in some healthcare as well as computer related
occupations.
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September 2007
(October 5, 2007) return
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Looking back a month and
more
...
No question that the U.S. Bureau of Labor Statistics'
August employment report created quite stir initially reporting a drop of
4,000 jobs despite most experts thinking it would rise. The revised job number
reported today for August was up 89,000. Questions continued to swirl around the
models the BLS uses to derive the monthly jobs data as recent months'
data have been revised significantly from when initially reported. This month's report
and revisions to previous data will only amplify those voices questioning BLS
models.
Looking forward ...
No doubt that this month's job report will be
greeted by some with skepticism, especially in light of the wide swings between
previous months' job numbers. And the apparent disconnect between the trends
in temporary help services employment and the overall jobs number continues to
baffle. I've tried to make make some sense of that changing relationship in
a full-length feature story -- "Has Temporary
Help Services Lost Its Mojo?" -- for a leading staffing
industry magazine that I have been providing editorial copy to for more than a
year. Through a special arrangement we made with the publishers, you can
receive a free copy of that issue by visiting and
filling out a simple form on a
special offer web page.
But hurry -- this offer is time limited.
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August 2007
(September 7, 2007) return
to top |
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More on fundamental changes
with temporary help services ...
Our comment in this space last month discussing some
possible fundamental changes that appear to be occurring with the relationships
between temporary help services, overall employment, and the economy created
quite a stir. The
main thesis was that temporary help services should no longer be thought of as a
leading indicator of overall jobs. With the help of an MIT economics
professor, we conducted a regression analysis between temporary help employment, overall employment, and the overall economy.
That
thesis was developed into a full-length feature story -- "Has Temporary
Help Services Lost Its Mojo?" -- for a leading staffing
industry magazine that I have been providing editorial copy to for more than a
year. Through a special arrangement we made with the publishers, you can receive a
free copy of that issue, which will be coming out next week, by visiting and
filling out a simple form on a
special offer web page. But hurry -- this offer is time limited and will expire in early October.
An emerging trend?
Although the development didn't receive a lot of
notice last spring when it was announced, at least one Silicon Valley tech company,
which had been offshoring work to India, started to bring that work back to the
U.S. because "Bangalore
wages have just been growing like crazy … this huge run up in the wages has
destroyed the ROI …we decided to consolidate all of our engineering and research
efforts back to our HQ in California,"
according to that company president's blog. Over the summer, Jay Leno, in his
Tonight Show monologue, set-up a joke with "Well, here's an
interesting story ... a company in
India that is one of the leaders in providing outsourced customer service to
American companies is now outsourcing its work to employees in Ohio -- you
see, this is how a global economy works..." and then went on to joke how a
customer service call gets bounced around the world through various different
ethic workers before ending up in Cleveland.
Small U.S. toy manufacturers are reporting
booming business brought on by the fear of sub-standard and dangerous components
(e.g. lead paint) in toys manufactured overseas; and let's not forget the
unfortunate recent problem with an imported pet food component. The local,
organic food movement is gaining strength partially based on fear of the unknown
with imported fruits and vegetables. However, these developments have yet to
produce domestic job growth. Despite the
Fed saying it sees little evidence that the housing meltdown/credit crunch is
spreading outside of the real estate sector but admits seeing slow auto and
furniture sales, the Bureau of
Labor Statistics August employment report was not pretty -- unless you think
pretty awful is pretty.
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July 2007
(August 3, 2007) return
to top |
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note: this is an unusually
lengthy opening section; the subject warrants it
What's happening with
temporary help services ...
For well more
than a year, temporary help services employment has been languishing and lagging overall
employment growth -- and it has been losing "market share"
(percentage of overall jobs). If you believe the old adage
that temporary help services employment is a leading indicator to overall
employment or the general economy, then does this mean difficult times ahead? Maybe ... but the current conditions warrant a re-examination of the
belief that temporary help employment is a leading indicator.
Although temp
help employment made some incremental gains in the last two months of 2006, it
has been eroding for about the last 18 months. Although 1Q2007 GDP (gross
domestic product, a
widely accepted proxy for the general economy) was very weak at up only 0.6 percent,
the advance estimate for 2Q2007 shows it has come back solidly (up
3.4 percent).
In the past 30
days, I have had several discussions with economists and employment experts and there is a growing
consensus that the current environment -- weak temporary help employment in an atmosphere of relatively solid overall job growth -- is because something
may have fundamentally changed. While temporary help employment may have been
a leading indicator of overall jobs growth in the 1980s and into the 1990s, but
then
that relationship became a little tenuous. Although several theories abound,
two seem to emerge. One is that the 'temporary fill-in' reason for using
temporary help services has abated as businesses run tighter ships. The other is
that computerization has vastly speed up the process, so the staffing function
is much more immediate than it had been.
is it offshoring?
But
additional factors are likely in play. Last month, and again this month, some
private employment analyses found that only small and medium sized companies saw
employment growth and that
large employers actually experienced declines in employment. It would be a safe assumption to say that a
significant portion of temp help activities takes place at large companies. If
large companies are declining in employment (for whatever reasons -- certainly
because they are offshoring more production would be a significant one), they would have less
need for temporary workers -- hence the lackluster performance.
Outsourcing at large companies creates employment reductions at their own
companies and a secondary impact for temp help services. To express it another way,
jobs that were being filled by
temporaries are likely being sent offshore in a disproportionate number compared
to the general employment market.
is it construction?
Also, overall construction employment has not
declined as much as one may expect from the reports of the housing bust and
this oddity has attracted notice from analysts, economists, as well as the news media.
One partial explanation could be that some of the loss has occurred outside the
construction sector per se but within temporary help services that supply those
workers. Recent results from some public companies indicate that the staffing
construction specialty has been hard hit, so this
development could also be a contributing factor to temporary help's poor
performance.
the future ...
With that said, there are increasing rumblings
among economists about the "s-word" (economic slowdown) but
still little mention of the "r-word". The current scenario is it may happen sometime in early
2008 although no one is committing to that predication. Let's face it -- the
recent economic news has been generally downbeat (most negative developments are centered
around credit markets, which includes housing, and fear the problem is spreading
to other sectors), albeit inconsistent.
Regardless, maybe it's time for you to add a
degree of sophistication to your marketing efforts, which doesn't mean cold
calling prospects with gourmet cupcakes. What if you could easily identify
the meaningful employment trends and metrics in the local counties you service
by sector and benchmark your company's performance against the trends in the
local market?
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June 2007
(July 6, 2007) return
to top |
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Mixed but consistent job
report creates some questions ...
Overall this
was a relatively positive employment report but mixed since not all sectors and
sub-sectors saw job growth last month. One private sector employment report,
which was consistent albeit a bit more optimistic than the official BLS data,
showed about 60 percent of the job growth occurring at small companies (1-49
employees) and 40 percent at medium-sized companies (50-499) with a small job
loss at large companies.
The fact that
the unemployment rate was unchanged at 4.5 percent in June and other key metrics
were fairly steady such as the ratio between the population and the number of
people employed as well as the labor force participation rate seems to reinforce
the thinking that a 132,000 job gain could be the new norm. But temporary
help services employment -- long thought of as a leading indictor -- continued
to drift down both in terms of absolute employment as well as its portion of
jobs. Perhaps it's not the leading indicator as it once was or something
else is askew.
If you are in
the staffing industry, with such a
relatively strong employment economy, are you concerned that you are not getting
your proper share of the pie? In less than two weeks, I will be conducting a
free webinar to help you figure out what is really happening in your local markets and
help you identifying new vibrant ones. For more information -- and to sign
up -- look in the box below and to the left.
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May 2007
(June 1, 2007) return
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I've said it before, but it
bears repeating ...
Too early to
say what others are saying about this month's employment report, but one widely
followed estimate issue earlier this week put the private job gain at 97,000 for
May and another consensus estimate of 20 economists put together by the
international news agency Reuters put it at 120,000. Private sector job
growth actually was 135,000
according to the U.S. Bureau of Labor Statistics.
The economy,
as reported by GDP, grew at its weakest rate in four years at 0.6% in
1Q2007. The last time it was so weak was back in 4Q2002 when GDP growth was 0.2
%. As refresher, GDP, or gross domestic product, is the value of all
goods and services produced within the U.S. and is comprised of many components.
One reason for the slow GDP growth was that businesses reduced inventories.
However, personal consumption spending,
which is responsible for two-thirds of the economy, was revised upward to 4.4%.
If consumer spending remains strong, those inventories will expand.
Last month, I
signed off my podcast saying, "Stay tuned, things are about to get really
interesting." Recent historically low unemployment rates and relatively
steady job growth are coupled with weak economic growth -- now that really is
interesting. And it should be good for staffing companies because it
demonstrates that despite a weak economy, there does not seem to be enough
qualified workers to go around. But temporary help employment (seasonally
adjusted) was down 8,900 for the month but up 54,400 not seasonally adjusted.
I said things were going to get interesting -- but puzzling is more like it.
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April 2007
(May 4, 2007) return
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"Margins" -- a modern parable
for our times ...
Once upon a
time, not so long ago in a land not so far away, there lived a powerful and
cunning Prince and hitherto a more powerful and greater King. Then one fair day, the Prince saw the King falter by
missing a global trend. So the ambitious Prince, who had the slick products
everyone in the land desired, saw an opportunity to dethrone the King as the
market leader and build market share
by slashing prices and margins. The clever Prince's strategy
worked and his market share soared from 14 percent in the year two thousand and
three and grew to 22 percent by the time the earth circled the sun three times.
But the
King did not sit idle my friends -- oh, no -- he traveled to new lands to develop
and explore new markets for his products. Although the people in these new far-off
lands were poor in comparison to the loyal subjects in his home kingdom and he could only sell less
expensive models, he continued to pursue his expansion and
secured a dominant market position. Today, the patient King reasons these new lands will
eventually account for 60 percent of his business and a majority of his new subjects will
bring more gold to the royal treasury as they
upgrade to more expensive models this year. The King's
global market share has improved to 36 percent while the Prince's
has fallen to 17.5 percent. Clearly, the eager Prince's strategy
backfired ... long live the wise King!
And the moral of the story is
...
Competing on
price, even if you have a superior product or service, is a risky strategy that
may not be sustainable. It's important to discover new markets; for the
staffing industry it may mean expanding to new geographic markets but to service new
sectors as well. My two strategic marketing tools enable you to do just
that. And if you take the time to view either online demonstration, you get a
free report on regional temporary help trends. For further information, look
at the column below on the left, which also includes the names of the companies
in the "Margins" parable.
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March 2007
(April 6, 2007) return
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Whoops, I did it again ...
Earlier this
week (Monday, April 2) the Financial Times published a letter of mine
responding to a story on free IT services and software for small business
that I felt was lacking as well as gave poor advice from a
marketing/communications standpoint. One of the points I
made in this letter could save you hundreds of dollars in office (and personal)
software costs. A link to it is on my
Media
Coverage webpage. FYI, this makes me three for three -- I've
written three letters to FT and all three have appeared.
Surprise on the upside for
new jobs
One broad
consensus estimate issues earlier this week of new jobs created in March was
168,000. Consistent with that, one economist who predicted a range between
125,000 to 150,000 went on the record to say he considered that as "sub par or
slightly sub par but I can't prove it."
Well, the
actual new jobs number was 180,000 new jobs in March, higher than the 164,000
monthly average of the past six months. Subtracting out 23,000 of those March
new jobs that were in government, that leaves 157,000 private-sector new jobs.
Taking into consideration demographic population shifts, I consider the March
new jobs number as better than "par".
February's
revised 113,000 new jobs (97,000 when first released) was quite remarkable
despite some weather-related factors -- an unusually mild January, which helped
produce a strong jobs number, followed by a cold and wet February, that normally
results in slow job growth.
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February 2007
(March 9, 2007) return
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"They" said February's employment
picture was going to be bad -- wrong.
With a variety
of factors pointing to what would have been a dismal February employment report,
the consensus of so-called experts -- although there were some exceptions --
thought there was going to be a pretty lousy employment report in February.
"They" were quite wrong. But, there is still cause for some concern in the jobs
numbers.
First, the
unemployment rate, which is a ratio of the labor force to those who are not
working, emerged in February with an incremental improvement from the previous month
at 4.5%. Some of the improvement can be attributed to the fact that the
civilian labor force shrank in size.
Once 175,000 new jobs a month was considered
a "normal' jobs report and north of 200,000 was quite good, but not out of the
realm of possibility. Today, the situation is different partially as a result
of broad economic and labor force characteristics -- some consider around
100,000 new jobs in a month quite acceptable. So, last month's performance
of 97,000 new jobs was quite remarkable despite some weather-related factors --
an unusually mild January, which helped produce a strong jobs number, followed
by a cold and wet February, that normally results in slow job growth. But, the
goods-producing sector took a big hit (partially as a result of weather issues)
while the service-providing sector saw very solid growth.
Despite the relatively good news this jobs report in sum may appear to report,
it was very uneven.
Although one
jobs report does not constitute a trend, the overall economy is beginning
to show signs of a patchy slowdown, despite activity in some regions
increasing at modest rates.
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January 2007
(February 2, 2007) return
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What will 2007 bring?
It seems that
more jobs were generated in 2006 as previously reported by the U.S. Bureau of
Labor Statistics. As I mentioned
in the e-mail of November 6, 2006, significant revisions to the 2006 jobs data
were anticipated -- based on preliminary data, I said at that time there
would be an upward revision of 770,000 to 850,000 jobs. Well, those
revisions were published this morning and it shows that job levels were
indeed higher in 2006 than previously reported -- 799,000 higher.
With that
said, job growth was 111,000 in January 2007 that was below most estimates, but
if you've been following what I've been saying for several months, this is quite
good taking into account the demographic shift toward an aging population.
Additionally, new population controls created new levels for the household data
(see below) increasing the size of the population as well as the civilian labor
force and the number of people employed.
Essentially,
the benchmarking/revision process raised the river.
In case you missed it ...
My
expertise, knowledge, and
history of statistical gathering agencies was recognized last month in the Financial Times
(Thursday, 11 January 2007), which published with a Letter to the Editor I sent. The letter is ... posted on
my website in the
"Media Coverage" page.
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2006 |
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December 2006
(January 5, 2006) return
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What will 2007 bring?
Before we get to what's in store for
2007, how did 2006 perform relative to 2005? Those annual
comparisons that the media loves to report may be conspicuous by
their absence in this newsletter, but those won't be published until
next month when revised 2006 employment data are released. Since the
revisions to the 2006 employment data are likely to be significant (if you
hang on to these monthly newsletters -- and we know they are worth saving,
if only for their wit and wisdom -- see the November 3rd edition) possibly
to the tune of 0.6 percent
upward, it
seems silly as best and misleading at worst to report
year-over-year changes now when they are expected to change next
month. Stay tuned ...
As for 2007, does anyone really know
what will happen in 2007 with any degree of accuracy?
For example, this month's estimates of December private-sector
employment's change range from a loss of 40,000 to a gain of more than
100,000 -- one economist revised his forecast from a gain of 125,000 to
50,000 only two days ago. However, knowing what really is happening in
your market is another issue -- and my strategic planning tools do just
that.
A recognition for me
...
In case you haven't heard, I was named
Time magazine's Person of the Year -- well, you were too. Actually,
this e-newsletter along with my podcasts are but two examples of what
Time was trying to point out -- the public (that would be you) has
changed the way it is getting news and information. Congratulations and
a prosperous New Year to us both!!! |
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November 2006
(December 8, 2006) return
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Further
confirmation of a tightening employment market …
In this
space several months ago, I made the point that the relatively small new jobs
number was just that -- relative to past performance -- and the economy was in a new phase where "'normal' job growth today is likely less than it has
been through much of the 1990s. We are now well into the massive population
shift expertly documented nearly two decades ago."
Ben Bernanke,
chairman of the Federal Reserve Board that looks over the economy and adjusts
monetary policy who is not as obscure with his public comments as his
predecessor Sir Alan (Greenspan), said last week that the labor market is “tightening” and
although “improved health and increased longevity may increase the interest of
older workers in remaining in the labor force, perhaps on a part-time basis,
and an increasing scarcity of labor … [that] some slowing in the growth
of the labor force thus seems likely over the next few years.” [emphasis
added.]
He went on to say that the Fed
closely watches labor costs for signs of inflation and “… it seems clear that
labor costs … have been rising more quickly of late. Some part of this
acceleration no doubt reflects the current tightness in labor markets.
For example, anecdotal reports suggest that businesses have been finding it
difficult to recruit well-qualified workers in certain occupations."
[emphasis added.]
Recently, the Financial
Times reported that the business community of Atlanta started to develop a
strategy to attract talent. According to FT, the "Competition for talent
is becoming increasingly fierce throughout the developed world as
baby-boomers retire and birth rates decline. For decades, growth in higher
education and increased labour participation by women provided rich seams of
fresh talent. But those trends are starting to slow."
[emphasis added.]
How can staffing executives
exploit this current trend? Other than the obvious of adjusting to an older
workforce, perhaps Shakespeare can proffer some pointers to prop up your
profits …
“The
fault, dear Brutus, is not in our stars, but in ourselves.”
Running
the risk
that I could be alienating you with a Shakespearean quote, I use this to
bring to light the potential folly of using national and industry-wide employment
trends (“our stars”) to try and benchmark and measure your own, local business
(“ourselves”).
If your business isn’t growing
the way you think it should, don’t blame the national and industry-wide
trends. The answer, my dear friends, may lie in your own business. |
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October 2006
(November 2, 2006) return
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Early warning -- major employment
revisions to come ...
The U.S. Bureau of Labor Statistics (BLS) annually
revises the employment counts by industry; the 2006 benchmark is currently
scheduled with the January 2007 employment report released in February 2007. For
the past decade, the revisions have averaged 0.2 percent. Not bad.
However, BLS is saying that preliminary calculations
indicate that there may be a much larger than usual revision of the 2006
employment numbers. The preliminary estimate is that the 2006 employment data
will be revised by about 810,000 (0.6 percent) upward. In the past, the published
benchmark estimate is consistent (within 5 percent) with the preliminary
estimate. Therefore, the 2006 will likely be revised upward by 770,000 to
850,000. Not good.
The last time there was a 0.6 percent adjustment was
1991 when it was revised downward by 640,000. Incidentally, the error in 1991
that caused such a large revision was traced to a close cousin of the staffing
sector -- the payroll processing industry. Nevertheless, the initial review
of the upcoming 2006 benchmark does not appear to be concentrated in any one
industry or geographic region. Stay tuned.
I'm Bruce Steinberg and I approve
of this message ...
Election Day is Tuesday and I don't think it's
an overstatement to say the year's campaign and crop of campaign ads are incredibly
nasty, negative, revolting, ugly, and often break new ground in tastelessness.
Maybe the Iraqis are on to something by dipping their fingers in purple ink to
proudly display and verify they voted. Come Tuesday, I plan to give even the
politicians I'm voting for the finger. They deserve it for their contribution to
the denigration of the American political process.
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September 2006
(October 6, 2006) return
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Good Morning ...
In this space last
month, I brought up the issue that -- in the face of the changing
demographic profile of the American population -- Wall Street, economists
and other labor experts (myself included) change our way of thinking of
what to expect from the monthly employment and jobs data. In brief, the face of
mounting evidence of an aging population, “normal” job growth today is
likely less than it has been through much of the 1990s. I continue to suggest
a more realistic scenario of “normal” job growth for today is probably
in the 100,000 per month range, versus 150,000 to 200,000 as it had been.
I may be a little ahead of the times with this pronouncement, but it
wouldn't be the first time. I say this because ...
More than a year ago (August 11, 2005, to be precise), I wrote a letter
to the editor that appeared in the Financial Times that told how the
real estate market would inevitably decline by using an economic theory
that was awarded a Nobel prize. Considering the current news about the
housing market, I was right, albeit a little ahead of the time. I also
used the theory to explain why recruitment services, staffing services and
job boards are successful sectors as well as why the IT bubble burst.
You can
read the Letter to the Editor here.
So, how you go down
a better strategic path regarding the direction of your service? I
developed a pair of tools for staffing services (both traditional and IT)
that complement each other so you can easily see how your specific markets
are developing as well as benchmark your performance relative to detailed,
local market trends. More information is immediately below in the left
column/box. |
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August 2006
(September 1, 2006) return
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Definitions change ...
Poor Pluto -- it is no longer classified as a planet
because the new definition of "planet" arrived at by a consensus of astronomers
left it out in the cold, literally (almost -400ºF or -240ºC).
And it may also be time for Wall Street, economists
and other labor experts (me included) to change our way of thinking of what to
expect from the monthly employment and jobs data.
Although the working-age
population (16 and older) continues to grow, the older segment of population is
growing faster, so the total participation in the workforce may have peaked and
could actually be declining slightly, despite people working longer.
With the participation rate likely declining on an annual basis
-- albeit slightly -- “normal” job growth today is likely less than it has been
through much of the 1990s.
We are now well into the
massive population shift expertly documented nearly two decades ago -- how many of
you recall the Hudson Institute's landmark study of the changing American
workforce "Workforce 2000" published in 1987 and its follow-up "Workforce 2020"
in 1997? -- that was a topic
of numerous seminars and programs at HR conferences throughout the 1990s.
Therefore, a more realistic
scenario of “normal” job growth for today is probably in the 100,000 per month
range, versus 150,000 to 200,000 as it has been.
Just as our solar system changed last month, so is
the human capital universe. Make sure to stay current and avail yourself of the
latest research and strategic planning tools, otherwise you may find yourself in
the same situation as Pluto -- too small to be considered a player and destined
to spend eternity at the fringes in a slow, cold orbit. Brrrrrrrr!!!
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