Hello, this really is a picture of me, Bruce Steinberg

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This is an edited collection of the introductory analyses and 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.

2014

July 2014 (to be published August 1, 2014)

June 2014 March 2014
May 2014 February 2014
April  2014 January 2014
2013

December 2013

June 2013

November 2013

May 2013

October 2013

April 2013

September 2013

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August 2013

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2012
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2011
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2010
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2009
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2008
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2007
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2006
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October 2006  

 

2014

June 2014 (published June 3, 2014) return to top

 

So, tell us, what's going on with that recent GDP number?

 

The quarterly GDP (gross domestic product, or the sum of all products and services, minus imports) actually is released three times because the data used to produce it drip out over time so the Department of Commerce / Bureau of Economic Analysis updates it after it is first released. FYI, the first release is called "advance", the next is the "second", and the third is called, you guessed it, the "third" estimate (side note: the third release used to be called "final" until someone pointed out that it is subject to subsequent revisions, but we digress).

 

The third estimate of Q1 2014 GDP that was released last week came in at -2.9 percent, which was quite shock from the second estimate of -1.0 percent, which itself was a bit of a jolt after the advance estimate was a positive 0.1 percent. The downward revision was mainly due to downward revisions in consumer spending and exports and an upward revision in imports. Most attributed the dismal performance in Q1 GDP to the harsh winter that suppressed economic activity. Recall that the jobs numbers were also down at the time, so this explanation carries a degree of validity.

 

But, did you notice that the politicians remained fairly quiet about this? One would think that at least one political party would shout from the highest rooftops that this is clear proof that the current administration's economic policies are failing ... but they didn't. Either they didn't have an understanding of what the drop in GDP meant and missed an opportunity to beat-up on the administration, or they did and accepted it was an anomaly caused by the bad weather and didn't want to get drawn into a losing argument. However, unless something really remarkable occurs, GDP for 2014 likely will be lower than previously predicted.

 

In early June and before the third estimate of Q1 2014 GDP was released, the consensus estimate was that the economy will grow around 3.5 percent in Q2 2014. Afterwards, some economists adjusted their predictions for Q2 2014 GDP upwards under the logic that the economy will, at least partially, make up for the bad winter weather that kept consumers out of stores.

 

This got us wondering how the economy was performing on a more granular level since this GDP statistic is of the entire country.

 

Although state-by-state GDP is only produced on an annual basis, we felt looking at it for the past couple of years would be interesting. Only six states, as indicated in bold, outperformed national GDP growth in 2011, 2012, and 2013. [note: clicking on the chart will open it in a new browser window where you can make it bigger as well as download to your device.]

 

Notice how some state's GDP fortunes radically change from year to year. Clearly, some states are dominated by a sector or two that drives that state's economy. Wyoming is a good example. Although its actual GDP is the second lowest in terms of dollars (these data are not presented), it was the second fastest growing state in terms of 2013 GDP and this growth can mainly be attributed to mining. It looks like the oil, gas, and mining sector (ND, WY, TX, OK, UT, and others) along with tech (CA and WA specifically) are clearly driving the economy as the financial sector (see NY) is holding it back ... and this clearly impacts the staffing sector's performance.

 

Then we decided to see how the states are expected to grow in the next six months; that's the table on the right.

 

Where do the states that you operate in stack up? If your state, or states, did well in 2013 and you did well too, then you are probably in the right sectors / industries. If not, you may want to revisit your strategic plan to ensure you are operating in sectors / industries that are driving that state's economic growth.

 

May 2014 (published May 2, 2014) return to top

 

Manufacturing has come back -- well, sort of ... (part 2)

 

Last month we examined the trend with manufacturing jobs and their relationship with productivity (output) and hours worked. We didn't envision revisiting this subject so soon so we didn't label last month post as "part 1" but this month can be considered as part 2. We ended posing a query, "... it remains to be seen if manufacturers will need more employees to further increase output. What have you been hearing?"

 

We heard from Susan Houseman of W.E. Upjohn Institute for Employment Research pointing out that manufacturing trends are commonly misinterpreted because manufacturing output and productivity measurements are being skewed by relatively small sub-sectors -- computer and semiconductor manufacturing. Without going into detail (we've read through two research papers), the gains in overall manufacturing productivity are grossly inflated because of the way productivity is measured. In brief, the measurement methodology captures quality improvements. And the vast improvements in computers and semiconductors, although relatively small sectors, have created a situation in which overall manufacturing productivity and output growth is dominated by them -- so much so that, when adjusting for computer and semiconductor manufacturing, the authors conclude that the nation's overall manufacturing real GDP has been weak or negative since 2000.

 

It may appear wrong to take out a specific sector and then conclude that the manufacturing economy is not doing well, but Houseman points to us in an email that, "The rest of manufacturing accounts for roughly 90% of value added and employment in the sector and, on balance, is not doing well.  But few people know that one small industry is driving the apparent robust growth." She suggests that the federal statistics continue publishing the current full manufacturing series, but also produce a sub-series without the IT sectors.

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The question remains whether the manufacturing sector is experiencing staffing pressures. For obviously reasons, the answer to that question is very relevant to staffing companies, but it also has further implications for the economy in general.

 

Some labor observers say that there is really no such thing as a worker shortage, at least in the longer term. When employers complain that they cannot find enough employees, it is more likely a result of not able (or willing) to pay a wage that will attract workers they want. Granted, for high skill jobs for which workers need specialized training, experience, and education, offering higher wages may not necessarily result in an immediate flood of qualified employees, but let's talk about the other end of the spectrum -- lower wage production jobs.

 

Imagine an employer who traditionally pays $19.50 an hour and is having trouble getting qualified applicants suddenly starts to offer $32.00 an hour. Of course that employer would be inundated with great applicants, but couldn't do that without raising its prices to its customers. However, the business may be able to incrementally raise wages and absorb the increase, but prices will need to increase in some point. That is inflation and those in charge of economic policy watch this balance very carefully. When prices rise, wages need to rise as well  -- although consumers may also substitute cheaper goods. The relationship between wages and prices is sort of that chicken and egg thing -- which actually comes first?

 

The latest edition of the Federal Reserve's Beige Book, which just came out earlier this week, includes a lot of comments about the regional trends for wages and prices throughout the country. You may want to review our summation of the Federal Reserve's latest Beige Book, which pulls out insights about the staffing sector as well as relevant sectors. It also discusses the challenges that employers in myriad sectors are experiencing finding qualified employees and the steps they are taking in attempt to address the situation, which includes providing training as well as increasing capital investments (i.e., automation) so they do not have to hire more employees and still produce more product.

 

Now, back to the discussion about the manufacturing economy. Since last summer, year-on-year wage growth for manufacturing (the green line) has been higher than for all private-sector jobs (the red line). It certainly is not too much of a stretch to say that manufacturers are raising wages in order to hire enough workers that they need and want.

 

In reality, the reason for the rise in manufacturing wages is not so simple nor singular. Manufacturing workers are bringing more skills -- and hence are worth more -- to the table that now is being produced more efficiently, which also can result in higher wages. Also note how the wage growth for the professional and business service sector has trended below overall wage growth at about the same time (actually, a few months earlier) -- possibly, there's a better applicant pool so employers are not under pressure to offer higher wages to attract solid candidates.

 

Then for grins, we decided to see how temporary help services wages (the brown line in the lower chart) compare. Although with much wide swings, the trendline for temporary help services generally mirrors the trendline for manufacturing wages.

 

Although many staffing companies continue to move into higher wage sectors ostensibly because of potentially higher profits and possibly better margins, the wage growth in manufacturing has been outperforming overall wage growth. This may indicate that those employers are raising wages possibly because they are having difficulty in finding enough good applicants. Perhaps it's a good time for temporary help services to re-work their strategic plans in order to capitalize on this development.

 

April 2014 (published May 2, 2014) return to top

 

Manufacturing has come back -- well, sort of ...

 

Inasmuch as manufacturing is a significant sector for many staffing companies (which are a significant portion of our readership), we though a review of how it has come back since the recession was in order.

 

As the upper chart shows, manufacturing jobs (brown lines) were declining for several years before the recession started and its downward path accelerated during the recession. And manufacturing jobs continued to decline for some time after the recession was over before starting to recover around the Spring of 2010. However, as the dashed brown line shows, manufacturing jobs are still down from the beginning of the recession and have only recovered by about 350,000 from the end of the recession.

 

But, the average weekly hours worked have recovered both since the onset as well from the end of the recession. When the hours worked trend is examined, it looks as if the growth in this measurement is at the level now as if the recession never happened.

 

Manufacturing employers have been paying less than one hour a week in overtime for about four years now -- until March 2014. But with that less-than-one-hour-a-week in overtime has now been broached and, although we can't speak for manufacturing employers, they may now be ready to start considering adding employees.

 

But, this first chart presenting just jobs and average weekly hours may be misleading without looking at total hours and manufacturing output, which is shown in the lower chart. As expected, the total hours worked in manufacturing follows the same general trend as the number of jobs in the sector -- much lower than from the onset of the recession and growth since the end of the recession, and not back the the pre-recession levels. But manufacturing output is almost back to the level at the onset of the recession and is actually slightly higher (the solid, brown arrowed line in the lower chart) than from about two years prior to the start of the recession.

 

Therefore, manufacturers are producing more now than before the recession and with fewer employees / jobs. We heard anecdotally that during the recession businesses 're-tooled' their systems to improve efficiencies. It appears what we are seeing is the result of those efforts via productivity gains -- producing more product with fewer input (hours worked, in this case). But as we said earlier, the average work-week has steadily been climbing and with output increasing as well, it remains to be seen if manufacturers will need more employees to further increase output. What have you been hearing?

 

Greetings from the High Country of North Carolina ...

 

And now, a very personal message.

 

As some of you may know, I arrived in the Washington DC area (from South Florida where I was with the corporate office of a national temporary help company) two dozen years ago for a job with was then known as the National Association of Temporary Services in Alexandria, VA.  Eight years later, I left as their first director of research to fill a similar role as well as to serve as Washington Bureau Chief for California-based Staffing Industry Analysts. Then about a dozen years ago, I struck out on my own, but stayed in the Washington area as it was important to have quick and easy access to federal data resources. 

 

A couple of years ago, it finally hit me -- ostensibly because of broadband Internet access -- that there was no business reason (except, perhaps, for the image of being located in the Washington, DC area) to stay there so I started to look for an area that I would want to be for the third epoch of my life (or fourth, or fifth, depending how one makes those distinctions). For a variety of reasons, I settled on Boone, NC, and left my Mt. Vernon, VA,  for good two weeks ago (anyone want to buy a nice, reasonably price house in a great location?).

 

I send you this note looking out to mountains and trees and grass and a big open field and my dog running around like the crazy canine he is.

 

If you ever make it to the area, look me up -- if you have the time, we'll go for a hike with the dog and have a beer.

 

March 2014 (published April 4, 2014) return to top

 

Last month, we discussed  the employment-to-population ratio and how some think it is a misleading indicator of the employment situation.

 

To review, unlike the unemployment rate that has some shortcomings mainly because it does not take into account people who have stopped looking for a job, the E/P is a ratio of those who have jobs to the entire working age population. Both the original blog posters (economists from the Federal Reserve Bank of New York) and unabashed liberal columnist Paul Krugman of The New York Times agreed that the aging population was driving the decline in the E/P ratio. Here's our discussion from last month, which includes links to the original blog postings.

 

This month we decide to see if their agreed upon conclusion was correct.  Our conclusion -- maybe not.

 

The top / smaller chart is the same one that we ran last month -- the E/P ratio of everyone 16 years of age and older.

 

This month, we broke out the E/P by age. As you can see, the E/P trend for those 55 and older (and the 65 and older subset) is different for the younger age groupings. Unlike the trend for the other age groups, the E/P for both the 55 and older as well as the 65 and older subset is higher today than at the onset of the recession.

 

Conversely, the E/P ratio for all the other age categories is lower today (because of production schedules, the data presented here run from January 2004 to February 2014) than at the onset of the recession (January 2008). And although it is getting close to returning to the levels of ten years ago, the E/P ratio is still lower now than it was in January 2004 for all those 16 to 54. It appears this age group is driving the decline in the E/P ratio.

 

The E/P ratio is higher for those 55 and older (and the 65 and older subset) today then ten years ago perhaps as those who were 55 ten years ago and now are 65 have had to return to work as their retirement financial plans were negatively affected by the recession. [Federal labor experts expect the labor force participation rate for the 55 and older cohort to rise until at least 2022 (and declining participation rates for all those 16 to 54 years old) because of increasing life expectancies, healthcare costs rising more than inflation and retirement fund returns, as well as other reasons.]

 

A very learned economist once told me not to base all conclusions 'upon squiggly lines in a chart.' Maybe it's time for some of those learned economists to study this subject further -- here's a line of thought to investigate: How has the increase in the E/P ratio for those 55 and older impacted the decline in the E/P ratio for the younger age groups? In other words, are the older people taking the jobs from the younger people? How's that for a contrarian point-of-view?

February 2014 (published Match 7, 2014) return to top

 

Something for all you real employment indicator wonks out there …
 

Early last month, a blog post by two senior executives at the Federal Reserve Bank of New York created some waves by suggesting that a major labor market indicator -- the employment-to-population ratio -- is misleading. Later that same day, Paul Krugman, via his New York Times blog “The Conscience of a Liberal”, chimed in as well. (Links to both blog posts at the conclusion of this section.)

 

The blog post by Samuel Kapon and Joseph Tracy of the NY Fed stressed a point that we have made before: that measurements of the current employment situation, or more precisely employment and unemployment indicators, are being affected by changing demographics. BTW, we said this space back in August 2006 that the aging population – and hence the size of the working-age portion of the population – will have a real effect on employment almost regardless of the condition of the economy.

 

And as the next election cycle starts (does it really ever end?, but we digress), we may be hearing about not just the state of employment and unemployment, but about the fairly arcane e/p ratio that has not really recovered since the recession ended. Unlike the unemployment rate that has some shortcomings mainly because it does not take into account people who have stopped looking for a job, the e/p is a ratio of those who have jobs to the entire working age population.

 

On one point -- that the aging population is driving the considerable decline in the e/p ratio -- Krugman agrees with Kapon and Tracy.

Some interpret the unrecovered e/p ratio see as continued overall weakness in the labor market. Kapon and Tracy attempted to normalize the data and came to the conclusion that the current e/p currently is only slightly below full employment. But Krugman takes them to task on both some assumptions that Kapon and Tracy make to normalize the data as well as their conclusions. This controversy is significant as it involves deciding if and how much slack currently exists in the labor market that, in turn, impacts public policy as well as monetary direction.

 

Here’re the links to both blog posts:

http://libertystreeteconomics.newyorkfed.org/2014/02/a-mis-leading-labor-market-indicator.html

http://krugman.blogs.nytimes.com/2014/02/03/demography-and-employment-wonkish/

 

January 2014 (published February 7, 2014) return to top

 

Does the climate really affect new job growth?
 

One explanation being volleyed around about the poor job performance at the end of last year was the cold weather. The logic is that cold weather suppresses new job creation and will bounce back in better weather.

 

So, we tried to see if this line of thinking has any validity -- or is just positioning by the "powers-to-be" or an excuse by staffing branch managers -- so we plotted the average temperature for the contiguous United States against the number of new jobs created or lost. The dotted lines presents the average for the each data series for the time period presented.

 

Interestingly, in December 2013, both were below their historical averages; also this occurred in December 2010, which would give some credence to that explanation. But in December 2011 and 2012, when the temperature was also below the historical average, job growth was above its historical average. So, for the past four years, we would have to call it a tie. Looking at more than December, new job creation does appear to "bounce" early in a year in January and February.

 

This also brings into question the rigor of BLS's seasonal adjustment procedures.  The seasonal adjustment for retailers has a significant weight on December, but with holiday spending shifting away from brick-and-mortar retailers, the data may be getting out of sync with reality. Clearly, much more research and sophisticated statistical calculations are need to see if there is a true correlation between climate and job creation. It may indeed have some validity, especially on a localized basis.

 

So, if you get drawn into a conversation about how or if the weather affects hiring activity, you now have some facts to say it appears to have a correlation some times, but not at others.

 

Oh, in case you were wondering, the famed "Super Bowl Stock Market Predictor" says it will be a bull stock market because the Seattle Seahawks won, bull being the

 

2013

December 2013 (published January 10, 2014) return to top

A New Year's gift to our readers ...
 

The U.S. Bureau of Labor Statistics published 10-year employment projections last month. These projections are based upon a plethora of criteria including how changes in population demographics will affect the demand for specific goods and services, the types of jobs, and levels of education for workers to fill those jobs.  For example, as the population ages so will the need for more health care workers. But this population shift will also drive pharmaceutical industry employment as well as the types of jobs that it will create. Our report highlights some of the changes in the direction that both jobs (occupations) and well as employment changes by industry and sector that may be of special interest to staffing industry executives planning for the near-term future.

 

You may be surprised to learn that it appears that light industrial will be a growing sector for staffing services encompassing growing portion of staffing services jobs by the year 2022; office and administrative support jobs, although they will remain a significant part of staffing services jobs, will decline slightly as its portion of the overall mix.

 

So our gift to you is something you can actually put to use: a gratis, new report on the expected employment projections to the year 2022, which is only eight years away, as they relate to staffing services to assist you in planning for the future. Given the highly analytical nature of our readers and followers, this brief, eight-page report is light on words but heavy on tables and charts. And because we know you are a busy executive, you don't even have to go to the additional step of requesting this valuable report from us. Just directly download it from here.

 

November 2013 (published December 6, 2013) return to top

Beveridge revisited ...
 

More than a year and a half ago, we looked at the Beveridge Curve and how it explains the inverse relationship between trends in unemployment and jobs vacancies. We thought it would be a good time to see is this relationship is still holding at this stage of the present economic cycle and if the inverse relationship would also hold true between the unemployment rate and private-sector job growth.

 

To review, we saw in dramatic fashion how severe -- and different -- the past recession had been and how the recovery still had some serious distance to travel before we are in a "normal economy." We tend to reach the same conclusion when looking at an updated chart of the data, which is the top chart on the right. To read our original posting of April 2012 that includes a further explanations of a Beveridge Curve, go here.

 

Then we decided to see if a similar inverse relationship would exist between the unemployment rate and the changes in all private-sector jobs. Logic would say that substituting job vacancies for new jobs should yield similar results.

 

But, there appears to be a departure when looking at new private-sector job changes at a certain stage in the economic cycle from the trend between the unemployment rate and job vacancies. In the bottom chart , the purple line (and scale on the right) is the percent of private-sector jobs that are new jobs.

 

Although an inverse relationship between the unemployment rate and percent of new private-sector jobs holds true for most periods, it does not for the very later stage of the recession and the early stage of the subsequent recovery when both move in the same direction. As we mentioned in this space previously, as the job situation begins to improve and employers start to add jobs, people who were considered out of the labor pool jump back in thereby raising the unemployment rate during that late recession / early recovery period. In addition, another potential reason that vacancies increased simultaneously with a rising unemployment rate during this period is because qualified candidates -- a.k.a. skills mismatch -- may not be readily available to fill those vacancies, especially if the economy fundamentally shifted during or contributed to the recession.

 

And although the unemployment rate continues to decline, both charts are showing a potentially disturbing trend. Recently, both the job vacancy rate and the growth in new private-sector jobs appear to be leveling off. However, the vacancy rate is not necessarily increasing, it is still in positive territory and that means that the number of vacancies continues to increase. This suggests that the unemployment rate still has some room to decline going into the new year. This is something that we will continue to watch closely.

 

October 2013 (published November 8, 2013) return to top

 

Is manufacturing rebounding?
 

Manufacturing is -- or had been -- a significant sector for staffing services. There has been a lot of talk, supplemented by anecdotal news reports, about how U.S. manufacturing is rebounding. Particularly on slow news days, the media will present this story and show some manufacturers are adding employees. Other groups and organizations tout how their manufacturing "index" in up.

 

Manufacturing -- as measured by output -- is growing but that may not necessarily mean more jobs. Through automation, the "new" factory is highly mechanized and the workers who remain are much more productive so growth in the U.S. manufacturing economy could actually translate to fewer manufacturing jobs at one point down the road. But, perhaps the more relevant question to staffing services is 'are manufacturers adding jobs and employees?' 

 

No doubt there is growth in many manufacturing sectors in many markets.

 

First, let's look at what has happen in overall employment in the last ten years or so.

 

The blue line (and left blue scale) is total nonfarm jobs; the red line (and right red scale) is the year-on-year change in the number of jobs. The red dashed line is 0 percent for year-on-year change -- above the red dashed line is growth and below it is decline. Note how the solid red line started to move down (indicating slower year-on-year growth) well before the blue line (jobs) actually started to decline.  Also, take note of how year-on-year change has become fairly steady, but fortunately above the red-dashed line, since the beginning of 2012.

 

Now, let's take a look at manufacturing jobs for the same time period.

 

As you can see, manufacturing jobs were steadily declining from before 2013 as seen by both the downward slope of the blue line as well as the red line positioned below the 0 percent red dashed line. But starting in the end of 2010, manufacturing jobs started to increase (the blue line starts to slop upward and the year-on-year change is above zero). But growth slows and even dips below 0 percent in 2013.

 

appears that the long downward slide in manufacturing employment has stalled for the time being. The current trend for manufacturing jobs can best be characterized as unchanged. The blue manufacturing jobs line has been fairly steady at about 12,000,000 jobs since around mid-2012.

 

The question remains will staffing services have a future in manufacturing? The answer is a definite maybe. Some manufacturers in some markets and industries are indeed growing their payrolls (and we have tools to help you identify them).

 

As we mentioned at the beginning of this article, the manufacturing economy is growing as manufacturers generate that growth with fewer employees because of productivity gains with manufacturing jobs that are higher skilled and higher paid than traditional manufacturing jobs (or, in economist-speak, "creating fewer manufacturing jobs per dollar of revenue"). Often, U.S. manufacturers are now manufacturing "the smarts in smart technology." The good news for staffing services is that the kind of workers these manufacturers are looking for may soon be in short supply.

 

The other side of that good news coin is that some manufacturing is undergoing a major shift as 3-D printing begins to supplant traditional manufacturing, which is probably not a good development for staffing services, unless those staffing services are setting themselves up to provide IT and engineering professionals to program and run those 3-D manufacturing processes.

 

September 2013 (published October 22, 2013) return to top

 

Better late than never ...

 

Because of the ripple effect of the government shutdown, this month we are providing only topline information along with our normal presentation on the current temporary help services trend.

 

With that said, we thought it especially apropos to rerun the following parable from our February 2013 employment report. Although that commentary was referring to the sequester, we feel it's even more meaningful today. To quote ourselves:

Commentary ...

 

Although you may be sick and tired about hearing about it, we would be lax if we didn't offer up a comment about the federal budget sequester. All of the inaction from what has essentially become a dysfunctional Washington reminds us of an old joke (or is Washington the joke, but we digress). We won't relate the joke in its entirely, so here's an abridged version:

 

The body parts were having a meeting to see which was in charge. The brain thought it should be because it does all the thinking; the eyes made its argument because it sees where the rest of them are going, so it should be; the stomach because it provides the energy; the legs because it provides the transportation; and then -- and we're using another word otherwise this email may not make it through spam filters -- the sphincter piped in that it should be in charge. All the other body parts laughed at it, it got mad and closed up tight. Soon the legs were wobbly, the stomach was queasy, the eyes were watery, and the brain got cloudy. All the other body parts agreed the sphincter was in charge.

 

Come on now, do we really have to continue and draw you a chart? Whatever your political leanings, the sphincter is the other guy.

August 2013 (published September 6, 2013) return to top

 

Same financial crisis, a year later ...

With the situation in Syria dominating the news coming out of Washington, the federal budget seems to have been relegated to the back burner. In case you missed it, the federal government will again run out of money next month and faces a shutdown if the debt ceiling is not raised or some budget changes are not agreed upon. Yup, same story, different year.

Here's an interesting parallel approach to forcing legislators, albeit at the state level, to do their jobs. You may not have heard what a governor recently did to try and force that state's legislators to address a major financial crisis.

Illinois governor Pat Quinn used his line-item veto to stop paying legislators because they failed to come up with a solution to the state's pension crisis, which is reported to be the worst in the entire nation. Although the legality of Quinn's action is in question and the legislature, which is controlled by the same political party of the governor and could simply vote to overrule the governor's line-item veto, decided instead to file a lawsuit to get paid.

At last report, a pension deal, and agreed to by the state employee unions, was approved by a state Senate committee and has moved to the full state Senate. A different pension proposal was recently passed the state House. It still remains to be seen if the paycheck-less legislators will finally come up with an actual solution to the real problem.

 

How the Fed sees the economy ...

 

The Federal Reserve's Beige Book, which came out two days ago, was a very important one because it will be the one that the Federal Open Market Committee (FOMC) will have read before they meet in about ten days. No doubt one of the major items on the FOMC agenda will be to decide if the economy is healthy enough to start to reduce the Fed's asset purchases (also frequently referred to as the Fed's bond buying program; the winding down of the program is often called the "taper" as this eventual action is often labeled). The September Beige Book offers a little glimpse into what the FOMC members will be reading to help them make that decision. FYI, it has never been a question of if the taper will occur, but when it will start.

 

Overall, the Beige Book, which is collection of economic and employment points-of-view from business executives throughout the country, saw "modest to moderate" growth throughout the country, with consumer spending rising in most areas around the country. However, "Lending activity weakened a bit, and several Districts reported less-favorable conditions than in the preceding reporting period." Inasmuch as lending activity tends to be a leading indicator in terms of jobs and economic activity, this is a bit troublesome. But on the somewhat positive side, "For most industries and occupations, hiring held steady or increased somewhat" in most areas throughout the country.

 

To see how specific industries and occupations are fairing throughout the country, see our summation of the new Beige Book that excerpts passages relevant to the staffing and IT sectors, developments in major industries that drive the staffing industry, as well as employment in general.

 

The same evening that the Beige Book was published, the president of the Federal Reserve Bank of Minneapolis, spoke at the University of Wisconsin. Considered as one of the more dovish FOMC members, it appears that he will be pushing for the Fed to continue to purchase assets since he said the Fed has, "... plans to buy still more over the remainder of 2013. It has also been targeting a fed funds rate of under a quarter percent for nearly five years. It anticipates continuing to do so at least until the unemployment rate, currently at 7.4 percent, falls below 6.5 percent, as long as inflation remains under control."

 

Our opinion, worded in typical 'Fedspeak': the Fed will continue asset purchases and will start to wind down the program at one point. Yeah, that really doesn't give any specifics, but that's how 'Fedspeak' works. Guess we've been in Washington too long and maybe it's time to move on at, as of now, an undetermined time in the future.

 

What we've been up to lately ...

 

We recently completed the Q2 2013 employment trends report with HigherEdJobs, which is visited by more than 1,000,000 unique visitors every month, mining their job postings data along with an analysis we conduct of relevant BLS data. The report, which helps position HigherEdJobs as the leading source for jobs and career information in academia, unveiled some interesting changes and trends in higher education. This link -- Higher Education Employment Report - Q2 2013 -- will lead you to the full report and a news release.

 

July 2013 (published August 2, 2013) return to top

 

And the debate about the quality of the new jobs is just starting ...

 

As the Administration tries to change the focus of the national discourse to jobs, employment, and the economy, we felt it was timely to put them into historical perspective and examine some of the components more closely. Since the debate about  how beneficial part-time jobs are for the overall economy often bleeds into public policy discussions on temporary help services, the entire staffing industry may want to pay close attention to those discussions.Click on chart to open in a new browser window.

 

These charts show the trends in jobs and part-time employment for periods of the past administration (January 2001 to December 2008, which is in red) and the current one (January 2009 to June 2013, in blue).


In the top chart, we contrast two different measurements, which have two different methodologies that measure two different things, of the employment economy in a single chart. The solid lines are the number of jobs that companies report; the dashed lines are the number of people who says they only work part-time (that is officially defined as "persons who "usually work less than 35 hours per week").

 

Clearly there are more part-time jobs in the first term (plus six months into the second term) of the current administration than for the same period of the former administration. However, there now are a greater number of jobs.
Click on chart to open in a new browser window.
The second chart
adds another metric -- the portion of employment that is part-time. That too is higher for the current administration than the previous one. Actually for the current administration, that average is 19.5 percent, meaning that 19.5 percent of people who are working are usually working less than 35 hours a week. The figure for the same period during the previous administration was 17.5 percent. 


We suspect you'll be hearing a lot more about this and related subjects in the coming months. Some pundits say the rise in part-time employment is due, in part, to employers looking to avoid triggering inclusion and / or penalties under the Affordable Care Act (a.k.a. "Obamacare").

 

Economic history has been rewritten ...

 

Earlier his week, the government (to be technical, the Bureau of Economic Analysis, which is part of the Department of Commerce) changed the way it calculates GDP, or gross domestic product, in order to better reflect the makeup of the economy. Actually, this is not a willy-nilly change; the U.S. is one of the first to adopt a new international standard for calculating GDP. The good news is that this new GDP will not cause a "break-in-series" because the changes will be made all the way back in time -- for the U.S., this means back to 1929. The last time a change this significant was made was back in 1999 when computer software was added to the national accounts. Many of the changes are to better reflect the impact of the "information" economy.

 

For today, the change means a rise in GDP so the economy has been doing better recently that previously reported (and this is sure to set off a firestorm of political finger-pointing). One of the bigger changes is that R&D, which was accounted for as a cost of doing business, is now being accounted for as an investment, and this will result in a little more than a 2.0 percent boost to the economy. At a more micro level, states that host some military R&D will get a big boost to their GDP (especially if it's a small state, such as Maryland, which happens to be where the National Security Agency is located, but that's no secret, is it comrades?). In addition, creative works (movies, TV, books, music, and theatre) are also now incorporated into GDP calculations.

  

The implications of these changes are immense and will take some time to digest. Stability of inflation targets will be re-examined and policy makers will be revisiting policy debates about myriad subjects down to the causes of economic growth.

 

 It also means that moi is updating a boatload of internal databases. Wish me luck.

 

Free for the asking ...

 

We are just getting around to our Spring cleaning (from 2008, or maybe getting a jump on the Spring cleaning of 2014?) and this includes disposing of a lot of reference materials that are no longer relevant to our current work.

 

If someone out there wants it, you can have it gratis (although shipping charges may apply) but here's the catch ... you have to take all of it.

 

What "it" is is a stack of old staffing company annual reports (both U.S. as well as non-U.S.), analyst reports about the staffing market and its players, as well as copies of mainly staffing company presentations at analysts conferences. Most of the materials are from 1999 to 2002. If you want The Steinberg Collection, let me know and we'll work out some method of delivery. Keep in mind that it's about a 3.5-foot stack of printed materials.

 

If we get no takers, it all goes into the recycling bin in a week!

 

June 2013 (published July 5, 2013) return to top

 

So, tell us, how is the economy really doing?


Throughout the year, the Federal Reserve Board publishes an overview of the economy that is colloquially referred to the Beige Book, which is so-named because when it was printed in hardcopy, it had a beige-colored cover. It's an assemblage of comments from business executives -- sort of a very committed, high-powered focus group -- throughout the country collected by the Board’s 12 District banks. It provides powerful insights into how the economy and employment are unfolding on a regional as well as on sector, or industry, basis.


The full report is quite voluminous; the one published last month was almost 18,000 words and nearly 50 pages in length. As a service to our readers, we distill it down to the passages with the most relevance to staffing executives and followers as well as others who find value in the employment information we provide. After reading this report for many years it has become clear to us that the nation’s economy is not a monolith and the trends occurring in certain industries and sectors in one part of the country may be very different than the developments in other parts.


For example, contacts at staffing services in the Fed’s First District (the Federal Reserve Bank of Boston, which covers most of Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont), “report weaker-than-expected demand in recent weeks, with billable hours generally falling towards their year-earlier levels. The dip in activity reportedly reflects a leveling off in the IT sector and downticks in temporary and permanent hiring in the light industrial and manufacturing sectors.” But they went on to say, “There is, however, renewed activity in the healthcare sector, with one contact reporting a substantial increase in demand for ambulatory nurses. In terms of labor supply, candidates with high-end skill sets, such as mechanical and electrical engineers and software developers, remain hard to find.”

In contrast, Beige Book comments from staffing services in the neighboring Second District (the Federal Reserve Bank of New York, which covers part of Connecticut, parts of New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands) were much different. “Two major employment agencies report that hiring activity has been fairly robust, particularly for information technology workers. There is also reported to be fairly strong demand in fields such as auditing and compliance. Large financial firms, typically a major source of jobs in New York City, are reported to be hiring only sporadically. While the temp business remains strong, a growing number of firms are hiring full-time workers. Although qualified job candidates are said to be increasingly hard to find, most employers are still said to be holding the line on compensation, though some are becoming more negotiable.”


You can read our full summation (is that a contradiction of terms?) here. And if you want to receive notification of when the next report is released, which will out in about ten days, and we publish our summation, you can sign-up from our summation of the June Beige Book.

 

And now a real arcane development...

 

Speaking of the "Fed," the 'smart money in Washington' (now, that, most assuredly, is a contradiction of terms!) is that current vice chair Janet Yellen is at the top of the list to replace current chair Ben Bernanke. Now here's an interesting factoid. Dr. Yellen's husband is George Akerlof who, along with Michael Spence and Joseph Stiglitz, won a Nobel Prize in 2001 for their work on how asymmetrical information influences markets; in a nutshell: unequal information (one party knows much more about a product or service than another) can lead to adverse selection and ultimately the collapse of an entire market. Back in August 2005, we wrote how this theory could apply to the housing market and it will eventually collapse, which, as well all know, did (assisted by a lot of garden-variety fraud and greed). Incidentally, housing prices peaked in late 2005 to early 2006 at which point they started to decline with the bubble bursting in late 2006-early 2007.

 

And the flip-side of the theory can also explain the positive contribution that employment and staffing services make to the employment marketplace. When an employer is using a temporary help service (or a recruitment service to locate qualified potential employees) as a means of trying out a potential employee, that action has the ability to reduce the inequality of the information so the potential employer may be able to say "If I didn't use a staffing service, I would know nothing about you (except what you tell me and that could be a big fat lie), but after seeing you in a work environment first-hand, I now know more about you in order to make a better hiring decision."  Employment services improve the efficiency and efficacy of the job market.

 

In addition, the theory helps demonstrate some of the success of job boards by providing more labor market information to all parties involved in the recruitment and employment process. Today, the same reasoning can be used to explain the success that recruiters and employers are having using social / professional networking websites such as LinkedIn.

 

We bring all of this up because it certainly cannot hurt the staffing industry's interests when people in high places understand the beneficial role that employment and staffing services fulfill in the employment economy.

 

May 2013 (published June 7, 2013) return to top

 

Temporary Help Services Reach Record High ...
 

It was bound to happen. Temporary Help Services reached a new high in terms of employment in May surpassing the previous high just more than 13 years ago in April 2000.

 

[Note: clicking on the chart will open it in a new browser window.]

 

As the chart shows, the sector has flirted with making new highs throughout much of 2006, but never surpassing that previous high of April 2000 until last month when it finally did.

 

But, is it really a development to celebrate? After all, temporary help services portion of all nonfarm employment -- i.e. its market share -- is lower, albeit incrementally, now than in April 2000. Why?

 

The world is a much different place today than 13 years ago. Jobs are quite different today than it was back then. Let's briefly -- very briefly -- explore how the nature of jobs has changed in the past 13 years.

 

Two sectors that were fairly important customers to many temporary help services back in 2000 were manufacturing and construction. In April 2000, those two sectors represented a total of 21.1 percent of all nonfarm employment. By 2006, they were only about 16 percent and last month those two sectors were only 13.1 percent of all nonfarm employment. And speaking of manufacturing -- it could again become a major force for the staffing sector -- there is speculation that the "energy revolution" could again make the United States a manufacturing powerhouse. For example, the cost of energy is about six times more expensive in Europe than in the U.S. so German carmaker BMW built a new factory in accordance to state-of-the-art sustainability principles in the U.S. to produce carbon fibers, which is a very energy intensive process. [We explored the apparent return of U.S. manufacturing in this space back in February.]

 

Temporary help services sector has been able to exceed its previous high 13 years ago despite significant shrinkage in two major customers sectors by servicing more sectors and / or broadening their array of services. But, they were not able to grow in terms of their share of the job market since the market share of temporary help services is slightly lower now (1.98 percent) than back in 2000 (2.03 percent).

 

Today, we -- along with a number of staffing industry consultants that we regularly work with -- are seeing that staffing executives are have come to the realization that in order to grow their business, they are not depending upon just temporary help services sector growth but are expanding into new markets, either, geographically or by discipline / service sector, or both.

 

  April 2013 (published May 3, 2013) return to top

 

A quick state-by-state analysis of Temporary Help Services job growth ...
 

As a means of demonstrating to you some of the strategic planning tools we provide to clients, we produced an interesting map for this month's employment report. It shows how temporary help service jobs have grown, or declined, in the first three quarters of 2012 compared to the same time period in 2011.

 

[Note: clicking on the chart will open it in a new browser window.]

 

The state with the greatest growth rate was North Dakota, which was up 21.8 percent followed by Arizona with a growth rate of 16.5 percent. At the bottom of the list was Delaware with a decline of 5.3 percent in the first three quarters of 2012 from the first three quarters in 2011.

 

Nationally, temporary help service jobs grew 7.2 percent in this time period (the maroon color).

 

As you can see, an almost contiguous group of states east of the Mississippi River registered growth rates well above the national rate. Those contiguous states are: Kentucky (up 14.9 percent), Illinois (up 13.7%), Tennessee (up 13.4 percent), and Mississippi (up 12.0 percent); and Nebraska, which is separated from that group, was up 14.1 percent. And a swath of five states from California (up 9.7 percent) to Kansas (up 11.5 percent) experienced growth rates above the national average.

 

We said that this was just a brief overview of our Temporary Help Services Interactive Data Book at the state level (other versions provide granularity down to the county level). A further description of this tool, along with a special discount, is under the Strategic Planning Tools heading in the box below, to the left.

 

Follow-up from last month ...

 

Last month in this space we summarized a recent NPR feature focusing on the federal disability program and how it has become, for some, sort of "permanent unemployment insurance." Last month the Federal Reserve Bank of St. Louis published an article on unemployment insurance program fraud, saying "In 2011, this program cost $108 billion, of which nearly $3.3 billion was spent on overpayments due to fraud." The authors "document a few facts regarding concealed earnings fraud among various income groups. These facts may help focus efforts to deter fraud and to recover overpayments." You can read the entire article here.

 

  March 2013 (published April 5, 2013) return to top
 

Where unemployment, disability, and no job skills collide ...

We came across an interesting news story recently that sheds some light on not just the employment picture. It also touched upon and tied it into a subject that we've addressed before -- that is how the very nature of work has changed and many who lose jobs because the company and / or sector becomes irrelevant are unemployable because they have no relevant skills.

 

The story, which was broadcast on NPR's This American Life two weeks ago and is entitled Trends With Benefits, is not without controversy because it goes further by parking itself in the middle of the intersection of unemployment, disability, disappearing jobs and irrelevant skills.

 

[Note: To examine the charts more closely, click on any of them to open them in a new browser window.]

 

Some of the major points of the story were:

  1. Those on disability end up not considered unemployed nor part of the labor force because they are not actively seeking employment.

  2. The number of those on disability has grown despite more services and assistance for people with disabilities. And this is not necessarily a new development. According to the NPR story, this has been growing for decades.

  3. Since the late 1990s when the economy started to recover from the recession, NPR reports that "about 150,000 jobs [are] created per month. In that same period every month, almost 250,000 people have been applying for disability." [While this is true, the story did not point out that only about 35 percent of those applications are awarded. Today, about 14,098,000, which includes children, are on disability.]

  4. Although there are likely some "fakers" and "cheaters" (as NPR put it), the growth in those on disability can partially be attributed to an aging population ("at they age, more and more of them qualify as disabled") because of health conditions.

  5. And that brings up another important point -- healthcare coverage. With disability, "the government also covers your health care." Therefore, as NPR points out, "...  if your alternative is a minimum wage job that will pay you at most $15,000 a year, and probably does not include health insurance, disability may be a better option." [So, here's an irony: some of those against healthcare reform have done so under the banner of 'stopping a government takeover of the healthcare system' as other government programs passively already are and have been the 'payers-of-last-resort.' Right hand, meet left hand; political pun recognized.]

  6. Some of those are on disability because they may no longer be able to do their former job (or their former job "disappears," which may have also included health insurance, in the occasionally labeled 'new' economy)  that involves physical labor and / or standing all day -- and here's where it probably gets the most controversial -- they are not qualified / have the education or training to do any other kind of work so they end up on disability, "disability has become a sort of de facto welfare for people without a lot of education or job skills," as one of the experts interviewed said. In other words, "Somewhere around 30 years ago, the economy started changing in some fundamental ways. There are now millions of Americans who do not have the skills or education to make it in this country." [Although not stated in this NPR story, others have said that disability has become sort of "permanent unemployment insurance."]

Here is NPR's Trends with Benefits story -- you can listen to it or here's the transcript as well as a web extra. If you are involved in employment services, we strongly suggest that you take the time and listen or read it. It may raise your blood pressure, possibly to the point that you too may be eligible for disability.

 

An interview worth reading (it's with moi!) ...

 

Lately we've been receiving an abnormal amount of requests for blog entries. Unfortunately, we don't have a lot of spare time to exert the necessary effort to develop gratis quality material. However, when the request is simply more than poorly veiled attempt of wanting free editorial material for a website / blog, and shows some real effort put into the request, we'll consider it.

 

One such request recently came from Purzue, a job market portal that, in addition to providing job postings for employers, also enables job seekers to create digital resumes to maximize their exposure to potential employers. They took the time to understand what we are about, how our experience and answers may help their stakeholders and posed some perceptive and provocative questions that made us think. In turn, we provided some thoughtful and insightful answers … the Q&A session can be found here.  

 

  February 2013 (published March 6, 2013) return to top

 

Analysis: Manufacturing rebounding??
 

Much has been said about the need for American manufacturing to come back as a way to rebuild the middle class in this post-recessionary economy. And since manufacturing can be a significant niche for staffing companies, we thought a quick examination of the trend with manufacturing jobs would be in order.

 

Manufacturing, which declined 16.6 percent, or about 2,270,000 jobs, from January 2008 to January 2010, were up 4.3 percent, or about 500,000 jobs, from January 2010 to January 2013.

 

But, let's put it into a little perspective and go back to 1945 when there were about 15,700,000 manufacturing jobs, which represented about 37.4 percent of all nonfarm jobs. In the 1950s, it was 30.4 percent; 27.4 percent in the 1960s, 23.0 percent in the 1970s, 18.5 percent in the 1980s, 14.8 percent in the 1990s, 10.9 percent in the 2000s, and 8.9 percent in the 2010s, which is the current level. Interestingly, although the level had pretty much declined -- there were a few exceptions when it rose -- by a tenth of a percent every few months since 1945, it has remained unchanged at 8.9 percent since August 2009. (Incidentally, some research in the 1980s determined that some of the decline in manufacturing employment was due to manufacturers filling their jobs with workers from the services sector, such as temporary help services. However, the portion was relatively minor and did not materially affect the trend of declining manufacturing employment.)

 

Today, manufacturers would need to add more than 1,750,000 jobs just to get back to pre-recessionary levels assuming the market share of manufacturing jobs is unchanged. Calculated another way, if manufacturing maintains its market share of all nonfarm jobs at 8.9 percent, the economy would need to add a total of about 20,000,000 nonfarm jobs, or nearly 17,000,000 more than it had at the onset of the recession and that is not likely to happen in the foreseeable future.

 

For manufacturing jobs to rebound significantly, they must regain market share and conditions are good. Rising wages offshore and transportation costs are making U.S. manufactured goods more competitive domestically and for close-in markets. In addition, as manufacturing becomes more technically advanced and products more intelligent, there will continue to be growing value in design, engineering, process management, and quality control, all areas in which America excels.

 

And major developments changes such as in the energy sector are helping as well. The abundance and relatively low cost of domestic natural gas due to advance recovery techniques is partially responsible for U.S. manufacturing growth. U.S. natural gas is a fraction the cost of other major global manufacturers (U.S. natural gas is between 20 to 30 percent the cost of natural gas in Japan, Korea, and Germany) and the resultant low cost of electricity it produces, which is a significant cost center for manufacturers. As a result, North American and U.S. manufacturers offer a significant cost advantage and are experiencing a renaissance. No need to look further than your iPad to see that Apple will be onshoring some of its manufacturing. In addition, a Brazilian manufacturer of denim recently opened a factory in Texas to produce denim. Yes, textile manufacturing is apparently returning to the United States, due, in part, to cheap energy.

 

The most recent Beige Book, published two days ago by the Federal Reserve Board, noted positive changes in the manufacturing economy in many parts of the country. (See "Did you catch it?"  below for more details.)

 

At the onset of the recession, manufacturing jobs were 9.9 percent of nonfarm employment. In that scenario, nonfarm employment needs only to grow by less than 4,000,000, which is realistic. FYI, since January 2009, nonfarm employment has grown by about 5,500,000 jobs.

 

Commentary ...

 

Although you may be sick and tired about hearing about it, we would be lax if we didn't offer up a comment about the federal budget sequester. All of the inaction from what has essentially become a dysfunctional Washington reminds us of an old joke (or is Washington the joke, but we digress). We won't relate the joke in its entirely, so here's an abridged version:

 

The body parts were having a meeting to see which was in charge. The brain thought it should be because it does all the thinking; the eyes made its argument because it sees where the rest of them are going, so it should be; the stomach because it provides the energy; the legs because it provides the transportation; and then -- and we're using another word otherwise this email may not make it through spam filters -- the sphincter piped in that it should be in charge. All the other body parts laughed at it, it got mad and closed up tight. Soon the legs were wobbly, the stomach was queasy, the eyes were watery, and the brain got cloudy. All the other body parts agreed the sphincter was in charge.

 

Come on now, do we really have to continue and draw you a chart? Whatever your political leanings, the sphincter is the other guy.

 

Did you catch it?

 

The Federal Reserve Board's Beige Book was published earlier this week included a plethora of findings from Fed researchers about regional developments that are of direct interest to those active in all of the staffing sector's verticals.

 

For example, manufacturers generally reported increased activity and hiring, although this trend was not consistent geographically nor by sector or industry. The Chicago Federal Reserve Bank reported, "a staffing firm noted that demand for temporary employees had improved -- largely based on an increase in demand from the manufacturing sector ..."

 

Our summation of the Beige Book highlights passages of concern to staffing, IT, and employment services and the sectors and industries that drive them.

 

  January 2013 (published February 1, 2013) return to top

 

How did Temporary Help Services perform in 2012?
 

Actually, quite well. With the publication of the annual revisions to U.S. Bureau of Labor Statistics jobs data this month, it's a good time to take a more detailed, but longer view, look at temporary help services.

 

As you can see, 2012 was a good year for temporary help services (click on the chart to open in a new browser window). Last year experienced a 8.6 percent rise in the number of temporary help services jobs. This compares to a 10.6 percent rise in 2011, a gain of 14.7 percent in 2010, and a decline of 22.6 percent in 2009, which was the year the recession ended.

 

As the chart clearly illustrates, the temporary help services sector experienced steeper growth coming out of the most recent recession than the previous downturn. But that is because the recent 18-month long recession (January 2007 to June 2009) was more severe than the previous eight-month one (April 2001 to November 2001).

 

Economy stalls ...

 

By now the news of the 0.1 percent decline in GDP in Q4 2012 is old. But we feel it's important to point out that:

 

bullet

That is the "advance" estimate and is based upon preliminary and incomplete data. When the second estimate is published at the end of this month, we should get a better picture.

bullet

Much of the decline is attributed to reductions in defense spending and also a downturn in what is labeled as private inventories investment (companies not restocking goods), which was driven, to a large extent, by the impasse in Washington. So blaming politicians for the Q4 2012 economic decline is not entirely wrong; actually, it's probably more right than wrong. Also, the severe weather played a part in reducing the amount of economic activity for the quarter.

bullet

Most other economic developments -- employment, consumer spending, and business investment (final sales of computers, which is officially in a different category than consumer spending, added 0.15 percentage point to Q4 GDP) -- remain positive for further economic growth.

 

To follow major economic and employment indicators, visit our Economic Indicators page.

 

Did you catch it?

 

The Federal Reserve's Bank's latest Beige Book, which was published last month, had an interesting comment about how long-term unemployment may be affecting the quality of candidates. Staffing companies could turn that comment around to make some marketing points with clients.

 

An employer remarked about a “great difficulty filling low-skill jobs” defining the problem as more workers are failing drug tests and many leaving soon after taking a job. This employer wonders if the problems could be due to “behaviors developed during extended periods of unemployment.” For the full comment, and in context, take a look at our summation of the Fed’s Beige Book (hint: it’s at the top, in the First District report).

 

2012

  December 2012 (published January 4, 2013) return to top

What sectors are driving new job growth?
 

As a majority of  our readership are involved in employment services in one form or another -- and sectors and industries that are creating new jobs at a heavy clip are of interest to employment services because that highlights opportunities for selling those employment services -- we thought it would be interesting to take a look at two sectors that appear to be generating  large number of new jobs relative to all jobs. Same bit of logic of why famed bank robber Willie Sutton said he robbed banks -- because 'that's where the money is.'

 

This chart (click on it to open in a new browser window) compares the number of new jobs generated in the private sector with the change in the number of jobs for two sectors, which happen to have a lower average wage base than all private sector jobs. This is not saying that higher wage sectors are not also generating new jobs -- just that these two lower wage sectors are simply generating a high volume of new jobs.

 

Although we are not going to get into a detailed discussion of what constitutes a low-wage sector, it should be sufficient to say for this discussion that, on the average, Retail trade wages are about 37 percent less than overall private sector wages and Leisure and hospitality wages are around 57 percent less than overall private sector wages.

 

When comparing the total number of new jobs for these two low-wage sectors -- Retail trade and Leisure and hospitality -- we found that they are generally contributing a larger share of the new jobs in the private sector compared to a few years ago. Generally in the past few months, more than 50 percent of the new jobs have been in these combined two sectors, which was not the case in 2010 nor 2011.

 

Of course, this is the trend nationally; economic and employment trends and conditions vary widely on a local basis. We have a variety of tools and services to help staffing find out what is happening in their local markets and, in the words of that famous bank robber, to find out 'where the money is.'

 

  November 2012 (published December 7, 2012) return to top

 

A seasonal message (with a twist) ...
 

As this is likely our last communiqué before the calendar ticks over to a new year yet again (is it just us, or is this event coming sooner every year?), we wish you and yours a happy and stress-free holiday season as well as a successful and prosperous new year. And although it may only be three simple words plastered on fancy cards this time of year, we cannot think of a more appropriate greeting than "Peace on Earth" at this time.

 

We think that simple message implies helping others and cooperating with them, so to those folks in Washington (we are being polite here with "folks" although "self-serving partisan ideologues" is probably more appropriate), it also applies to you!

 

Did you catch it?

 

The Federal Reserve Board's Beige Book was published last week and it included a plethora of findings from Fed researchers about regional developments that are of direct interest to those active in all of the staffing sector's verticals. Overall, skills shortages persist in many areas of the country especially in IT, engineering, as well as for truck drivers. And some employers -- facing an uncertain economic future into 2013 mainly dominated by the "fiscal cliff" (which is really more of a gradual downward slope should it come to pass, but we digress)  -- are adjusting the way they are staffing such as extending the "temp" portion of "temp-to-perm" arrangements. In a more general vein, the regional economic impact of Hurricane Sandy was also reported.

 

Our summation of the Beige Book highlights passages of concern to staffing and employment services and the sectors and industries that drive them.

 

-----------------------

 

We're taking time off this month from the in-depth examination / commentary on general economic and employment issues normally found in this space as we prepare a host of new client projects for 2013 and take some well-deserved downtime. Do you have any economic and / or employment issues that you would like to see us address in the coming year? Please let us know.

 

  October 2012 (published November 2, 2012) return to top

 

What's really happening with unemployment ...
 

Last month, upon learning that the unemployment rate declined by 0.3 percentage point to 7.8 percent, management guru and former head of GE Jack Welch tweeted "Unbelievable jobs numbers.. these Chicago guys will do anything.. can't debate so change numbers". It should come as no surprise that this statement created a lot of controversy in the media and blogosphere -- and he followed up with a further explanation in The Wall Street Journal. Other musings about the subject attributed the September drop to a 'statistical fluke.'

Are these charts unclear? Click on either to see a larger version.

 

We are not going to weigh in directly on the subject, but while preparing a presentation for a small group of staffing business owners, we came across an interesting development ourselves about the unemployment rate. 

 

You may not be aware that the official unemployment rate is for those 16 years of age and older. However, there are also breakdowns of unemployment by education attainment for those 25 years of age and older. It was when we were looking at those data series, something interesting emerged.

 

The top chart shows what is expected -- the unemployment rate rises during a recession as the the number of jobs declines. At some point, the situation reverses as the recession concludes. And that is what indeed happened for the 25 and older cohort.

 

But when looking at a subset -- those with less than a high school diploma -- as their unemployment rate declined after the recession, so did the number of them employed. There are likely several reasons for what we call a "counter-trend."

 

One is that the apparent "mismatch of skills" -- workers do not have the skills that employers are looking to hire for -- that we've been hearing about may be at play here. However, we don't completely buy into that argument since the "mismatch of skills" can also be defined as 'employers, possibly because of weak economic growth, are not willing to offer wages to attract the types of workers they want.' Let's face it, does anyone believe that employers who are having trouble finding enough "widgetologists" to hire would have troubles if they decided to pay significantly more than they are currently offering?

 

But, these charts could mean that the unskilled jobs that this cohort had before the recession went away (we'll leave it up to the politicians to tell us what happen to those jobs) and have not yet returned, if they ever will. Perhaps, in this aspect, the "new" economy is indeed a different animal (more about the type of animal in the next paragraph) than the previous one and no longer requires the types of jobs this group had before the recession. Therefore, this group needs some retraining for the types of jobs that do exist in the new economy. Maybe that's where some of those 25 and older with no high school diploma are now -- back in school or retraining programs. Maybe some have found 'off-the-books' work.

 

Some may conclude that this population has decided to completely drop out of the workforce, in which case they are no longer counted as unemployed. But, quite frankly, this last reason is most assuredly wrong. In other words, "If you hear hoof beats, why would you assume they are made by zebras?"

 

The main reason that the size of this cohort has shrunk is because there simply are less of them due to the decline in the birth rate in the late 1980s and early 1990s and historic improvements in high school completion rates in the 1990s and 2000s. This is a very visible manifestation of the shifting demographics of the workforce that was initially explored in Workforce 2000 and its companion study Workforce 2020, which we discussed more than six years ago in this space back in April 2006. Those demographic changes are and will have a profound impact for companies who are in the business of providing human capital (e.g. staffing services).

 

What we are certain about is that there is no single answer to this question.

 

  September 2012 (published October 5, 2012) return to top

 

We interrupted our regularly scheduled programming ...
 

last month to bring you our analysis of how -- or if -- the employment situation was influencing state-by-state voter preferences in the national presidential election. If you missed it, you can see that analysis here.

 

And now back to the topic we had planned to address last month.

 

Nationally, temporary help service jobs grew 10.6 percent from 2010 to 2011. Some states grew faster than the national average, many grew at about the national average, and some grew below the national average. However, it's clear that the eastern half of the United States generally did better than the western part of the country. As the saying goes, your actual mileage may vary, so this state-by-state examination may prove to be helpful. (To view a larger map, just click on it.)

 

We present this information as a not-so-veiled demonstration of the value of our two major strategic planning tools, which provide much more detailed information both in terms of geography as well as industry and sector. Want to know the trend for temporary help services in Lake County, FL, or Lake County, IL? We can show you how many temp help jobs there were in every month for the past four years, how many temp help branches there are and how it has changed, and even how much the temporary workers are earning as well as how much payroll the average temporary help services branch is generating. But knowing and comparing your company's performance to the local market trends is only half the story.

 

So we also provide another strategic planning tool that shows the employment trends for all the active industries and sectors at the local level. It can be very helpful to see what industries and sectors are adding jobs, what the average wages are, how many new business have started by industry and sector, etc. -- and all available at the local level in easy to understand charts and tables.

 

For further information, go the Products section of our website, which includes self-paced demonstrations.

 

  August 2012 (published September 7, 2012) return to top

 

Red states, blue states, white states, oh my!
 

Well, here was an interesting exercise.  Is there some correlation between how the unemployment rate has changed in the past year to how that state is leaning in the upcoming presidential election? After all, if we are to believe the media and even the candidates, this election is all about jobs.

 

To determine if a state was red (expected to vote for Romney), blue (expected to vote for Obama), or an all important "swing" state, we examined four different sources, which are all presented in the map (click on it to open in a new browser window). There was surprising agreement among those four sources for most of the states, but occasionally there were differences. When there was a difference, it was not if a state was leaning red or blue but rather the difference is whether it was a swing state or a red or blue state. In those instances, we simply simply said if it was leaning in one direction or the other.

 

Then we examined the change in the unemployment rate in the past year by state (click on it to open in a new browser window). Actually, it fell in most of the country, with the largest drops in Florida, Mississippi, and Nevada, which each declined by 1.8 percentage points. It should be noted that all three were quite high a year ago and still are over the national average. Florida went from 10.6 percent in July 2010 to 8.8 percent in July 2012, Mississippi from 10.9 percent to 9.1 percent, and Nevada was 13.8 percent and 12.0 percent in July 2012.

 

There really doesn't seem to be a discernible pattern. Some states where the unemployment rate has declined are firmly red states while others are blue and another is clearly undecided. Conversely, some states where the unemployment rate has increased are blue and others are red.

 

The point of this exercise was not to predict the winner in November but to see how, if any, the issue of unemployment (and by proxy, jobs) may be having on voter behavior. But, this does not mean that employment prospects have no influence in this election. However, it does appear that employment alone is not the overwhelming determining factor who will be sitting in the Oval Office come January.

 

This analysis suggests that candidate selection is perhaps a bit more complex than is suggested by all the hand-wringing over the jobs report expressed in the media.

 

Conclusion? We don't think there is really a solid connection, but it was a good exercise, nevertheless. Or to quote American inventor Buckminster Fuller, "It was never my intention to design the geodesic dome. I wanted to discover the principles at work in our universe. I could have ended up with a pair of flying slippers."

 

Anyone want a pair of flying slippers? If you don't want them, they are going on cragislist.

 

Did you catch it?

 

Last week, the Federal Reserve Board published its latest Beige Book, which comes out eight times a year (does anyone know a word for eight times a year? saying "the Fed's octuple Beige Book" just doesn't seem correct), and it presented a mixed bag of regional economic and employment trends. If you haven't seen our summation of it that pulls out passages relevant to jobs, staffing and temporary help services, and IT staffing and solutions companies, head over to our summation page, which also includes a link to the full report if you have the appetite to read the whole thing.

 

   July 2012 (published August 3, 2012) return to top

 

How bad are things, really, tell me, how bad is it really ...
 

Not as bad as it may seem, but the cacophony of political static makes it pretty hard to hear. Or maybe we are just getting old and our hearing is going.

 

Let's talk about GDP, or gross domestic product, which is one of the more common and widespread proxies for "the economy." In brief, it's the sum total of all of the economic activity in the country and it is reported on a quarterly basis. (Well, sort of on a quarterly basis. Since some of the data that are used to calculate GDP are reported at different times, it is revised every month as well as annually.) GDP growth in Q1 2012 was 2.0 percent and in Q2 2012 it was up only 1.5 percent. It doesn't look too good, does it? But looks can be deceiving.

 

Oversimplified, GDP is the total of four major components of the economy:

 

bullet

All personal consumption (the value of all good and services sold),

bullet

the value of private investments, domestically,

bullet

the net exports of goods and services (exports minus imports),

bullet

and government consumption and investments.

 

Note that the last item is essentially the public (i.e. government) version of the first two items.

 

Earlier this week, a scholar with the American Enterprise Institute, which is a Washington think-tank and by most accounts conservative and leaning to the right in the political spectrum, recently blogged about the difference between "private-sector GDP" and "public-sector GDP " and reiterated a recent argument that GDP growth would have been higher if the government data were removed.  Government consumption and investments have been negative "averaging -2.88% per quarter over the last two years. In contrast, there have been 12 consecutive quarters of positive growth for private sector GDP averaging 3.07% per quarter in the three years since the recession ended, which is slightly higher than the 2.8% average growth rate in private real GDP over the last 25 years."

 

According to an economist at First Trust Advisor, an investment and advisory service, who tracks public-sector and private-sector GDP, Q2 2012 "grew at a 2.2% annual rate in Q2 and is up 3.3 % in the past year.”

 

This idea that the contraction of government spending is what is holding back economic growth is gaining some traction and was also reported in The Wall Street Journal this week. The AEI blog went as far to proffer the question that "maybe the sub-par recovery has some positive effects of shrinking government?

 

This subject is part of the basis of the current monetary policy debate these days. The big spending cuts and tax increases set to take effect at the start of next year would, in essence, create an even greater decline in the public-sector GDP and this could bring the rest of the economy, that is the private-sector GDP, over the edge with it and splat onto the floor.

 

But it's interesting to note that someone at AEI appears to agree with a Democratic president by asking, "So maybe it’s true that the 'private sector is doing fine' and most of the sub-par economic growth measured by real GDP is simply reflecting the decreases in government spending, and not weakness in the private sector?"

 

There are no easy answers. But even the questions are bound to give some people headaches. Maybe, just maybe, the situation is not as bad as many make it out to be. Whether this is good or bad may only be a 'red herring' -- many consider it necessary to put the economy back into some semblance of balance and create a vibrant private sector, which translates into a strong and health economy.

 

    June 2012 (published June 6, 2012) return to top

 

Are we headed into another recession?
 

We don't think so, but the news and data are enough to keep economic growth below average for some time to come. As the Fed's Beige Book last month recounted (for our summation of it focusing on developments relevant to employment services, commercial and professional staffing, IT staffing and solutions companies, and the sectors they service, click here; you can sign up on that webpage to receive our summation when the next Beige Book comes out in less than two weeks), employers around the U.S. expressed concerned about "uncertainties surrounding the potential impact of developments in Europe."

 

The uncertainty involving sovereign debt issues in Europe is not something that the U.S. economy can ignore. But even with three years into the recovery of the U.S. economy, there's still plenty of domestic developments and trends to cause concern about the immediate  and longer-term future. Gross domestic product (GDP) growth was limited to 1.9 percent in Q1 2012, which was down considerably from Q4 0211 growth of 3.0 percent (Q2 2012 GDP data will be released the end of this month).

 

And don't expect Washington to be able to fix this. Regardless of where you lie on the political spectrum, apparently the other side is totally out of touch with the American people and has the wrong solution.

 

What is clear is that many occupations and industries continue to face skills shortages even in the face of relatively weak economic growth. This trend, along with a "wait-and-see" attitude among many employers, is creating increased demand for temporary help services in many sectors and areas around the country. Uncertainty is not necessarily a bad thing for a sector that has developed an expertise in providing workers on a temporary basis.

 

At a recent Fidelity Investments webinar, the consensus among the presenters was that the U.S. "will lead the world out" of the current economic situation and the housing market "will eventually improve." Although it may not feel like it to us, foreigners find the U.S. especially attractive for investing their money, which includes buying U.S. real estate, especially in light of the shaky situation in Europe and slowing growth in China. But this is not a new phenomenon.

 

For those who were around in the 1970s and 1980s, recall that foreign investments in the U.S. soared as this country offered the some of the best global investment opportunities. Let's go back further. A significant part of this country's early history was a result of a foreign investment. According to Gale Encyclopedia of U.S. History, the basis of the English settlement of Jamestown, VA, was the result of an investment of some London stockholders in the early 1600s who hoped the settlers would discover gold and silver. If any of you were around then and can confirm this, please let us know.

 

Or in the words of Yogi Berra, "It's like deja-vu, all over again."

 

It's going to be a long, hot summer (already is in many parts of the country), with many different opinions and heated exchanges on how to best address this country's economic malaise.

 

We think a quote from another Yogi, Yogi Bear, is most appropriate, "Another golden rule is: don't lose your cool." And let us not forget that this Yogi, is "smarter than the average bear" so we consider this good advice, even coming from a cartoon character. Too bad we can't say that about our politicians .. well, we could say it, but it just wouldn't be true!

 

You can get better strategic information than an international staffing company ...

 

This is a slightly edited version of an e-mail we received from a global staffing company with its own extensive in-house research capabilities as a result of our commentary last month that included a map of the market share of temporary help services by state:

Hey Bruce,

I got a quick question for you. How were you able to calculate the penetration rate by state? From my understanding, the [government] does not publish ... industry by state ... Maybe this is a glitch in our system, or in the recent [government data].

Nonetheless, any insight from you would be much appreciated.

Keep up the awesome job.

Kind regards,

a fellow analyst.

This was our response:

Hello [name redacted],

Nice to hear from you ... I really appreciate hearing how my work is, well, appreciated.

I would love to help you, but I'm sure you understand that access to that information is limited to our on-going clients on a subscription basis.

Incidentally, penetration rate trend information is included in our Temporary Help Services Data Book strategic planning tool. My clients have found it very helpful to see the multi-year trend for temp help penetration rates not just at for a state, but at local market level as well. I recall one specific case a year or two ago. The client found it especially helpful to see that although the TH penetration rate was declining in a particular state, the tool was able to identify that the THS penetration was growing in a specific metro and city in that same state and targeted that market for expansion. Then with our companion Employment Tracking Tool, we were able to identify several sectors in that market to concentrate their marketing efforts.

Best regards,

Bruce

For more information about our strategic planning tools, click here.

 

    May 2012 (published June 6, 2012) return to top

 

So, what 's your market share? ...
 

At the industry level for temporary help services, most consider "market share" as the portion, or percentage, of all jobs that are provided by temporary help services. Last year, it was about 1.8 percent and in Q1 2012, it's approaching 1.9 percent. This tells us the sector is growing in a national basis.

 

Click on chart to open a larger version in a new browser window,

The market share that temporary help services has varies greatly by market and is dependent upon a variety of factors. We thought you would like to see what market share, also referred to as the penetration rate, looks like on a state-by-state basis (click on the map for a larger version that will open in a new browser window). As the map shows, it varies immensely throughout the country from a low of about 0.3 percent in Alaska to a high of more than 3.0 percent in South Carolina. Although we only present temp help market share by state here, the penetration rates go much higher in many metropolitan areas and county-wide markets. We provide that information -- and much more -- through our exclusive strategic planning tools.

 

Interestingly, but not surprisingly, one of the highest average weekly wages for temporary help jobs is in Alaska at almost double the wages in South Carolina. Yes, we also are able to drill down and see what wage trend for temporary help services is at the metropolitan as well as county levels. Great information for staffing company executives to see evaluate a potential market as well as to discover what strata of the market they are currently serving. And, our tools also look at the local jobs economy by sector or industry, so our analyses additionally provide information on the employment and wage trends at the market level.

 

If you want to see what temporary help employment trends look like over several years in the markets you serve -- or are thinking about expanding to -- that information is available through our tools designed specifically for the staffing industry. For more information about, go to our products page.

 

While we are talking about trends throughout the country ...

 

Next week, the Federal Reserve Board will publish its Beige Book and we will publish our summation of it focusing on remarks relevant to jobs and employment in general, staffing services, IT services and the sectors that staffing companies focus on. Only those who have signed up to receive the notification will be informed when our summation is published. If you want to be included on that list, just go to our current Beige Book summation from April and fill out the form at the top of the page. There is no charge or either the notification or access to the actual summation.

 

    April 2012 (published May 4, 2012) return to top

 

The Beveridge Curve is heading the wrong way ...
 

A couple of weeks ago one of our editorial advisory members mentioned that some economists think the Beveridge Curve has shifted outward and to the right since 2007, which is not good (no political implications).

 

Developed in the late 1950s by two British economists (neither of whom were named Beveridge, but we digress), the Beveridge Curve, according to Famous Figures and Diagrams in Economics, is an attempt to measure "excess demand in the goods market for the guidance of Keynesian fiscal policies. ... Since excess demand is unobservable ..."   Huh? The actual idealized curve is a "rectangular hyperbola" -- double "say what"? And, you are just going to have to trust us when we say, the mathematical formula for drawing a Beveridge Curve is a triple 'they-have-got-to-be kidding", squared.

 

Its basic concept of comparing job vacancies to unemployment seemed intriguing to us, albeit with a fairly obvious relationship, which would be an inverse one. Unemployment should go down as vacancies rises and vice-a-versa, which is a phenomenon that every staffing professional has likely experienced firsthand. But the question remains if the relationship between vacancies and unemployment in the current economic cycle is different than in the past. So we went about plotting those two measurements and the resulting chart is displayed above (if the chart is unclear, click on it to open in a new browser window). Let's just call what we came up with as "Steinberg's Non-Wonky Beveridge Curve."

 

We think our chart shows in dramatic fashion how severe -- and different -- this past recession has been and how the recovery still has some serious distance to travel before we are in a "normal economy," which is the area between the two recessions represented in the chart. And there are a bunch of other interesting clues how this past recession and subsequent recovery is fundamentally different than "normal."

 

Although the vacancy rate has finally recovered to the level for the period after a recession, clearly the unemployment rate has not. As we've discussed in this space many times before, but the persistent high unemployment rate -- despite an acceptable number of vacancies in a post-recessionary period -- could likely be due to a mismatch between those job openings and workers' job skills. The lack of enough qualified people to fill a rising number of job openings is being widely reported throughout the media and indeed is a phenomenon that staffing companies are seeing today. But that also means it's an opportunity for staffing companies who have figured out how to fill those openings.

 

We found it particularly interesting how the two series definitively moved in opposite directions before the recession officially started. Let us know what the chart says to you.

 

2020 is only eight years away ... this free report will help you plan to get there

 

Our special supplemental standalone report on the future nature of jobs to the year 2020, which includes a focus on what the future holds for staffing and employment services, is still available. And because we know our audience tend to the analytical, the eight-page report is packed with charts and tables of data. The report also includes lists of the fastest growing industries/sectors as well as types of jobs in order for staffing executives to help in their strategic planning for the immediate future. If you would like a copy free of charge, just shoot us an email and we'll send the link to you.

 

  March 2012 (published April 6, 2012)  return to top

 

And now, time for something a little different ...
 

To keep our monthly commentary fresh and topical, we are doing away with it this month.

 

Its absence is not because there aren't a plethora of interesting and relevant topics. It's just that we have a subject that can't really be addressed in this limited space.

 

This month we are publishing a brief standalone report on the future nature of jobs that includes a focus on what the future holds for staffing and employment services. And because we know our audience (or stakeholders for those of you who faithful to the latest corporate jargon) tend to the analytical, the report is packed with charts and tables of data. Here's a sample to the right that shows how the percentage of different types of jobs are provided by staffing services. The report also includes lists of the fastest growing industries/sectors as well as types of jobs in order for staffing executives to help in their strategic planning for the immediate future.

 

If you would like a copy of the eight-page report free of charge, just shoot us an email and we'll send it to you. Alternatively, if you can't wait, just visit our Twitter page. We tweeted about this report yesterday and the tweet includes a direct link to the report. FYI, you do not have to have or open a Twitter account to see our tweets or download the report via Twitter.

 

Important service notice (change) ...

 

Next week, the Federal Reserve Board will publish its Beige Book and we will publish our summation of it focusing on passages relevant to jobs and employment in general, staffing services, IT services and the sectors that staffing companies are focused upon. In the past we have sent a notification of our summation to everyone who receives this monthly employment report, but will not do that next week. Only those who have signed up to receive the notification will be informed when our summation is published. If you want to be included on that list, just go to our current Beige Book summation from February and fill out the form at the top of the page. There is no charge or either the notification or access to the actual summation.

 

  February 2012 (published March 9, 2012)  return to top

 

Will the economy continue to add jobs in 2012?
 

Last month, we dove into the details of the unemployment rate and received a lot of supportive feedback. This month we tackle a more complicated and somewhat controversial issue, but it may shed some light on if and how job growth may develop this year. [Spoiler alert: the number of new jobs should continue to grow in 2012.]

 

We took a detailed examination of the relationship between productivity, jobs, and unemployment and the timing of economic cycles. While the relationship between productivity and employment was a controversial economic and political issue long before Messrs. Marx and Engels published their Manifesto, but we will discuss only a specific portion of the relationship between those components.

 

There are many ways to measure productivity, but we took a closer look at output per person, which is probably more relevant to employment services and staffing executives than other measurements such as output per hour, unit labor costs, etc. We compared output per person to employment to temporary help jobs and looked at what happened to those relationships during and after a recession.

 

Essentially by definition, employment declines during a recession But what about productivity? One might suspect that at least labor-intensive companies that manage their staffing levels in real-time, productivity -- or output per person -- may not change that much if they are able to match output to staffing levels. In fact, that is what happened in both the relatively short 11-month recession of 2001 and the first part of the 18-month Great Recession of 2008-2010. Actually productivity incrementally rose in the second three-month period of the 2001 recession and after dipping in the first three-month period of the 2008-2009 recession, rose back to the level it was when the recession started in the next three-month period before eventually declining in the second half of that recession.

 

Here's a chart showing the relationship between output per person, employment, and temporary help jobs.

And while employment continued to decline after both recessions were declared over before stabilizing and eventually increasing, productivity was up in the very first three-month period at the conclusion of both recessions. [Changes in productivity likely are part of the 'formula' used to declare changes in the economic cycle.]

 

There are a few reasons for productivity and employment moving in different directions.

  1. A Darwinian marketplace. Firms who failed to take risks in investing in technologies, processes, and business practices to make themselves more productive are weeded out by the end of the recession. In the early stages of a recovery, the less efficient firms that are still around are laying off workers faster than more efficient ones can add new workers. 

  2. Self-preservation by workers. Seeing coworkers and neighbors laid off, workers gladly put in additional uncompensated hours to ensure their continued employment.

  3. Risk-adverse management. Just as management failed to see the warning signs and held onto employees after sales first began to decline when the recession began, they are equally reluctant to respond to the first up tick in new orders or sales and add workers. This factor was especially during the current recovery relevant  given the false starts the economy exhibited in 2010 and 2011. Firms first offer existing employees overtime to meet early increases in demand and / or bring in temporary workers. When they are convinced that these gains are sustainable, they hire new workers.

  4. Competition for resources. The industries and jobs rising out of the ashes of a recession are often in different markets and different regions than those that drove the economy before the decline. To fill new jobs, workers need to acquire new skills or relocate. As employers dip deeper into the local labor pool they find they need to provide more training and look farther a field for the skills they need. Because these additional workers are marginally more expensive to acquire, there must be marginally greater increases in sales to justify their being hired.

  5. A shift within labor-intensive and capital-intensive industries and from lower-skilled functions to higher skilled functions. The labor-intensive industries (retail, hospitality, real estate, and construction) were among those that suffered the worst job losses However, other the labor- intensive sectors (healthcare, education, and professional services) are adding jobs and these sectors employ some of the most highly educated workers in the labor force, with significantly higher output per worker. Capital-intensive industries, especially manufacturing that is accounting for a significant share of the jobs created in the last three quarters, require higher output per new employee because with each new hire there are additional capital costs. The higher output per worker will continue to outpace job growth, much to the consternation of policymakers trying to lower stubbornly high unemployment rates.

     

In brief, after a recession is officially declared over, employment continues to decline but productivity rises immediately. Companies improve efficiency during a recession because they have to in order to survive so when demand begins to return they can produce more product or services with no corresponding increase in jobs. And, because they are more efficient, they may be able to cut jobs as demand picks up and produce more so the productivity measurement continues to rise.

 

Eventually, it becomes more difficult to squeeze more products or services out of the same size labor force, so they begin to hire more people (see number three, above). The productivity measurement continues to rise but not the faster rate immediately after a recession.

 

When the economic recovery is underway, demand for products and services continues to grow. So, in order to produce more, they must bring in more people and employment continues to rise.

 

And that's where we believe that's where the current economy cycle is at the present moment. The sharp rise in productivity after the conclusion of a recession is past and is increasing at a normal clip. The employment decline and subsequent weak job growth that continued after the recession was declared over looks like it has ceased. Productivity and employment should continue to rise as long as the current demand levels for the economy's products and services continue.

 

Of course, the economic situation throughout a good deal of Europe is not good and has the potential to slow down the U.S. economy that has only recently picked itself off the ground and started to move again.

 

  January 2012 (published February 3, 2012)  return to top

 

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.

 

2011

  December 2011 (published January 6, 2012)  return to top

 

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.

 

  November 2011 (published December 2, 2011)  return to top

 

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.

 

October 2011 (published November 3, 2011)  return to top

 

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?

 

September 2011 (published October 7, 2011)  return to top

 

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.

 

August 2011 (published September 2, 2011)  return to top

 

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."

 

July 2011 (published August 5, 2011)  return to top

 

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:

 

bullet

Structural changes in the economy.

bullet

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.)

bullet

Workers who are available for work not having the proper skills, education, experience, etc.

bullet

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.

bullet

Companies are more willing to invest in capital improvements to improve efficiency in order to complete in the global economy rather than human capital.

 

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.

 

June 2011 (published July 8, 2011)  return to top

 

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.

 

May 2011 (published June 3, 2011)  return to top

 

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.

 

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.

 

March 2011 (published April 1, 2011)  return to top

 

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.

 

February 2011 (published March 4, 2011)  return to top

 

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.

 

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.

 

2010

December 2010 (published January 7, 2011)  return to top

 

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.    

 

November 2010 (published December 3, 2010)  return to top

 

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!

 

October 2010 (November 5, 2010)  return to top

 

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.

 

September 2010 (October 8, 2010)  return to top

 

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.

 

August 2010 (September 3, 2010)  return to top

 

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?

 

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.

 

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."

May 2010 (June 4, 2010)  return to top

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.

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.

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.

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.

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

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.

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.

October 2009 (November 6)  return to top

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."

September 2009 (released October 2)  return to top

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!

August 2009 (released September 4, 2009)  return to top

"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.

July 2009 (released August 7, 2009)  return to top

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.

June 2009 (released July 2, 2009)  return to top

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.

May 2009 (released June 5, 2009)  return to top

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!

April 2009 (released May 8, 2009)  return to top

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.

March 2009 (released April 3, 2009)  return to top

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!

February 2009 (released March 6, 2009)  return to top

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.

January 2009 (released February 6, 2009)  return to top

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!

2008

December 2008 (January 9, 2009)  return to top

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.

November 2008 (December 5, 2008)  return to top

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.

October 2008 (November 7, 2008)  return to top

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.

September 2008 (October 13, 2008)  return to top

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.

August 2008 (September 5, 2008)  return to top

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. 

July 2008 (August 1, 2008)  return to top

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.

June 2008 (July 3, 2008)  return to top

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.

May 2008 (June 6, 2008)  return to top

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.

April 2008 (May 2, 2008)  return to top

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.

March 2008 (April 4, 2008)  return to top

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.

February 2008 (March 7, 2008)  return to top

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.

January 2008 (February 1, 2008)  return to top

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.

2007

December 2007 (January 4, 2008)  return to top

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.

November 2007 (December 7, 2007)  return to top

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.

October 2007 (November 2, 2007)  return to top

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.

September 2007 (October 5, 2007)  return to top

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.

August 2007 (September 7, 2007)  return to top

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.

July 2007 (August 3, 2007)  return to top

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?

June 2007 (July 6, 2007)  return to top

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.

May 2007 (June 1, 2007)  return to top

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.

April 2007 (May 4, 2007)  return to top

"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.

March 2007 (April 6, 2007)  return to top

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.

February 2007 (March 9, 2007)  return to top

"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.

January 2007 (February 2, 2007)  return to top

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.

2006

December 2006 (January 5, 2006)  return to top

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!!!

November 2006 (December 8, 2006)  return to top

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.

October 2006 (November 2, 2006)  return to top

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.

September 2006 (October 6, 2006)  return to top

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.

August 2006 (September 1, 2006)  return to top

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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