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Archived Employment Newsletter Analyses
(all past analyses are posted below starting in August 2006 are posted)

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.

2022

January 2022

February 2022

2021

December 2021

June 2021

November 2021

May 2021

October 2021

April 2021

September 2021

March 2021

August 2021

February 2021

July 2021

January 2021

2020

December 2020

June 2020

November 2020

May 2020

October 2020

April 2020

September 2020

March 2020

August 2020

February 2020

July 2020

January 2020 (not published)

2019

December 2019

June 2019

November 2019

May 2019
October 2019 April 2019

September 2019

March 2019
August 2019 February 2019
July 2019 January 2019
2018

December 2018

June 2018

November 2018

May 2018

October 2018

April 2018

September 2018

March 2018

August 2018

February 2018

July 2018

January 2018

2017

December 2017

June 2017

November 2017

May 2017

October 2017

April 2017

September 2017

March 2017

August 2017

February 2017

July 2017 January 2017
2016

December 2016

June 2016

November 2016

May 2016

October 2016

April 2016

September 2016

March 2016

August 2016

February 2016

    July 2016

January 2016
2015
December 2015 June 2015
November 2015 May 2015
October 2015 April 2015

September 2015

March 2015

August 2015

February 2015
July 2015 January 2015
2014

December 2014

June 2014

November 2014

May 2014
October 2014 April  2014
September 2014 March 2014
August 2014 February 2014
July 2014 January 2014
2013

December 2013

June 2013

November 2013

May 2013

October 2013

April 2013

September 2013

March 2013

August 2013

February 2013
July 2013 January 2013 

2012

December 2012 June 2012

November 2012

May 2012
October 2012 April 2012
September 2012 March 2012
August 2012 February 2012
July 2012 January 2012
2011
December 2011 June 2011

November 2011

May 2011

October 2011

April 2011

September 2011

March 2011
August 2011 February 2011
July 2011 January 2011
2010
December 2010 June 2010

November 2010

May 2010
October 2010 April 2010
September 2010 March 2010
August 2010 February 2010
July 2010 January 2010
2009
December 2009 June 2009
November 2009 May 2009
October 2009 April 2009
September 2009 March 2009
August 2009 February 2009
July 2009 January 2009
2008
December 2008 June 2008
November 2008 May 2008
October 2008 April 2008
September 2008 March 2008
August 2008 February 2008
July 2008 January 2008
2007
December 2007 June 2007
November 2007 May 2007
October 2007 April 2007
September 2007 March 2007
August 2007 February 2007
July 2007 January 2007
2006
December 2006 September 2006
November 2006 August 2006
October 2006  

 

2022

February 2022 (posted February 4, 2022) return to top

 

Con Te Partiro...
 

Not to bury the lead, this is my last newsletter ... I'm retiring.

 

But, why use a few words, when many more will do?

 

In December 2002, I left Staffing Industry Analysts not necessarily to strike out on my own, but to take a breather to see what else life had to offer. Eventually, a few projects came in over the transom, I started this newsletter, and eventually secured a few clients. The first edition of this newsletter was published on September 1, 2006, as I lamented that Pluto had been demoted from planet status by a consensus of astronomers. In that first newsletter, I drew a parallel to what could be considered "normal job growth" and what to expect from the labor market should also change, mainly due to a shift in population demographics.

 

So it's been almost 20 years and who is going to give me a gold watch? Honestly, who needs one today and I have my father's a 25-year gold watch that he received in 1967. I don't wear it but it still keeps excellent time if  I wind it, but I digress.

 

I am not participating in what is currently being called the "Great Resignation" caused by the pandemic because my decision was pretty much determined when I was born. As I mentioned in that first newsletter there was massive population shift expertly documented nearly two decades earlier by U.S. Department of Labor’s Employment and Training Administration, along with the Hudson Institute landmark study of the changing American workforce "Workforce 2000: Work and Workers for the 21st Century" published in 1987. A  follow-up report "Workforce 2020 -- Work and Workers in the 21st Century" was published in 1997.

 

IMHO, the pandemic has been a catalyst to the evitable.

 

When predicting workforce and labor trends in "Workforce 2000" for the following 15 years and presenting possible public policy issues that would arise, the authors discussed, among other matters “…Improving the dynamism of an aging workforce … Reconciling the needs of women, work, and families … Integrating Blacks and Hispanics fully into the workforce … Improving workers' education and skills.”
 

BTW, there is a recent movement by some scientists arguing that Pluto should be reclassified as a planet. What is old is again relevant in both cosmology and labor market trends. Still don't accept this premise? Last Friday Tears for Fears appeared on one of the late night talk shows with their 1985 classic "Everybody Wants To Rule The World". Apparently -- and I fact-checked this -- the original phrase was "everybody wants to go to war".

 

Actually, I lied a little -- I'll continue to look at economic and labor market trends that interest me and will periodically publish those thoughts via my Twitter account. Furthermore should an interesting project/s -- preferably one-off or possibly ongoing -- come across a different transom since I now live in the mountains of western North Carolina, I'll consider it.

 

As for my more immediate plans, time to go hiking with the pup.

 

Bruce out.

 

 

 

 

 

 

[This space intentionally left blank.]

 

January 2022 (posted February 4, 2022) return to top

 

Is there really a shortage of workers or workers who want to work ...
 

Granted, the above headline is a bit redundant, but this month's analysis could be a different take on this subject that has not been widely reported. And this part of the labor force is a meaningful portion of the temporary help workforce, so this discussion could have important implications to the staffing sector.

 

Labor force, a.k.a. workforce, data are normally reported as seasonally adjusted numbers that take into account the -- well -- seasonally ups and downs. But, not seasonally adjusted data are raw numbers and may reveal more real ground level trends. Although the trendlines rarely run differently between the seasonally and not seasonally adjust data, the actual numbers differ. Not seasonally adjusted data are examined for this discussion.

 

Although multiple job holders are not necessarily a very large part of the total number of employed persons, they are not an insignificant portion at around 5 percent -- and that ratio is less now than prior to the pandemic, which brings us to the discussion at hand.

 

From January 201 to February 2020, before the pandemic started to affect employment, multiple jobs holders were 5.1 percent of the total number of employed persons. In April 2020, the first full month the pandemic affected employment data, that ratio dropped to 4.0 percent and slowly began to rise to 4.8 percent by December 2021. (Because this analysis is prepared prior to the release of the current employment situation, it lags by a month.)

 

In raw numbers, the number of employed persons was only 983,400 less in December 2021 than the average of the 26-month period prior to the pandemic. For multiple job holders, there were 465,500 fewer in December 2021 than prior to the pandemic.

 

Perhaps one of several reasons there are fewer multiple job holders and hence people available for temporary help job openings could be because of wage increases at the lower end may be outpacing inflation, at least for the time being.  Maybe those at the lower end of the wage scale do not find it necessary or have sufficient incentive to work multiple jobs. There is no single right answer or over encompassing reason covering all situations.

 

2021

December 2021 (posted January 7, 2022) return to top

 

Dissecting a tangle of squiggly lines ...
 

This month we present data that -- technically speaking -- probably shouldn't be combined. So shoot me. But, in our ignorance, we may have stumbled across something that is very telling regarding the state of the labor market.

 

This month we look at the ratio between two different data programs / surveys that measure very different aspects of the employment market that also use very different methodologies. Although we are not quite doing something as bizarre as comparing the price of tomatoes in Cleveland and the average number of children in a London household, but using such divergence data sources can be sketchy. And don't get us started on how wrong it is to present a chart with so many squiggly lines to draw any conclusions! It may be helpful to click on the chart to open a larger of this chart to see a trend or two.

Now that we have taken the liberty of pointing out the error of our ways, let's see how the labor market has improved since the depth of the pandemic and possibly show where it is now but still not back to where it was before the virus infected the economy.

The Job Openings and Quits data come from a survey of employers / businesses. (It is published on a two-month lag that is why the latest data is for November.) Job Openings are pretty much self-explanatory. The Quits number, on the other hand, is a subset of Separations and Quits can better be labeled as voluntary quits. Quits are considered as an indication of labor market strength -- people voluntarily leave a job because that may have already have another job waiting or feel the job market is strong enough that they can quit and find another job within their own timetables.

 

The number of unemployed persons come from a survey of households querying if household members are available to work, want a job, and are actively seeking one but have not been able to secure one.
 
And now we answer the question how the pandemic affected the ratio between these two different data series.

To help readers interpret the chart above, here are some actual numbers: For those who where unemployed for less than five weeks in January 2018 there were 2.9 jobs for each unemployed individual; by April 2020, the first month that the pandemic impacted the employment situation, that ratio fell to 0.32, or less than one job for every unemployed person that skyrocketed that month. By November 2021, that ratio was 5.4, or 5.4 jobs for every single unemployed person, that largest number since at least January 2018.

Quits performed similarly. For the same cohort -- those unemployed for less than five weeks -- there were 1.3 quits for every unemployed person in January 2018. In the pandemic bomb of April 2020 the ratio had sunk to 0.15 and by November 2021 it was 2.05, or 2.05 quits for every unemployed person.

 

Clearly there are more openings and quits per unemployed person now as well as before the pandemic, which we fairly arbitrarily define as the period from January 2018 to February 2020, inclusive, for the cohort of those unemployed for less than five weeks as well as the next group that are those unemployed for five to 14 weeks. For those unemployed for 15 weeks and over, there were only slightly more job openings now (3.4) than pre-pandemic (3.3).

But for those unemployed for a longer period of time -- 27 weeks and longer -- the relationship reverses. There are fewer openings and quits pre pandemic compared to November 2021 for these longer-term unemployed people.

It is no great insight to conclude that the longer people are unemployed, there are fewer jobs available to them, as well as fewer quits, than for those who are unemployed for a shorter periods of time. No surprise that the longer a person is unemployed, there are fewer opportunities possibly because employers are less willing to hire them because of a lack of skills, work history, and / or work ethic.

Or in the words of one of the members of Team Steinberg who review these opening analyses before publication, "An elegant proof of the obvious."

 

November 2021 (posted December 3, 2021) return to top

 

How jobs have returned ... and how much further they have to go to get back to where they were ...

We started this year with our report of the December 2020 employment situation looking at how some staffing-centric industries / sectors have recovered -- or had started to recover -- from the massive  loss of jobs due to the pandemic. As we close out the year, we thought another follow-up to these trends are in order. Keep in mind that this section of our monthly employment report is prepared prior to the publication of the November employment and jobs data so this analysis runs to October.

 

[Note: depending upon how well your browser and / or email program renders this chart, it may be difficult to view; we suggest you click on it to open a larger version.]

 

Total nonfarm jobs were down only 2.9 percent from its peak but up 14.0 percent trough by October 2021. Private-sector jobs trended similarly and 2.5 percent from its peak and up 16.7 percent from its trough.

 

All but one of the limited sectors examined were still down in October 2021 from their respective peaks of February 2020 sans one -- computer systems design and related services is up 50,600 jobs, or 2.3 percent.

 

Food services and drinking places were the hardest hit by the pandemic in terms of the number of jobs that declined nearly fifty percent from peak to trough and was still down 6.4 percent, or around 784,000 jobs, in October 2021 from its February 2020 peak but is up 82.0 percent from its April 2020 trough.

 

Clearly, temporary help services was hit very hard in April 2020 with a 33.9 percent decline from its peak two months earlier in February 2020, and by October 2021 it was up 42.4 percent from its April 2020 trough. But temporary help services was still down 5.9 percent in October 2021 from its February 2020 peak, so there appears to still have some room to grow.

 

The number of workers on temporary layoffs or permanently lost their jobs have still not returned to pre-pandemic levels ...

 

Although the first affect of the pandemic on the employment and jobs data may had first been seen in March 2020, the major impact did not occur until the following month. This is because the survey week is mid-month.

 

Regardless, the pre-pandemic levels of these two metrics have pretty much returned to their pre-pandemic relationship, but not levels.

 

For the past six months (May to October 2021), the average number of workers on temporary layoffs was almost 1,384,000 and those who report they permanently lost their jobs was just a little greater than 2,702,000. For the same six-month time period in pre-pandemic 2019, just over 830,000 workers said they were on temporary layoff and 1,303,000 said they permanently lost their job.

 

Interestingly, the ratio between these two sets of workers -- and it should point out that these statuses are self-reported so those who report they were on temporary layoff may have, in reality, been permanently laid off or vice-a-versa, which is why we used the words "report" and "said" -- was 1.6 in 2019 meaning for every one workers on temporary layoff, there were 1.6 who permanently lost their job; By October 2021, the ratio had risen to 2.0.  A  preliminary conclusion is that employers are lowering their permanent staffing levels and the reasons for that development are numerous -- more numerous than will be addressed here.

 

October 2021 (posted November 5, 2021) return to top

 

The Great Resignation continues -- or does it and is it really something else?

 

Job openings are self-explanatory, but quits may require some explanation. Quits are voluntary and many consider this metric as a sign of labor market strength -- people quit their jobs when they optimistic about their prospects for getting another job. The adverse is also true -- as the number of job openings fall, people will hold on to their jobs so there will be fewer quits. Both measurements tend to move in unison.

 

Obviously as the pandemic hit the employment market in April 2020 when job openings dried up, workers did not quit their jobs because there were no other jobs to go to.  (It's interesting to note that the number of job openings was fairly steady from around mid-2015 to mid-2017, but we digress.)

 

As employers fail to fill their job openings, the number of openings rise, which can easily be seen -- and dramatically -- starting in December 2020. Although the movement with the number of quits is not as sharp, the ratio between quits and openings is. Although the changes with one month of data do not necessary mean a new trend, it is interesting to note that in August 2021 (latest available data) as the number of quits continued to rise, the number of job openings declined along with the ratio between those two measurements. FYI, these data are from the U.S. Department of Labor / Bureau of Labor Statistics program JOLTS (Job Openings and Labor Turnover Survey); for the full news release of the data, go here.

 

Are employers giving up looking for workers to fill their openings, actually filled some of their job openings, have accelerated their automation / technology efforts to require fewer workers, or have workers who may have quit found more likeable / suitable employment? The reality is most likely a combination of these reasons, with a few more unstated.

 

When will job growth and people return to jobs according to so-called normal trends?  "A long time ago in a galaxy far, far away" in our very first employment report of August 2006, we offered a clue of what "normal" job growth may realistically look like making reference to two seminal studies, the first published in the late 1980s and the follow-up ten years later. Six years later in October 2012, we again referred to those studies how shifting demographics was creating and will continue to cause a labor shortage.

 

The current pandemic pushed a lot of people out of the workforce -- many of whom do not feel it is worth the personal capital to return to a workplace. In the immortal words of Pogo, "We have met the enemy and he is us."  Incidentally, that phrase was coined as an anti-pollution slogan for the first Earth Day in 1970. Guess we've come full circle. Mic drop.

 

September 2021 (posted October 8, 2021) return to top

 

And the results are ...

 

Last week, and several times this week, we surveyed our subscribers asking if and how the ending of the enhanced unemployment benefits impacted their staffing operations. Although we did not get the number of responses we hoped for, there were enough to report them back to you. And the comments we received were very enlightening. To review the survey questions, go here.

 

Geographically, there was a broad cross section across the country with some responses reporting back at a local market, state, regional, or national levels, which made up just less than a quarter of the responses. And more than 90 percent of the respondents knew when the enhanced benefits ended, it is a bit disturbing that the remaining 9 percent did not considering the business they are in.

 

As for the market segments of the responses, for which multiple responses were accepted, it was pretty much all over the board, with almost 75 percent in clerical / office, 50 percent in warehousing, about 45 percent in light industrial and the same amount in customer service including call center -- all the rest of the categories were under 30 percent. Because of the small number of responses per market area, it was not possible to draw even bad or inaccurate conclusions regarding how ending enhanced U.I. benefits impacted any market or staffing service segment.

 

Almost two-thirds did not see an increase in applicants or inquires about available jobs, but 14 percent did and there were three write-in votes: one for "Yes, but it was only temporary," one for "Yes, but more of a trickle than a wave," and one for "We saw more activity a few weeks before the benefits ended and ongoing."

 

When queried about what type of arrangements that new applicants or inquiries were looking for, it was confirmed almost two-thirds percent of the respondents did not see an appreciable increase in applicant or inquiries. However, a solid third were interested in direct hire opportunities, followed by temporary-to-hire at under 15 percent, and about 10 percent looking for temporary jobs only. There was a write in for "Remote" and another "Saw an increase, but not sure tied to unemployment. They didn't care, they just wanted a job."

 

Although nearly 60 percent did not see an improvement in their fill rate after the enhanced unemployment benefits ended, almost 30 percent did and a bit less than 15 percent did not.

 

CONCLUSION: This survey is far from being a true reflection of what did and continues to occur regarding this subject, but ending enhanced unemployment benefits appears to have had a somewhat positive affect on some staffing businesses, albeit likely minor and highly dependent upon geography and sector serviced. 

 

However, as previously stated, the comments section of the survey -- as well as comments received from those not directly involved in providing staffing services but auxiliary services to the sector such as consultants -- were quite illuminating. Here is some of the more insightful feedback:

 

1) "... the combo of govt funding and covid caused a protracted length of time in which folks found supplementary ways to create an income. This, along with savings folks have accrued, will keep people off the 'official' count till Jan of 2022."  In other words, people found alternative means of earning money.

2) "The sustain high unemployment is more likely to be accredited to a skills gap, i.e. the jobs opening up first are a bad match for those still unemployed because they either:
    A) lack the skills required,
    B) trained for a more highly skilled occupation and are, wisely, continuing to look for jobs in their field, or
    C) outside the regions where the jobs are appearing first."

3)  Lack of child care due to lack of availability -- even in good times, day care's economic viability can be frail at best. Anecdotally, we have hear that "... many childcare facilities failed to survive the pandemic. And with parents laid off or working from home, these facilities lost significant revenues. In addition, until the vaccines are approved for those under five many parents are refusing to send their kids completely unprotected. It's not the facilities they don't trust; it's the good sense of other parents."

4) Although there certainly are people "abusing the system" and may be "addicted to 'eating from the government trough'." and therefore find it easier to do that than get back to work. But it should be pointed out that "gaming the system" exists at all strata of society but in different and perhaps more sophisticated ways and is bipartisan as well.

5) It comes as no great -- or even a minor -- revelation that staffing services "... have  more job orders than people to fill them." But that same staffing executive goes on to say, "However, companies that pay more do get their positions filled and the turnover is less. It all comes down to pay. Companies that are trying to hang on by paying $12.00 per hour are floundering. The pendulum has swung to the advantage of the employee."

6) "The results are somewhat obscured by the COVID situation and supply chain challenges partially offsetting the sun-setting on the three UE extended and enhanced benefit programs."

 

It has been suggested that employment also did not recover quickly after the influenza pandemic of 1918-1919 either. We looked into this but could find no acceptable and / or verifiable data. First, the pandemic coincided with the end of World War I; employment and economic data was not very good at the time; and although the recession in 1920-21 did occur, that is best attributed to the actions of the Federal Reserve at the time and not the pandemic.

 

For those who filled out the survey and provided their contact information requesting the raw data, we will prepare and send that out by early next week. We thank all for participating.

 

August 2021 (posted September 3, 2021) return to top

 

Another way to look at those who are on temporary layoffs compared to permanent job losers ...

 

Several times during our pandemic-related analyses, we examined the different trends with those on temporary layoffs and those who permanently lost their jobs. More importantly, how are they changing.

 

This month instead of emphasizing the actually numbers of workers in each of these cohorts, we take a deeper dive into the ratio between them expressed as a percentage. It may be helpful to review the actual meaning of "percent" ... and we do not have to go any further than reminding it is a ration of the "portion of one hundred."

 

Pre-pandemic the number of workers on temporary layoff was about 60 percent of those who permanently lost their jobs; in other words, there were 60 workers on temporary layoff for every 100 who permanently lost their jobs. Reduce it down and it works out to three workers on temporary layoff for every five who lost their job permanently.

 

During the initial impact of the pandemic on the employment economy, the situation reversed -- and very abruptly and by a large amount. In April 2020, there were almost 890 workers on temporary layoffs for every 100 who permanently lost their jobs. Reduce and round it down further, there were almost nine workers on temporary layoff for every single worker who permanently lost a job.

 

As we have pointed out before, it is important to keep in mind that these data are self-reported so it is not really known if people were really on temporary layoff or it was just wishful thinking or employers were not being honest, or possibly knowing, and dangled the prospect that furloughed workers will be the first to be rehired. In addition, the Paycheck Protection Program -- a.k.a. PPP loans -- that subsidized firms to keep laid-off personnel on their payrolls possibly encouraged some employers to report as "temporarily" laid-off employees that realistically had no chance of being brought back.

 

The ratio began to return to normal --  or the pre-pandemic ratio -- this year and only slightly above the pre-pandemic level in H1 2021 at 62.4 percent.

 

Much as been reported -- and essentially correctly -- that the pandemic had a disproportionate impact on lower-wage, lower-skilled service jobs and did not have such a large affect on higher-wage, higher-skilled professional jobs.

 

But in July -- the latest figures available at this time -- the ratio plunged to 42.3 percent. likely an indication that many of the jobs that were lost to the pandemic are returning and remain in the employment economy.

So if many of the people who lost jobs during the pandemic are coming back, why is the widespread labor shortage persisting? 

 

Keep in mind that this information is just from people who lost jobs -- and for those who are currently losing jobs, although there is a declining number of than them, also feel that their personal job loss is not temporary.

 

July 2021 (posted August 6, 2021) return to top

 

How jobs have returned ... and how much further they need to go to return to where they were ...

We started this year with our report of the December 2020 employment situation looking at how some staffing-centric industries / sectors have recovered by November -- or had started to recover -- from the massive  loss of jobs due to the pandemic. It has been more than half a year so we think it would be of interest to see how far jobs have come back -- and possibly how far they still have to travel to get back to pre-pandemic levels.

 

 

[note: depending upon how your browser and / or email program renders the above chart, it may be difficult to view; we suggest you click on it to open a larger version.]

 

Total nonfarm jobs dropped 14.7 percent to its trough in April 2020 from its peak two months earlier and was still down 4.4 percent from its peak but up 12.0 percent from its trough in June 2021. Private-sector jobs trended similarly but were down further -- declined 16.5 percent -- into its trough and rebounded higher -- up 14.4 percent.  Interestingly, both were up 4.4 percent in June 2021 from their peaks.

 

We won't go through each of the sectors or subsectors that are presented in the table -- you can see that for yourselves -- but will highlight some specifics for the outliers to the overall job trends.

 

All but one of the sectors examined were still down in June 2021 from their respective peaks of February 2020 sans one -- computer systems design and related services was essentially able to return to its February 2020 level with a marginal gain of 2,700 jobs or 0.1 percent growth.

 

Food services and drinking places were the hardest hit by the pandemic in terms of the number of jobs and was still down 10.3 percent in June 2021 from its February 2020 peak but is up 74.3 percent from its April 2020 trough.

 

Clearly, temporary help services was hit very hard in April 2020 with a 33.9 percent decline from its peak two months earlier in February 2020, and by June 2021 it was up 33.7 percent from its April 2020 trough. But temporary help services was still down 8.5 percent in June 2021 from its February 2020 peak, so there appears to still have plenty of room to grow.

 

The employment situation continues to be on the mends, but further upside movement appears to be mainly limited by a lack of workers. If you find this information interesting and helpful and would like to see similar data for other industries / sectors, let us know and we may just address it in the future.

 

June 2021 (posted July 2, 2021) return to top

 

Are jobs and employment going sideways ... or just returning to "normal"?

 

Several times last year during the pandemic -- the last time was with the August 2020 employment report -- we looked the different trends with those on temporary layoffs and those who permanently lost their jobs.

 

Regardless, those on temporary layoffs clearly skyrocketed at the onset of the pandemic and remained at a much higher level then pre-pandemic. Although the level has come down rapidly, it is still higher. The average number on temporary layoff per month from January 2019 to February 2020 was just under 805,000 before radically rising and then dropping; by May 2021, it was to a little more than 1,800,000, which is the first time it was under 2,000,000 since the pandemic.

 

For those who have permanently lost their jobs, the pre-pandemic level was just under 1,340,000 and gradually rose, albeit not as dramatically, during the pandemic and by May 2021 was a little more than 3,230,000.

 

Stated another way, there was an average of 1.7 people who permanently lost their job for each person on temporary layoff in 2019. By the height of pandemic-related job losses in April 2020, the situation was reversed and there were 890 people on temporary layoff for each person who permanently lost their job. Since that apex, the ratio been declining and somewhat returned to the pre-pandemic relationship (those who permanently lost jobs is greater than those on temporary layoff) and ratio has pretty much returned to the 2019 and earlier level. In March and April it was 1.7 and in May the ratio increased marginally to 1.8 people who permanently lost their job for each person on temporary layoff in May.

 

It is important to keep in mind that these data are self-reported so it is not really known if people were really on temporary layoff or it was just wishful thinking or employers were not being frank and dangled the prospect that furloughed workers will be the first to be rehired. In addition, the Paycheck Protection Program -- a.k.a. PPP loans -- that subsidized firms to keep laid-off personnel on their payrolls possibly encouraged some employers to report as "temporarily" laid-off employees that realistically had no chance of being rehired.

 

Initial unemployment claims still high  but continue to improve  ...

 

The latest Beige Book also discussed that the rich unemployment benefits appear to be keeping workers from going back to work. A typical comment: "... generous unemployment benefits had made it difficult to bring payrolls back to desired levels, especially at the entry level."

 

The number of initial unemployment claims continued to declined last week by slightly more than 3.5 times the decline of the previous week. BTW, the Labor Deportment changed the seasonally adjustment methodology because of the pandemic, which is why we report the not seasonally adjusted data for this series.

 

And now, a not rocket-science conclusion:

 

To state the obvious, these two charts look very similar. Fewer people on either temporary layoff or permanently lost their jobs tracks similar to the trends with the number of people filing initial unemployment insurance claims, but still at greater levels than before the pandemic.

May 2021 (posted June 4, 2021) return to top

 

The recovery -- by gender ...


Last month when the unemployment rate ticked up in April financial experts said it was because unemployment compensation was keeping potential workers home because they could do better by not working. This comment was reinforced by many of our staffing executive readers lamenting that they just cannot get people to take assignments.

 

But things are rarely a single monolith and another contributing reason for the rise in the April unemployment rate. The Federal Reserve Board heard from many employers regarding what's keeping  people out of the labor force. One comment of several in its latest Beige Book that was published earlier this week, "... of factors limiting labor supply, including health safety concerns, childcare challenges, cutbacks in public transportation schedules, job search fatigue, and financial support from the government."

 

While we examined unemployment by gender back in November when reporting the October 2020 employment situation, we thought it would be insightful to test this statement ... were women staying out of the workforce more than men for whatever reason or reasons? Child care appears to be a major concern and that often falls upon women.

 

In reality, the unemployment rate for all women 20 years and older ticked down to 5.6 percent while the unemployment rate for the same age group of men rose from 5.8 percent in March to 6.1 percent in April.

 

And again, trends are not monoliths. For women in the younger age categories -- 20 to 24 and 25 to 34 -- the unemployment rate declined, ticked up for the 35 to 44 year olds, was unchanged for the 45 to 54 group, and rose for the 55 and older.

 

But for men, it rose significantly from March to April from 10.9 percent to 11.5 percent, was unchanged for the 25 to 34 group, declined for the 35 to 44 year olds, and rose for those 45 and older.

 

However, the labor force participation rate for this same group of those 20 and older did shift. For women, it declined from 57.4 in March to 57.2 in April and a decline of  83,000 employed women. For men, the labor work participation rate rose from 69.5 in March to 69.8 in April and an increase of 154,000 men.

 

Although the unemployment rate for women 20 years old and older declined in April from the previous month, so did the actual number of employed women. Conversely, the unemployment rate for men in that same age group increased, so did the actual number of employed men. Before your head explodes trying to figure out why the overall unemployment rate increased, let's just say that there is a major labor storage thought many sectors of the employment economy.

 

That translates into major pain for the staffing sector, or in the words of at least one staffing executive, "... we have a zillion open job orders and no one to fill them."  But is the demand as over-the-top as it may appear via staffing services' unfilled orders? Again referring to a comment -- which was echoed by shortage in the supply chain for goods in this week's Beige Book, ".. perceived demand may be overstated by clients placing orders with more staffing firms than is typical."

 

 

April 2021 (posted May 7, 2021) return to top

 

Are you in the right markets?

Last month we examined how the trends with new business formations could provide some strategic intel (it may not be an acceptable Scrabble word but this is business, not a word game) for staffing companies to target their marketing efforts by sector. This month we examine the same information, but at the geographical level.

 

As the data clearly show, clearly new businesses are being formed at a higher rate today than pre-pandemic. Specifically, from March 2019 to March 2020 -- we will call this period "pre-pandemic" -- there was an average of  about 290,100 new businesses forming every month in the country. But in March 2021, almost 440,200 new business were formed for an increase of almost 52 percent from the pre-pandemic period.

 

But some regions of the country did better in terms of growth rates. The Midwest outperformed the country, albeit only slightly, with a growth rate of 54 percent in March 2021 from the two-year pre-pandemic average with about 26,210 more business formations in March 2021.

 

The South seems to be the hot bed of new business formations both in terms of percent growth and absolute numbers. The number of new business formations jumped nearly 64 percent with  about 79,750 new businesses formed in March 2021 from the pre-pandemic period.

 

Coincidentally the two remaining regions of the country experienced essentially the same 38 percent increase for new business formations with the economically mature Northeast region only seeing about 17,940 new businesses forming in March 2021 from the pre-pandemic period  while the West had 26,200 more.

 

 

March 2021 (posted April 2, 2021) return to top

 

Are you targeting the right sectors?

How the pandemic has affected new business formation is another interesting trend to examine. New businesses can often translate into renewed opportunities for suppliers to those new businesses as well as present more sales for staffing companies.

 

For two years prior to the pandemic, the average number of business formations was just under 300,000 per month, ranging from almost 17,600 more in February 2019 than the previous month to just under 30,300 fewer in January 2020.

 

Between February 2018 and January 2020 inclusive there were only a little less than 670 new business formations per month on average.

 

But in  April 2020, the month after the pandemic was firmly established in the United States, there were almost 61,900 fewer new business formations compared  to just two months earlier in .February 2020. From that nadir in April 2020 of only 236,500 new formations, it jumped only three months later to a zenith of 551,660 in July 2020 to a zenith.

 

And although the month-over-month changes continue to bounce around a lot,  from May 2020 to February 2021 inclusive, there was an average of almost 418,800 new business formations per month.

 

The same basic trend of reaching a low point in April 2020, shooting up in July 2020, and then bouncing around a lot but generally declining but still at a higher level in February 2021 than the two-year pre-pandemic average is seen in most major sectors.

 

[The various sectors in the multiple sector charts were grouped together solely based by the number of new business formations and not by any similarly between the sectors. This was done because the trend lines would not be clearly delineated since the number of formations varied greatly among sectors.]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

February 2021 (posted March 5, 2021) return to top

 

How the pandemic affected employment by different sectors / industries ...

Although we recently looked at the changes the pandemic had on the number of jobs in general and specific sectors, we repeat that examination for some different sectors this month with many that are especially relevant to the staffing and IT staffing sectors. And for comparison, we also look at the changes in the general labor employment as well as focusing on some sectors that have been especially hard hit by the pandemic, but may not necessarily be staffing-centric.

 

The first table shows the changes made from before the pandemic hit in February 2020 that was the peak for employment in most sectors to when the largest jobs losses occurred in April 2020 that was the low point or trough last year. The second table shows the changes from the peaks and from the troughs to December 2020, the last month of the year.

 

Specifically, the number of all private-sector jobs dropped 16.5 percent from a peak in February 2020 to the trough in April 2020 (first table) but was still off 6.6 percent by December 2020 (second table) from its peak.  However, all private sector jobs have increased 11.8 percent from the trough in April 2020 at the end of the year in December 2020 (second table).

 

Before we discuss the performance of some staffing-centric sectors, it's interesting to see what has occurred in some of the restaurant sectors, which has been especially hard hit by the pandemic. Full-service restaurants were down 65.0 percent from peak to trough and were still down 24.3 percent from the year's peak, but recovered 116.3 percent from the year's trough. Regardless that it is a fairly small sector, cafeterias, grill buffets, and buffets -- many of which have closed their doors because of the pandemic -- were down 87.3 percent from peak to trough and were still down 64.1 percent from the year's peak at the end of the year, but recovered 182.3 percent from the year's trough.

 

Since we have faith in our readers are educated enough to be able to read these tables we will limited our verbiage to discussing the general trends and leave out the specific numbers from this point onward.

 

The private services-providing was hit harder by the pandemic than the goods producing sector, which is essentially all private (unless one considers producing red tape by government entities as "goods producing"). With that said the federal government was one of only a few sectors that did not lose jobs during the pandemic.

 

Within the staffing industry, executive search barely lost its mojo due to the pandemic. Temporary help services, which we have been reporting about in detail all along, fell off the cliff in early 2020 had made a nice recovery by the end of the year.

 

And if the percentage changes in temporary help services looks familiar to you, they are. Those numbers sort of mirror the changes in GDP, but along a different timeline. In Q2 2020, GDP dropped 31.4 percent and recovered with growth of 33.4 percent in Q3 2020. This is strictly a coincidence, but interesting nevertheless.

 

Did you see it?

 

Two days ago the Federal Reserve Bank published its March edition of its round-up of the local economic and employment situation from each of its12 district banks. It includes many comments about the staffing and IT services situation and how some of those business are dealing with today's challenging business environment. Check it out by clinking here.

 

January 2021 (posted February 5, 2021) return to top

 

How the pandemic affected employment by ethnicity ...

We closed out 2020 by looking at how the pandemic has impacted the unemployment experience by gender in November and by race in November. This month we look at the impacted it has had on the Hispanic or Latino populations and further by age group and gender.

 

As the first chart shows that prior to the pandemic, the unemployment rate for all Hispanic or Latino men and women was higher than for the overall unemployment rates for the same cohorts, but not my much. [note: unemployment rates for non-Hispanic and non-Latino are not available by different age cohorts. Also, although it may be technically and / or politically more correct to refer to women as Latina, we report these data by the official Bureau of Labor Statistics labels.]

 

Specifically, the unemployment rate prior to the pandemic in February 2020 for all Hispanic or Latino was 4.4 percent compared to 3.5 percent overall. For Hispanic or Latino men 20 years old and over, the unemployment rate was 3.9 percent and about the same at 3.8 percent for all men in that age group. However, for all Hispanic or Latino women 20 years old and over, it was 5.0 percent but much lower at 3.1 percent for all women in that age group.

 

The unemployment rates for all Hispanic or Latino men and women started out 2020 at 4.7 percent in January and 3.7 percent overall for all men and women, a difference of 1.0 percent. However, the year ended with the unemployment rate for all Hispanic or Latino men and women at 8.9 percent in December, but 6.2 percent overall for all men and women, a difference of 2.7 percent. Also take note that the unemployment rates for men and women for both the Hispanic and Latino cohorts as well as overall workforce were in a very narrow range, albeit markedly higher for the Hispanic and Latino cohort.

 

In April 2020, the first full month after COVID-19 impacted employment, the unemployment rate for all Hispanic or Latino shot up to 17.8 percent and but only rose to 13.9 percent overall. For Hispanic or Latino men 20 years old and over, the unemployment rate was 16.3 percent but only 12.9 percent for all men in that age group. For all Hispanic or Latino women 20 years old and over, it was 19.8 percent but much lower at 15.1 percent for all women in that age group.

 

Drilling down further into gender and different age cohorts, it's understandable that the youngest group for both Hispanic or Latino men and women -- 20-24 years old -- would have the highest unemployment rates. Interestingly though, the  unemployment rate for Hispanic or Latino women in this age cohort peaked in April at 31.5 percent whereas the rate for men in this same age group did not peak until the following month in May at 25.4 percent.

 

What the immediate future holds for employment trends remains unknown because the future direction of the pandemic is also unknown, but as vaccinations increase, it is expected to slowly decline. However, the ultimate impact of COVID-19 variants is creating more questions of how the virus will progress.

 

That uncertainty creates a cautious environment for employers and as some businesses are forced to close their doors, others businesses and individuals who have the fiscal means and optimism for the for a post-pandemic economy are expanding or opening. It may be insensitive to say, but this environment of uncertainty can be a fertile environment for staffing services to furnish workers into an uncertain future.

 

2020

December 2020 (posted January 8, 2021) return to top

 

How jobs have returned ... and how much further they need to go to return to where they were ...

Let's start out my wishing everyone a Happy New Year and hoping 2021 is better than last year. Instead of sending an e-card to everyone -- and we surmise some of you would have no interest and that email would just be cluttering up your inbox, which you may have resolved to keep less cluttered in 2021 -- if you would like to see my personal holiday greeting card, click here.

 

Now, to get down to business. We thought it would be interesting to see how some industries / sectors have recovered -- or have started to recover -- from the the loss of jobs due to the pandemic. Because this analysis was prepared earlier this week before the December 2020 employment situation was released, we only have examined the 2020 jobs data to November 2020. The peak in 2020 for jobs was in February and troughed two months later in April. 

[note: depending upon how your browser and / or email program renders the above chart, it may be difficult to view; we suggest you click on it to open a larger version.]

 

Total nonfarm jobs dropped 14.5 percent to its trough in April from its peak in February and still down 6.5 percent from its peak but up 9.5 percent from its trough. Private-sector jobs performed similarly. And the changes for most industries and sectors followed the same basic trends.

 

We won't go through each of the sectors or subsectors that are presented in the table -- you can see that for yourselves in the chart -- but will highlight some specifics for the outliers to the overall job trends.

 

It should come as no surprise that jobs in food services and drinking places -- more commonly referred to as restaurants and bars -- plummeted 41.4 percent in April and was still down 17.2 percent from its peak despite being up 63.7 percent from its trough.

 

On the other end of the spectrum, computer systems design and related services, which only dropped 3.6 percent to its trough and was still only down 3.1 percent from its peak, is only up 0.4 percent from its trough.

 

And temporary help services that had experienced a lot of pain and dropped 30.3 percent into its trough and was still down 10.0 percent in November  from its peak, is up a healthy 29.1 percent from its trough.

 

The employment situation is either on the mend or still has a long way to go depending upon one's point of view -- sort of a glass half-full / half-empty thing. If you find this information interesting and helpful and would like to see similar data for other industries / sectors, let us know and we may just address it in the future.

 

November 2020 (posted December 4, 2020) return to top

 

How the pandemic affected employment by race ...

Last month we looked the effect the pandemic had on employment -- well, unemployment to be more precise -- by gender and drilled down further by age grouping. This month we look at the pandemic's effect on unemployment by race.


We normally prefer to examine unemployment trends by seasonally adjusted data but unfortunately unemployment rates for some races are only published on a not seasonally adjusted basis.

 

But, the difference between seasonally adjusted and not seasonally adjusted data series for all persons 20 years and older is fairly minor and doesn't significantly change the trendlines. Additionally, the differences between the trendlines of seasonally adjusted and unadjusted unemployment rates by race do not vary much from the trendline for all persons so they are not charted / presented here, but will send them upon request.

 

In January and February the unemployment rate for White and Asian persons 20 years and older was slightly under than for all workers and significantly higher for Black or African American persons (sidebar: these race names are those used by the Bureau of Labor Statistics). While the unemployment rate for Black or African American was around 6 percent, it was under 4 percent for all White and Asian persons 20 years or older. In March 2020 -- the month before the pandemic affected unemployment rate measurements -- the overall unemployment rate was 4.2 percent for all persons broken out as 3.8 percent for White, 4.0 percent for Asian, and  6.4 percent for Black or African American.

 

The following month in April 2020 as the pandemic hit the job market, the overall unemployment rate for persons 20 years and older skyrocketed to 13.9 percent and to 16.0 percent for Black or African American, 14.1 percent for Asian, and 13.3 for White. After the peak in April, the unemployment rates generally trended downward with one exception; the Asian unemployment rate rose 0.4 percentage point to 14.5 in May.

 

However, the gap between the unemployment rates for all persons and race show varying trends. Prior to the pandemic, the unemployment rate in Q1 2020 was a little more than 0.4 percentage point below the overall rate for White; a little less than 2.3 percentage points higher for Black or African American, and a little more thanb 0.5 percentage point lower for Asian.

 

But the current gaps between the unemployment rates by race -- although generally continue to decline -- show different trends.

 

For White, the gap in October 2020 was 0.9 percentage point lower compared than the overall unemployment rate to the gap of 0.4 percentage point lower in March 2020. For African American, the gap in October was 3.8 percentage points higher than the overall unemployment rate compared to 2.2 percentage points higher than in March. And the gap was 1.2 percentage points higher than the overall unemployment rate in October compared to being 0.2 percentage point lower in March for Asian.

 

October 2020 (posted November 6, 2020) return to top

 

How the pandemic affected unemployment by gender ...

There's a subject that is only now starting to be examined and reported in the media in earnest ... how the pandemic has impacted the employment status of women.


The unemployment rate for women and men has basically been about the same for some time. Conveniently -- for our purposes -- in March 2020, which was prior to the pandemic impacting employment, the unemployment rate was the same for men and women at 4.0 percent.

 

Although COVID-19 has been hard on all working people, women were and are more negatively affected.

 

The following month in April 2020 the overall unemployment rate rate skyrocketed to 14.2 percent with 15.5 percent for women and 13.0 percent for men. The difference between genders of 2.5 percentage points is not insignificant. There is no monolithic reason for the higher unemployment rate for women. 

 

Regardless of gender  or workforce politics, lower wage jobs are disproportionately held by women and lower wage jobs were and are disproportionately impacted by the pandemic. In addition, the childcare system and K-12 education -- other than being disproportionately staffed by women -- took a major hit from the pandemic that many believe are not able to accommodate the needs of working women, who -- agree with it or not -- are the major caregivers for children.

 

Breaking out unemployment rate by different age cohorts yields predictable results with younger persons taking the bigger hits regardless of gender on the job front likely because they are in lower wage jobs.

 

Although  many smaller services businesses -- think local restaurants (aren't all restaurants basically local businesses?) as one example -- have permanently closed, it will be some time before those jobs return and those businesses are reestablished.

 

In addition, forward-thinking businesses are taking advantage of the slowdown and trimmed down its workforce to automate processes where and when possible to be more productive. So even when activity returns to pre-pandemic levels, they will likely need fewer workers.

 

September 2020 (posted October 2, 2020) return to top

Three years ago, we poised the question "Will there be enough workers?" Now we ask, "What does that same data tells us today?"

After examining the apparent disconnect between low unemployment and fairly stagnant wages / low inflation as the Phillips Curve appeared to no longer be functioning properly in August 2017, the next month in September 2017 we ponder the question "where will workers come from?"

At that time, we looked at labor force participation rate, the number of discouraged workers, and the unemployment rate. In the far corners of the business and economic news, there has been recent writings that the Phillips Curve has also been a victim to COVID-19. But, we concluded three year ago that the Phillips Curve did not seem to be working in the then economy. But, times have dramatically changed.
 

It doesn't take an economist to see that the pandemic has and is playing havoc with these three specific measurements of employment.

During the past three recessions, as the unemployment rate increases, the labor force participation rate has declined. And that inverse relationship is especially dramatic in the current recession. Yes folks, we are likely still in a recession right now. With so many other developments dominating the news cycle, don't feel bad that you missed the National Bureau of Economic Research's announcement in early June 2020 that the economy peaked in February 2020 and therefore entered a recessionary period.


The labor force participation rate had been basically declining since early 2000. Although there are a multitude of reasons, such as changing demographics including declining retirement ages and policies encouraging college enrollments that removed many younger people from the workforce. Perhaps it's time to rethink how the labor force participation rate is calculated. 

 

The number of discouraged workers continues to rise immediately after a recession is officially declared over and the economy reenters growth mode. Why do their numbers continue to rise after a recession is over? Because many people who may have been sitting out the recession on the sidelines, think they can get a job soon after the recession is declared over. But, it takes time for companies to readjust their business and staffing plans and start to create jobs and hire to fill them.

 

Although the Phillips Curve may still be bending the same way, globalization  and regional economic conditions have muted effects on prices and made it somewhat irrelevant. Employment is still a lagging indicator. Hence the number of discouraged workers and even the unemployment rate continues to rise in the period immediately after the end of a recession. As the labor force participation rate plunged upon the onset of the pandemic, the number of discouraged workers increased. Although both these metrics have begun to reverse direction, they still have a ways to go before getting back to their pre-pandemic levels.

 

The same trends are seen with the number of discouraged workers and the unemployment rate. The official unemployment rate, after skyrocketing at the beginning of the pandemic and has dropped considerably, but is still at the level observed in late-2011 / early-2012. However, the current trend of a relatively high unemployment rate is at least partially due to other factors other than people not being able to secure a job such as rich unemployment benefits and workers staying home due to the lack of child care options.

 

To answer the question we poised three years ago if there will be enough workers -- the answer is yes, but the question remains if people want to go back to work and if there will be enough jobs. Clearly the pandemic has changed the operations -- and hence, the staffing requirements -- of many sectors and industries. When the pandemic ends -- and it will -- how will staffing in the post-pandemic economy be affected? This country's economy morphed from agrarian, to industrial, to manufacturing, to service, and to information-driven. Will there be such a stage labeled a "post-pandemic" economy? First, we have to see the Covid-19 in the rearview mirror but simultaneously keep an eye on what's in front of us. The best advice is fasten your seat belts for what will likely be a bumpy ride -- and wear a mask!

 

August 2020 (published September 4, 2020) return to top

Are jobs and employment going sideways?

 

Two days ago the Federal Reserve Board published its September 2020 edition of the Beige Book, their regional and sector anecdotal observations of the economy. Several common themes cropped up throughout the country and we'll examine one of them more closely.

 

Back in April 2020 and May 2020, we mentioned that a lot of workers who self-reported that they were furloughed -- and characterized  by the Bureau of Labor Statistics as "on temporary layoff" by not really have been on temporary layoff, but questioned if it was "wishful thinking that they will be recalled from layoffs? Also, are employers are not being frank by dangling the prospect that furloughed workers will be the first to be rehired when, in fact, employers will use this as a way to eliminate workers whose productivity does not meet the possibly new and reduced level of activity?"

 

The latest data this month's BLS month's employment situation seems to indicate that workers' expectations of returning to their jobs may indeed had been overly optimistic. As the chart shows, the number of permanent jobs losers has been steadily increasing, albeit at a slower rate of increase than those on temporary layoffs have been decreasing. In August, there were ?,???,??? permanent job losers while there were ?,???,??? on temporary layoffs, or on furlough.

 

Pivoting back to the Fed's recent Beige Book, it seems that some employers / businesses are deciding that there are no longer jobs for laid-off workers, " ... Some larger firms also reported laying off furloughed workers in the face of slower recovery." In another part of the country, "... a few firms reported that previously furloughed workers have recently been laid off permanently — a sign that the labor market's recovery may not be smooth."  And similar comments from other parts of the country include: "... many contacts noted that some prior staff cutbacks were permanent, and others had used attrition to reduce headcount." and another employer told the Fed, "I anticipate furloughs becoming layoffs if some of our shelved work doesn't start up."

 

Our summation of the Federal Reserve Board's latest Beige Book highlighting developments and reports about trends in regional employment and wages, staffing services, information technology, engineering, manufacturing and other industries that drive the staffing and IT sectors is here.

 

Initial unemployment claims still very high ...

 

The latest Beige Book also discussed that the rich unemployment benefits appear to be keeping workers from going back to work. A typical comment: "... generous unemployment benefits had made it difficult to bring payrolls back to desired levels, especially at the entry level."

 

The number of initial unemployment claims rose last week, but by a relatively small amount. BTW, the Labor Deportment changed the seasonally adjustment methodology because of the pandemic, which is why we have always reported the not seasonally adjusted data for this series.

 

July 2020 (published August 7, 2020) return to top

How many people are unemployed?  Does anyone know?

 

Last month we titled our opening analysis as "Has unemployment been misstated? Yes -- read on if you want more detail." The title of an article published in the spring 2020 issue of Chicago Booth Magazine, which is the alumni magazine of the University of Chicago Booth School of Business, pretty much confirms what we surmised last month: "U.S. Unemployment Is Even Worse Than the Official Numbers Say." Click here for the one-page research digest.

 

It's a very important question, so this month we look at this subject with different data to try and figure out not necessarily what the actual unemployment rate is, but what is the real trend with employment / unemployment.

 

The pandemic has affected the employment-to-population ratio, which normally `varies little from month to month. But in April 2020 it plummeted 8.7 percentage points from the previous month when it rarely varies more than 0.1 percentage point on a sequential basis. Likewise, but not as dramatic, for the civilian labor force participation rate that dropped to 2.5 percentage points in April. Both these metrics have been making gains since then, but still are not quite back to pre-pandemic levels.

 

The changes in the percentage changes do not necessarily tell what really is happening. The next charts shows the change in the size of the civilian labor force from month to month. Again, pre-pandemic it has been fairly steady -- average a change of about 200,000 for the months of May 2019 to February 2020, inclusive, before starting to decline in March and plummeting in April 2020 and starting to rebound in May 2020.

 

But the question remains about what about those who think of themselves as no longer in the workforce -- are they just unemployed and no longer consider themselves as part of the labor force but may return if an opportunity presents itself, or have they left the workforce for good. These data really does not answer that question.

 

 

Regardless, it appears that many of people have left the workforce. The exodus began in March 2020 and peaked the next month in April, when many more decided to hang it up and file for a separation from the labor force. However, in the subsequent months of May and June -- although many are still leaving the labor force -- the rate of exit is moderating, but still much greater than it has been.

 

 

 

 

 

 

 

 

 

 

June 2020 (published July 2, 2020) return to top

 

Has unemployment been misstated? Yes -- read on if you want more detail ...

 

In our report of the April 2020 employment situation, we questioned, "Are workers accurately reporting their job prospects or is it wishful thinking that they will be recalled from layoffs? Also, are employers are not being frank by dangling the prospect that furloughed workers will be the first to be rehired when, in fact, employers will use this as a way to eliminate workers whose productivity does not meet the possibly new and reduced level of activity?"

 

One month later in a 15-page FAQ released simultaneously with the May jobs report in June 5, the Bureau of Labor Statistics, admitted that many workers were misclassified as "employed but not at work" when in reality they "... should have been classified as unemployed on temporary layoff." We won't get deep into the weeds why the misclassification error occurred, but we are quite sure there was no political pressure -- actually the only political appointment at BLS is the commissioner and he has no influence on the final published numbers, which is a highly automated process overseen by career BLS economists.

 

With that said, BLS's FAQ elaborated" "Of the 8,400,000 employed people not at work during the survey reference week in May 2020, 5,400,000 people were included in the 'other reasons'."  This was much, much higher than the 549,000 average for May 2016-2019. "BLS analysis of the underlying data suggests that this group included workers affected by the pandemic response who should have been classified as 'unemployed on temporary layoff'." 

 

Outside economists estimate that this error means that the actual April unemployment rate should have been closer to almost 20 percent instead of 14.7 percent that was officially reported. And the May unemployment rate should be around 16.1 percent instead of 13.3 percent that was officially reported.

 

A little side note from "the weeds": answers from the survey are accepted as recorded and "no ad hoc actions are taken to reassign survey responses." BLS further explains "Such a misclassification ... can occur when respondents misunderstand questions or interviewers record answers incorrectly." Obviously, BLS and the Census Bureau -- Census actually administers the survey instrument for BLS, but we digress -- acknowledged the problems the pandemic has had on the data and are conducting additional training and adding more instructions into the survey instrument.

 

In blog post on June 29, which was essentially a restatement of the June 5 FAQs, the BLS commissioner admitted, "Although we noticed some improvement for May, the misclassification persisted." 

 

Temporary Layoffs compared to permanent job losers ...

 

Now that we have either made the unemployment situation clearer or completely confused you at this point, let's look at those who think they are on temporary layoff and those who know that they have permanently lost their job.

 

As you can see, more people considered themselves as having permanently lost their jobs in June from the month prior and fewer considered themselves on only a temporary layoff.

 

Specifically, 4,778,000 fewer considered themselves on temporary layoffs in June from the previous month, probably because they got called back to work. But, 1,604,000 more consider themselves having permanently lost their job in June  than in February, which was the month before furloughs began due to the pandemic.

 

As we've mentioned before, there is likely a large number of those who think they are on a temporary layoff but, in reality, have little chance of being called back because there will be no job or company to go back to.

 

May 2020 (published June 5, 2020) return to top

 

Potpourri ...

 

Last month (see the discussion here), we discussed workers on self-reported temporary layoffs questioning if "these workers [are] really only on temporary layoffs? Obviously, returning to work is contingent on a business to return to -- and many businesses may not survive and reopen. Are workers accurately reporting their job prospects or is it wishful thinking that they will be recalled from layoffs? Also, are employers are not being frank by dangling the prospect that furloughed workers will be the first to be rehired ... It is likely that many of the jobs lost will not be coming back quickly, or even not at all."

The Federal Reserve's Beige Book, which came out last week covering the period from early April to mid-May (our summation of it highlighting comments relevant to staffing, IT, and sectors relevant to them is here) seems to bear that supposition out. In addition, the employers who are trying to call back workers are finding them not willing to come back in some cases because the extra $600 weekly supplement to regular unemployment benefits is making it financially beneficial not to return to work, e.g.: "...  overcoming the lure of expanded unemployment benefits." That weekly supplement expires on July 31. We think it's important to be reminded that unemployment benefits not only provide assistance to workers and their families, but enable those who are out of work to continue to be actively spending consumers, which is the basis for the economy. Keep in mind that consumer spending is responsible for about 70 percent of GDP so regardless of political leanings, the money being distributed to the unemployed regardless fairly or not, may be assisting to save the economy from a black hole implosion.

If you have not yet read the May edition of the Beige Book, we highly suggest you review it. To lure back workers, some employers are "... temporarily increasing wages to retain essential on-site staff, to match the amount employees could earn on unemployment, or to reduce absenteeism." Although bringing staffing levels back can be a boon to staffing companies, we warn for a possible PR nightmare as one staffing contact told fed researchers, "Overall, contacts expressed optimism, 'excited' (as one put it) to facilitate hiring during the upcoming recovery." IMHO, nothing wrong with staffing executives being optimistic about increased activity, but being "excited" may be going a bit too far.



Initial filings for unemployment benefits ...

 

For those who do not follow our Twitter feed, the latest number -- it was released yesterday and is on a one-week delay -- is down more than 300,000 from the previous week. But it is still scary high for those filing for unemployment benefits for the first time for the week ending May 30, 2020.

 

However, although this metric continues to slow, at more than 1,600,000 people filing for unemployment for the first time, this metric is still no where near the pre-pandemic level of around 222,000 per week, which is the average from January 2018 to mid-March 2020.

 

 

 

 

 

 

 

Temporary Layoffs compared to permanent job losers ...

 

Since we started off discussing this subject and in detail from last month, we thought it insightful  to update this information .

 

As you can see, more people considered themselves as having permanently lost their jobs in May and fewer considered themselves on only a temporary layoff.

 

Specifically, 2,720,000 fewer considered themselves on temporary layoffs in May from the previous month, probably because they got called back to work. But, 1,016,000 more consider themselves having permanently lost their job in May than in February, before furloughs began due to the pandemic.

 

 

April 2020 (published May 8, 2020) return to top

 

When, where, and what jobs will come back?

 

Not to be accused of burying the lead, we don't know -- and doubt if anyone else really does -- but there are some clues regarding what will happen to the jobs lost since February and if  the growing number of unemployed persons will return to a job, if at all. Note that we only said "return to a job" and not "return to their former job."

 

At this time, the big unknown -- other than the "when" -- is how the pandemic will affect the types of jobs and the possibly opportunities for some new occupations. As America's economy transitioned from agrarian to industrial to manufacturing to services to one that is information and technology driven today, we may see the pandemic creating a new phase, or possibly a new, ongoing way of accomplishing what had been an established means of doing jobs -- a "post-pandemic economy?".

 

But, what we do know is that a lot of people are expecting to return to their former jobs ("on temporary layoff"), which proportionally has affected more lower-end service jobs, and we question if those jobs will be coming back at all and / or if workers are disillusioned.

 

There is always a certain amount of churn in the job market. As the chart shows, the number of people who permanently lost jobs in March 2020 and April 2020 was not too much more than the average from January 2018 to February 2020. BTW, of permanent job losers or those not on a temporary layoff, there is another smaller but related group not charted here of persons who completed temporary jobs, which were not necessarily with staffing services.

 

Unlike those who permanently lost jobs, there is a striking difference between the average number of people who said they were only on temporary layoff -- often referred to as furloughed workers in the media -- from January 2018 to February 2020 that averaged just under 826,000 a month and the past two months of March and April. Keep in mind that first month coronavirus impacted the employment data was March -- data are collected for the employment situation in the first half of the month and that was before many major layoffs and just as local officials began to shutdown the economy with stay-at-home orders and non-essential business closures -- and there were already almost 1,050,000, or greater than 130 percent, more people on temporary layoffs in March than in February. In April, there were 16,215,000, or 877 percent, more people on temporary layoffs than in March.

 

But, are these workers really only on temporary layoffs? Obviously, returning to work is contingent on a business to return to -- and many businesses may not survive and reopen. Are workers accurately reporting their job prospects or is it wishful thinking that they will be recalled from layoffs? Also, are employers are not being frank by dangling the prospect that furloughed workers will be the first to be rehired when, in fact, employers will use this as a way to eliminate workers whose productivity does not meet the possibly new and reduced level of activity?

 

It is likely that many of the jobs lost will not be coming back quickly, or even not at all. How will restaurants / movie theatres / amusement parks / etc. adjust their business model in an era of social distancing, which is likely to continue for some time, and subsequent staffing levels and requirements? Will some manufacturers add third shifts -- at least, temporarily -- by reducing staffing for shifts in order to maintain social distancing / testing requirements in order to maintain output? More specifically, how many contact tracers will be needed and for how long, what skills will they need, who will train them, and who will be paying for them? (Note to staffing companies: could  this be an opportunity / a new service line?)

 

The National Conference of State Legislatures has traditionally reported that 49 states must balance their budgets although that varies depending on the way the requirements are defined. Regardless, since these states must balance their books by year's end by law, there is going to have to be huge cuts in spending or tax increases to counter the overspending on the pandemic and the decline in tax revenues.

 

[BTW, the 2020 Census has adjusted its timeline in response to COVID-19, delaying some operations. If there was no pandemic and unemployment remained very low there would be a dearth of qualified workers to conduct some field operations for the necessary follow-up period on the original timeline, but the situation has changed. Better qualified people may be available to conduct some of the now delayed in-person canvassing operations, but it remains if they will be willing to do go out into the community and if people will be willing to literally open their doors to Census enumerators. However, we unofficially hear that the online response to the Census exceeded expectations possibly because people staying at home had the inclination to respond. So while in-person follow-up will start later than originally planned, the total amount of work will be less than anticipated.]

 

So many questions and so few answers at this time. We'll leave it to the professional futurists to opine on what that may look like in a modern world that now has experienced a true pandemic, or we'll look at this at a later  time.

Stay healthy -- stay strong,

Socially distantly yours,
Bruce

 

March 2020  (published April 4, 2020) return to top

 

Why this month's official employment situation data may be pretty useless ...

 

Although the novel coronavirus first appeared in December 2019 (the World Health Organization didn't officially name it COVID-19 until mid-February), the first case confirmed in the United States was on January 20 or 21, 2020, and the first case of suspected local transmission occurred more than a month later at the end of February. The number of U.S. infections breached 100 on March 4, topped 1,000 cases on March 11, surpassed 10,000 by March 19, exceeded 60,000 by March 25, 160,000 on March 30, and about 240,000 by April 2.

 

On March 14, which is also the same week data are collected for the two surveys that are used for the monthly employment situation and from one of which the official unemployment rate is calculated, there were less than 3,000 COVID-19 cases in the United States.

 

As the two charts here show, the wholesale filings for unemployment insurance did not start until the next week.  Therefore, the U.S. Bureau of Labor Statistics monthly employment situation for the month of March may not properly reflect the layoffs / furloughs that employers started in earnest in the second half of the month.

 

Instead of using the seasonally adjusted data as most media outlets report, we chose to use the raw, not seasonality adjusted numbers to show actual activity and not statistically derived numbers. Also, although self-employed and gig workers may be now eligible for unemployment benefits, they are likely are not included in the current claims counts at this time and may not qualify if they don’t have the proper work and pay documentation. At this time the guidance from the Labor Department about the kinds of acceptable documentation, and states’ interpretation of that guidance -- are the biggest unknowns.

 

These two charts track the same time periods, but in order to see what the 'normal' trend was before the number of filings jumped for the week ending March 21 and again for the week ending March 28, a different scale was required for the number of initial claims for the week of March 14. To reiterate, these charts to NOT show cumulative data, but the raw number of initial unemployment insurance claims for the indicated weeks.

 

We are not going to even venture a guess as to when -- and by what magnitude -- lost jobs return. However, to paraphrase James Carville's from 1992 of what now has become a political cliché "It's the economy, stupid," the return of the jobs, "It's a public health issue, everyone."

 

Be safe, be careful, be mindful -- and above all -- be kind and compassionate.

 

Best regards,

Bruce

(from Sarasota, FL, looking after my 91 year-old mother recovering from a fall requiring surgery in late January)

 

February 2020 (published March 6, 2020) return to top

 

Was Job Growth Slowing Before the Coronavirus Emerged?

 

One of the big questions facing economists and the financial universe is if job growth is slowing that could mean trouble for the overall economy, regardless of the current coronavirus, a.k.a. COVID-19, situation. However, keep in mind that employment is considered a lagging indicator. In addition, in today's ongoing tight employment market, employers may still hang on to workers longer than they normally would in a slowing economy because of the time, effort, and resources spent to bring them on in the first place.

 

In order to eliminate any effect of government hiring -- including the U.S. Bureau of the Census's hiring and discharging workers as Census 2020 ramps up and down and up and down -- we will only look at changes with private-sector jobs.

 

A clear trend is difficult to discern in the number of private-sector jobs by just looking at squiggly lines regarding month-over-month changes as seen in the first / top chart. But a somewhat better picture emerges when looking at job growth on a quarterly basis as seen in the second / bottom chart.

 

In Q1 2015, private sector jobs expanded by about 2,884,000 from Q1 2014, the most for the time period examined (2007 to 2019). But almost four years later by Q3 2019, jobs only increased 1,803,000 from a year earlier.

 

From late 2010, year-over-year quarterly changes in private-sector jobs have more or less steadily increased and reached a zenith in Q1 2015 but then began to steadily declined until 2018 when they began to recover for three quarters, but then started to decline again in Q4 2018 and for most of 2019, but increased in Q4 2019.

 

Did the jobs machine enter a new phase or was just taking a breather?  Only time will tell ... and of course the big unknown is how deeply the coronavirus will infect the nation's and the world's employment economy. And speaking of COVID-19, the Federal Reserve's March Beige Book, which was published two days ago, had this to say ...

 

Fed's Beige Book Finds Uncertainty about the Future ...

 

Comments about COVID-19 in the March Beige Book published on March 4 were based upon interviews and comments received on or before February 24th, which was the the first day of the recent stock market plunge, and mainly limited as 'disruptions in supply chains.' In addition, many employers expressed in one way or another that they were, "slowing down hiring due to election uncertainty."

Other remarks that may be of interest was that manufacturing strengthen in some markets and sectors where it had previously weaken and weaken where it had previously strengthen. Of course, the labor markets remains tight in most markets and across many sectors and for a wide variety of skill-sets. This is resulting in "modestly higher wages" and "more in-house training and supervision." However, at least some employers "do not believe larger wage increases will attract more applicants."


There are several comments specifically about staffing services. For example, "One staffing contact noted that many clients were converting current temporary workers to permanent staff and not placing new temp orders."

 

Our focused summation of the latest Fed Beige Book can be found here.

 

2019

December 2019 (published January 10, 2020) return to top

 

Time to change thinking about a recession?

 

If you are not a recent subscriber, you know that we have been talking about the risk of a recession developing in the near-term future. But, it appears that the risk of a recession -- at least in 2020 -- has been downgraded and no longer an imminent threat, or is it?

 

One of the better leading indicators for a recession is an interest rate inversion which is when short-term interest rates are higher than long-term rates. We first discussed this in April 2018 before an inversion actually occurred, but interest rates seemed to be heading in that direction. Then in March 2019 an inversion started between three-month and the ten-year treasuries, but not with the two-year treasuries. And then a few months later in August 2019, a very brief inversion occurred with the two-year treasuries as well. 
 

In 2019 the Federal Reserve Board -- possibly because they felt the risk of a recession was increasing -- stopped raising interest rates and then started to lower them. Recession averted? Maybe.

 

As the chart for the ten-year and the three-month treasuries shows, an inversion started in late March 2019 and lasted more than six months before eventually ending in early October 2019 and reached its low point on August 28, 2019.

The inversion for the two-year treasuries performed fairly similarly, but occurred only for three days in late August and reached its low point on August 27, 2019, but was barely an inversion by historical standards.

There currently are no clear and strong headwinds that will cause the economy to reverse direction and descend into an endogenous recession. An endogenous recession is the result of the economy's own making. The Great Recession of 2007--2009 is an example when consumers over-borrowed and over-invested in housing and the real estate market collapsed, bringing the rest of the economy with it.

There are also exogenous recessions, which is when some outside force or forces knock the economy down with a body-blow. The multiple oil crises of the 1970s are good examples as well as current international trade and tariff issues and the current Middle East situation.

By most accounts and indicators, the economy is expected to continue to grow and a recession in 2020 is unlikely at this time but if one occurs, it is expected to be mild. The consensus estimate for GDP growth will be slower than in 2019 and dip below 2 percent in 2020, absence of traditional "election year pump-priming" or other currently unforeseen geo-political developments.

 

November 2019 (published December 6, 2019) return to top

 

Yo, readers, it's time, again ...

 

Through this monthly employment report, it has been my goal for the past 15 years or so to provide an unbiased independent view and analysis of the employment and jobs situation along with some insights about the overall economy with a focus on the staffing sector. And by looking at the stats from the email distribution service I use and feedback from readers, it appears that I have been successful for this gratis report. Take note of the word "gratis."

 

There are no plans to start to charge for this report -- but I do have a favor to ask, although this is not a quid pro quo.

 

Since I arrived in Boone, NC, more than five years ago, there is a non-profit, pay-what-you-can restaurant that reserves your support and is staffed primarily by volunteers. It is F.A.R.M. Cafe (www.farmcafe.org) and a 501 (c) (3) organization with the goal ".. to build a healthy and inclusive community by providing high quality & delicious meals produced from local sources, served in a restaurant where everybody eats, regardless of means." We -- I say "we" because I am on the board of directors -- do not turn away anyone; if someone cannot pay, they can work for an hour in exchange for a meal. As with most, if not all, small local non-profits, revenues from daily operations only partially covers the expenses. We also operate a very successful F.A.R.M. Full Circle food recovery program that has been able to process almost  20,000 pounds of food and produced 22,000 servings of meals and produce distributed to partner agencies at no charge.

 

Therefore, I am asking my readers and followers to make a donation -- no limit. Go to F.A.R.M. Cafe to learn more about us and then hit the "Donate" tab, which will present several different modes of donating. When I joined a national staffing company more than 30 years ago and went through sales training, it was stressed to make sure to "ask for the order." This is me now asking for a donation, which is tax deductible.

 

Latest Beige Book offers insights to staffing services trends around the country ...


In case you missed it, the Federal Reserve Board's periodical recap of the nation's economy -- commonly referred to as the Beige Book -- was published last week on the day before Thanksgiving. From looking at our notification email's "click-to-open" stats, apparently many of our subscribers to this recap of the report had already left for the extended weekend. Here're a some sample  statements from our recap of the November 2019 Beige Book
:

  • Some ways that some staffing services are dealing with a lack of suitable candidates is that they have, "...also increased their presence on online job boards and other advertising channels. A few respondents have expanded by hiring more recruiters and building specialized teams for retained search services or permanent placements."... "and another indicated that a different staffing firm was deploying yard signs to recruit for jobs paying $16 an hour."

  • In addition, "... Employment agencies reported a seasonal pick-up in new job openings and an increase in direct hire recruitment services, rather than temporary, for larger clients. ... staffing agencies reported increased wage pressures for jobs in the lower pay scales."

  • Also, "... Staffing contacts noted strength in healthcare and banking but weakness in energy."

We provide this as a public service for our readers free of charge although donations -- see first item above -- are certainly welcome and accepted.

October 2019 (published November 1, 2019) return to top

 

Can it go any lower?

A couple of months ago, we discussed the dropping unemployment rate, questioning if it could go any lower and promised to look into it in further detail.

At that time, we only went back 20 years and could not come to any firm conclusion.

When the unemployment rate was lower than where it is today, the labor force participation rate was also lower.

But -- and not taking into account the late 1960's when the unemployment was only briefly below current day levels -- it was a much different world back when the unemployment was lower than today.

WWII was a recent past event and the economy was much different having emerged from post-war heavy manufacturing and austerity status. In 1950, the federal minimum wage rose to $0.75 an hour, which was almost double from $0.40 an hour established in 1945, and average cost of a new car was $1,510, or about a full year's minimum hourly wages. The minimum wage was up to $1.40 by 1967. (FYI, today the average cost of an automobile is $37,200, which is about $6,000, or 16 percent, more than a full year's hourly wages of $15. But, you do get a lot more car today than back in 1950.) We are not saying that life was better back then -- only less expensive than today.

Now we go back 70 years and pretty much come to the same, non conclusive conclusion. Maybe, maybe not.

 

Weaker overall economic growth ...

 

Two "events" occurred this week that point to a weakening economy.

 

First the advance estimate of U.S. GDP in Q3 was reported at 1.9 percent growth, down from 2.0 percent growth in Q2, and 3.1 percent growth in Q1. But keep in mind that the Q3 GDP figure released this week is labeled as "advance" and based on data that are incomplete and / or subject to subsequent revision. Regardless, it shows weak growth. One factor for the weakness is a decrease in nonresidential fixed investment, which is business structures and equipment and software. In other words, businesses are not spending.

 

The other event was the Federal Reserve Board reduced interest rates this week in order to stimulate the economy and more spending. Look at it this way: the Fed would not be lowering interest rates if the economy was humming along nicely and did not need a little goose to spur spending. The most recent Beige Book, which was released about two weeks ago, included a number of not optimistic comments and a number of remarks about businesses being cautious on a go-forward basis. If you missed our summation that includes mentions of special concern to staffing executives, go here.

 

September 2019 (published October 4, 2019) return to top

 

What the future may hold  ...

 

Every two years, the Labor Department's Bureau of Labor Statistics provides a ten-year projection of employment. The projections for the 2018 to 2028 time period were published last month and we've extracted some information that may be of interest to staffing executives in a brief, seven-page chartbook, which doesn't actually contain any charts, but is chock full of tables.

 

BLS projects that overall employment will increase 5.2 percent from 2018 to 2028 but temporary help services employment will only grow 2.3 percent. This is in sharp contrast to the actual 27.9 percent growth in temporary help services employment for the previous ten-year period of 2008 to 2018 when overall employment increased 8.6 percent.

 

Drilling down to a more granular level, although office and administrative support occupations will remain the third largest group of occupations within temporary help services, it is expected to contract by almost 35,000 jobs, or 6.6 percent, from 2018 to 2028. And the largest group of occupations within temporary help services is not those in production (e.g. manufacturing), but ... well, just download the report to find out.

 

This free report is available for download here. A long-time staffing executive who reviewed a preview copy of this report offered some feedback -- "Cool!"

 

 

You may have read about it first here ...

 

Yesterday, Reuters reported that Uber is entering the staffing business. Almost a year ago, we did that in this space -- and with more details -- with the headline "Uber is getting into the staffing business." Just thought you would like to know.

 

August 2019 (published September 6, 2019) return to top

 

Potpourri  ...

 

Last month, we said we would explore if or how shifting demographics -- and / or some other reasons -- are responsible for a declining labor  force participation rate. But some other interesting developments since then dictate we address a few other subjects this month.

 

First up -- the "INVERSION"

 

The financial media starting screaming 'A Recession Is Coming, A Recession Is Coming' when interest rates inverted -- that is the rate for short-term treasuries was higher than for the ten-year. More than a year ago and earlier this year, we discussed that an inversion was likely coming and why this is considered a possible indicator of an approaching  recession (click on the links above to see our previous analyses). But, as our updated chart indicates, the actual inversion last month was much less, or just getting started, at this time than previous ones that preceded recessions.

 

One economist who reviews our material before distribution pointed out, "there is an average of 15 months from an inversion to the beginning of a recession." Another reviewer pointed out that this inversion "... may be different this time ... as usual. [The] reason is the prevalence [of]. 20% of negative interest rate world bonds that has no precedent. ... an inversion is a necessary, but not [a] sufficient condition, for a recession!" "

 

Only time will tell if this indicator will prove to be accurate this go-around.

 

 

Second up -- more than 500,000 fewer jobs than previously reported ...

 

You may have read that the preliminary revision of the current employment statistics data (a.k.a. the CES, or jobs report), which is a survey of businesses, showed that the previously published number of nonfarm jobs was too high by 501,000, or 0.3 percent. Take out the government sector, and the previously published number for private-sector jobs were off by 514,000, or 0.4 percent. Some of the bigger losers were retail trade (overestimated by 146,400), professional and business services (overestimated by 163,000), and leisure and hospitality (overestimated by 175,000). The preliminary revision is only for March 2019 and  don't expect to see any corrections at a more granular level for awhile since all the numbers are not updated until the final benchmark revisions are made. And that does not happen until the January 2020 employment situation is released in February 2020. We can't wait, smiley face / sad face / sarcastic face.

 

Third up -- latest Beige Book ...

 

Eariler this week, the Federal Reserve Board published its Beige Book, which is a summary of comments from employers and business executives throughout the country regarding labor and business conditions and future expectations. Although there are many mentions tariffs and trade policy uncertainty as risk factors,  the near-term outlook is generally optimistic. One comment pretty much summed up the feelings throughout many areas of the country: "A few firms said they were holding back or being cautious due to uncertainties around trade, the federal budget, and the availability of labor."

 

The absence of adequate labor supply -- particularly acute at both the low- and high-end of the skill scale -- continues to limit businesses ability to expand and grow. Staffing services growth continues to be limited by a lack of candidates prompting one contact to say, "... labor pool in its area as 'nearly nonexistent.'"

 

Our summation of the September 2019 Beige Book, which highlights comments relevant to staffing services and the major sectors they service, can be found here as well as a link to the full book.

 

July 2019 (published August 2, 2019) return to top

 

Last month we asked, "can the unemployment rate decline any further?" Now, we try and answer that ...

 

We offer an unqualified maybe.

 

The unemployment rate has more-or-less been steadily declining since late 2009 and early 2010, after the end of the Great Recession.

 

But, the same cannot be said about the labor force participation rate.

 

After the end of the fairly brief 2001 recession, the labor force participation rate continued to decline for about two years before stabilizing and stayed fairly steady for about four years until the next recession.

 

It resumed a downward trend during the Great Recession and then continued on a downward trend for about another five years before stabilizing in late 2013 / early 2014 and has pretty much remained at that level ever since and has not changed much for the past five years. Prior to the Great Recession when the labor force participation rate was stable, the unemployment rate steadily declined. After all, this was a period of economic expansion -- ergo, employers also hiring -- so with the participation rate steady, the unemployment rate duly declined.

 

These two factors are in a similar relationship now. The labor force participation rate is basically steady and the unemployment rate is declining. If the economy continues to hum along and not weaken into recession, the unemployment rate may: 1) continue to decline and / or 2) inflation, especially wage inflation, will pick up. Perhaps this is the thinking behind many anticipating the Fed lowering interest rates to stave off anticipated higher inflation than its mandate.

 

However, there could be another development due to the Fed's recent action -- businesses respond to a diminishing avialable labor pool by increasing investments in automation. This, in turn, could create another skills gap and cause unemployment to go up. And with the decline in interest rates, it makes it more likely that companies -- particularly manufacturers -- will feel more comfortable about increasing their spend / debt burden on automation. Maybe that's another minor / contributing reason why the Fed dropped the rate this week -- to stimulate business spending.
 

Unintended consequences ...

 

There was a very intriguing item about manufacturing in the most recent Federal Reserve Board's Beige Book. At least one company is shifting manufacturing -- and reducing headcount -- out of the United States to Europe due to tariffs on parts from China, "... [it] moved an assembly line from the U.S. to Germany because most of the components in the product came from China and making the product in Germany allowed them to avoid the tariffs."

 

Next month ...

 

One reason for the recent decline with the labor force participation rate has been the shifting demographics of the population. Next month, we plan to explore this issue further as well as some other possible reasons why the labor force participation rate has been declining.

 

June 2019 (published April 5, 2019) return to top

 

We've seen this before, but not quite like this ...

 

The relationship between the unemployment rate and the job vacancy rate is called the Beveridge Curve.

 

Typically, when there are a lot of unfilled job vacancies it is because people are working and unemployment goes down; conversely, if there are not a lot of job vacancies, people cannot find jobs and unemployment is high. The reason we believe this relationship can work as an early sign of an upcoming recession, is that job vacancies fall and unemployment goes up during a recession.

 

This occurred during the last two recessions so the question-of-the-day is if this is occurring now? Let's discuss each item separately and start with the unemployment rate.

 

Month-over-month changes aside, the unemployment rate has likely stabilized and the average for the past 12 months charted (March 2018 to April 2019) is 3.8 percent. But, has it really stabilized or has it simply cannot go down any further? As probably every staffing professional knows, there really are very few employable people who are not working. See our most recent summation of the Federal Reserve Board's Beige Book to read what staffing executives as well as many other employers are saying about the shortage of people available to fill open jobs. Coupled with the ongoing demographic shift as more people age and / or retire out of the workforce, we conclude that the most likely reason the unemployment rate has stabilized is because it just simply cannot go any lower.  A more in-depth discussion on this subject -- can the unemployment rate decline any further? -- will be forthcoming in this space next month.

 

But, the job vacancy rate tells a different story. It has been rising since the end of the recession as businesses created jobs at a faster rate than they were filled. Although the job vacancy rate is at the highest level it has been for some time, it too has remained fairly stable for the past 12 months. But, unlike the unemployment rate that probably simply cannot go lower, the number of jobs that businesses create is not subject to restrictions. Employers do not create new jobs because they believe that their level of business activity cannot justify increasing their payroll. Sure, some employers have probably decided it would be fruitless to try and hire new employees because there are none out in the labor force so why even try. Anecdotal reports are surfacing that business are putting resources and money into automation in order to increase productivity instead of hiring new workers who they believe do not exist. Also, businesses also feel that the high degree of uncertainty with tariffs and trade makes them to take pause in bringing on more workers.

 

The trend of stable job vacancies, albeit at a relatively high level, could be a sign of a static amount of business activity that may be turning downward in the future and the economy heads into a recession. Remember, recession are retroactively declared, and the lag is often many months. Should job vacancies start to fall and unemployment start to creep up, it could mean that a recession has arrived.

 

May 2019 (published April 5, 2019) return to top

 

More on the upcoming Census ...

 

We got an unusually large amount of feedback from last month's warning about the "other" potential problem with the 2020 Census, we thought a little further detail was required.

 

If you missed it last month, it can be found here.

 

Although the change in the overall number of jobs attributable to the Census may only be a minor bump in the big picture, it does appear to move the needle. The interesting trend to the jobs and unemployment trends is that hiring large numbers of people for the Census starts about a year prior to Census Day, which is April 1, and continues for several months after.

 

As discussed last month, some of the success of the 2010 Census can be attributed to the high quality of enumerators who where available due to a high unemployment rate. The Great Recession officially ended in June 2009, which is about the same time that the Census Bureau starts staffing up on a temporary basis for the address verification process and then calls many back to follow-up with households that have not returned the census form.

 

Clearly, the total job count number experienced a bit of a boost by the Census in 2010 and then a bit of a decline immediately when the data collection portion ended. Although the economy was just at the beginning of the current expansion period, the benefit of Census hiring to the jobs number is easy to overlook.

 

But the effect of the 2010 Census on the unemployment rate after the end of the Great Recession and the beginning of the current economic expansion is harder to discern, or if the Census had any impact at all.

 

Did you see what the latest Fed Beige Book said about staffing services?

 

Two days ago, the Federal Reserve Board published its report on regional economic and employment conditions called the Beige Book. We  excerpt passages relevant to the staffing and IT sectors, developments in major industries that drive the staffing industry, as well as employment in general.

One very common theme heard from employers throughout the country was concern about trade uncertainty and tariffs -- so much so that some staffing firms are seeing client companies increasing contract lengths and cutting back on hire hire services.

Some employers, in order to find suitable candidates, are recruiting directly out of high school. In addition, some firms are: "adjusting employment standards" as well as "directing more wage dollars towards retention efforts," to lessen other employers poaching workers, especially IT professionals.

Although wage pressures are throughout the entire labor market spectrum, pressure is greatest for the low- to mid-Level skilled positions. The Book includes comments regarding how the labor shortage has given staffing firms some pricing leverage that have been able to increase billing rates.

 

Our summation of the latest Beige Book, which includes a link to the full publication, is here:

 

April 2019 (published April 5, 2019) return to top
 

The other problem facing the U.S. 2020 Census ...

 

One part of the debate on whether to include questions about citizenship in the 2020 Census centers on the final quality of the information. Legal and political issues aside, the concern is that citizenship questions will degrade the response rate and therefore the final data. But we have not seen any reports about another big issue looming about the 2020 Census that could also negatively affect its outcome.

 

I worked as an enumerator for two phases of the 2010 Census -- the address verification process and the in-person follow-up canvassing for those who did not return the census form. One of the reasons the 2010 was very called successful -- other than government officials patting themselves on the back -- was the quality of the enumerators, or put another way, the foot soldiers for the census.

 

When the address verification process was started in the spring of 2009, the year prior to the census, the unemployment rate was around 9 percent and increasing (it reached 10 percent by the fall). This process involved physically walking up to the front door of a house to verify its address as well as locating new homes and addresses not included in the 2000 Census. Then almost a year later while the unemployment rate was still high around 9 percent after the 2010 Census forms should have been returned, in-person interviews were necessary. Since this entire period pretty much coincided with the Great Recession, the Census Bureau was able to choose enumerators from a large population of unemployed persons, many of whom were well educated professionals out of work. For example, on my teams there were some pretty sharp marketing professionals, a number of real estate agents as well as an independent documentary film producer.

 

But now the unemployment rate is at levels not seen since the late 1960s so there are not many people available to work as census foot soldiers and those who are available may lack the needed skills. First takeaway: The 2020 Census may be of lower quality than the 2010 Census because of the lack of quality enumerators. Although the Census Bureau no doubt is aware of this issue, they missed -- courtesy of the government shutdown earlier this year -- a crucial field test / dress rehearsal of a new technology that is intended to increase the efficiency of data collection. And should problems with the new technology appear during the final dress rehearsal later this year, there probably will not be time to fix it before it needs to be operational. And another factor is that the gig economy -- think Uber, Lyft, TaskRabbit, etc. -- was clearly not as developed then as it is now so even those who may be available to work as enumerators may already have work. Keep in mind that when the 2010 Census was staffing up, Uber was just getting started (it was founded in March 2009), Lyft didn't come along for a few more years, and TaskRabbit was still a kit as RunMyErrand.

 

It is certainly conceivable and probable that many drivers for ridesharing services and other gig economy workers will become enumerators at one point. The 2010 Census added more than 560,000 intermittent workers as each phase of the Census affected the overall job and employment numbers. Second takeaway: there may be some bumpy employment and job numbers as the 2020 Census staffs up that may not necessarily be consistent with what private employers are experiencing.

 

Final takeaway: if staffing executives think recruiting temporary employees is difficult now in today's environment of low unemployment, it may get tougher as the government begins to vacuum up qualified  people for the different phases of the 2020 Census.

 

March 2019 (published April 5, 2019) return to top

 

Did an interest rate inversion really happen?

 

Almost a year ago we alerted you to a potential pending interest rate inversion, which is often believed to be an advance signal of a recession. And just two months ago, we revisited the subject.

 

And soon after Federal Reserve Board's March meeting of its committee that sets the fed funds rate, you may have heard the financial / business news media report that an inversion had indeed occurred and a recession is coming ... but did an inversion really happen?

 

By means of a quick review and oversimplified, an interest rate inversion is when short-term interest rates are higher than long-term rates (or when long-term rates are lower than short-term ones). The reason that this may signal a pending recession is because the money markets believe that the longer term prospects for the economy are weaker than in the short term, and therefore longer term interest rates fall below the shorter term rates.

 

Most pundits seem to agree that the interest rate for 10-year treasuries is a proper proxy for "long term." But the devil is in what is defined as "short term" ... before the March meeting of the Federal Open Market Committee, or FOMC that determines interest rates, many financial professionals used two-year treasuries as a proxy for "short term."

 

When the FOMC did not raise interest rates at the March meeting and said they probably will not for the remainder of 2019, many saw it as a sign of a weakening economy and bid up short-term treasuries to above the ten-year treasuries.

 

But what the financial / business news media failed to mention was that the yardstick was changed. Instead of comparing rate of 10-year treasures to two-year treasuries, an interest rate inversion did indeed occur when compared to the three-month treasuries. An inversion did NOT happen with the two-year treasuries. This is not to say that an inversion with the three-month treasuries does not seem to predict a recession as the charts demonstrate.

 

It may be difficult to discern that the comparison with the three-month treasuries inverted, the trend is clearly visible with a third chart of a the trend from 2018 to the present. (It should be pointed out that data are daily values of the differences between the interest rates.)

 

Regardless of the interest rate inversion, the big question many are asking is what does the Fed know to move them to leave interest rates unchanged that the rest of us do not? Did weak job growth numbers in January and February spook them into inaction?

 

There's another thought floating around that the yield curve is foremost a predictor of Fed monetary policy rather than recessions that are caused by a credit crunch due to rising interest rates. According to that premise, the yield curve either approaching an inversion (10 year/2 year treasury rates) or already has inverted (10 year/3 month treasury rates), could be the main reason that the Fed recently announced that they are not likely to raise rates in 2019.

 

February 2019 (published March 8, 2019) return to top

 

How permanent placement agencies and executive search services doing ...

 

Although temporary help services are by far the largest component of what officially is considered employment services, there are two other components. One is professional employer organizations (PEO) and the other is the combined category of employment placement agencies and executive search services, as it is officially labeled.

 

Although temporary help services are by far the largest component of what officially is considered employment services, there are two other components. One is professional employer organizations (PEO) and the other is the combined category of employment placement agencies and executive search services, as it is officially labeled.

 

The Federal Reserve Board's latest Beige Book that was published two days ago continues to see a very tight labor market in areas of the country for a wide variety of jobs that would indicate a growing need for perm placement and executive search services. In addition, when ManpowerGroup, with its vast resources tracking global staffing sector developments, says during its 4Q 2018 earning conference call  that "we're adding recruiters here in the U.S. because we think the market will be good here in the U.S." for their professional resourcing and project solutions division, it's time to pay attention.

 

Employment / jobs trends can be a good proxy for the strength of a sector, but the perm placement / executive search sector presents challenges for using that metric. Unfortunately, 'number of placements' is not an officially measured government statistic. 

 

Mainly, advancing technology translates into higher productivity that translates into more business activity with either the same number or fewer people, i.e. employment / jobs. Although the human element cannot be totally removed from the business of perm placement and executive search, technology can produce a slate of viable candidates in a matter of minutes or less. In addition, there is a certain amount of perm placement that takes place under the auspices of temporary help services as temp-to-perm services.

 

Regardless of the limitations of applying job growth as a proxy for sector strength for perm placement and executive search services, it is interesting to see the trend with its employment. As expected, a comparison of the trends with temporary help services and perm placement / executive search jobs follows roughly the same trends, although growth in perm placement/ executive search jobs appears to have leveled off for the last several years. This likely could be the result of productivity increases brought about by greater technological utilization.

 

And the comparison of of the trends for total nonfarm  and perm placement / executive search employment shows the same general trend. The number of perm placement / executive search jobs has remained fairly stable since late 2014 while nonfarm jobs continued to increase.

 

But, overall post-recession job growth for perm placement / executive search exceeded that of nonfarm jobs from their respective nadir, or low point. but then again one cannot expect nonfarm jobs, which is about 500 times larger in terms of its number of jobs to increase at even close to the same rate as its much smaller sub-component.

 .

January 2019 (published February 1, 2019) return to top

 

Latest on our two favorite indicators that give advanced notice of a recession ...

 

Two of our favorite indicators that move in advance of a recession are still not showing an immediate threat of recession, but continue to move closer to critical levels.

 

The first one is our version of the Beveridge Curve, which we last looked at a year ago in January 2018. The Beveridge Curve is the relationship between unemployment and job vacancies. Typically, when there are a lot of unfilled job vacancies it is because people are working and unemployment goes down; conversely, if there are not a lot of job vacancies, people cannot find jobs and unemployment is high. The reason we believe this relationship can work as an early sign of an upcoming recession, is that job vacancies fall and unemployment goes up during a recession.

 

But before that happens both trends tend to stabilize and remain flat before changing direction.  As the latest trendlines show in the chart -- Incidentally, there is no issue when the two trendlines cross -- it's just a statistical convenience that we use the same scale -- it appears that the unemployment rate has been essentially unchanged for the past few months as job vacancies may be beginning to level off, but it's really two early to tell if this is just monthly volatility or an actual trend. But, the job market continues to be very tight and vacancies high -- just take a look at our most recent summation of the Federal Reserve Board's Beige Book, which is an anecdotal look at employment and economic conditions around the country.

 

Another indicator that seems to be an accurate predictor of a recession is commonly referred to as an interest rate inversion, which we last looked at In April 2018.  Oversimplified, it's when short-term interest rates are higher than long-term rates (or when long-term rates are lower than short-term ones). It may be helpful to you to review our full discussion of how this trend predicts a recession.

 

Although it certainly appears as we are heading for an inversion, the Federal Reserve Board's recent announcement that they may ease up on interest rates increases in 2019 may avert an interest rate inversion.

 

In conclusion, although these two indicators appear to be heading into pre-recessionary territory, the economy is not there yet.

2018

December 2018 (published January 4, 2019) return to top

 

What temporary workers are doing and where they are doing it ...

 

In mid-2018, the Bureau of Labor Statistic published the topline results of a special, but periodic, supplement to its monthly survey that queries people regarding their employment situation, which is officially called the current population survey (CPS), but often referred to as the household survey. It is from this survey that asks about the employment status of people and from which statistics such as the unemployment rate is derived. In May 2017, several questions were added to drill down into people's job situation focusing on "contingent and alternative work arrangements" as this special supplement to the CPS is titled. The last time this supplement was administered was in 2005.

 

Instead of detailing the several different specific types of contingent and alternative work arrangements as defined by BLS, we will compare people employed by temporary help services and people with so-called traditional employment relationships.

 

As you will observe in the first set of pie charts, the distribution of occupation is somewhat different for temporary help workers and those in traditional relations in two major occupational groups. Production, transportation, and material moving occupations, which includes manufacturing as well as warehousing jobs, is nearly 40 percent of temporary help workers, but only about 12 percent of those in traditional employment relationships. Conversely, management, professional, and related occupations composes about 22 percent of temporary help workers compared to almost 41 percent of those in traditional employment relationships.

 

To drill down further after looking at temporary workers' occupations, it follows that more than 32 percent of them are at manufacturing companies; this is in contrast to only 11 percent of workers with traditional employment relationships are in manufacturing. However, almost 27 percent of temporary workers are assigned to professional and business services compared to only about 11 percent of people in traditional relationships. As for the combined education and health services sector, only 15 percent are he workers in that sector are temporary workers while 24 percent are those employed via traditional arrangements.

 

And as the second set of pie charts clearly illustrates, nearly three-quarters of temporary workers (74 percent) are working in only major three industrial sectors while less than half (about 46 percent) of those in traditional employment relationships are in those same major industrial groups.

 

Although staffing services have found success in servicing other industries / sectors, a majority of assignments are in only those three groups.

 

November 2018 (published December 7, 2018) return to top

 

It's a giving time of the year ...

 

Last month, I was pleasantly surprised by the response to this request. But, since it was the second tiem in this section, perhaps some of you missed it -- and I want to make sure everyone has an opportunity to support this most worthwhile porject.

 

Through this monthly employment report, it has been my goal since for the past 15 years or so to provide an unbiased independent view and analysis of the employment and jobs situation with a focus on the staffing sector. And by looking at the stats from the email distribution service I use and feedback from readers, it appears that I have been successful for this free report. If you just noticed I sneaked in the word "free" pat yourself on the back for being very observant.

 

There are no plans to start to charge for this report -- but I do have a favor to ask.

 

Since I arrived in Boone, NC, coming up on five years ago, there is a non-profit, pay-what-you-can restaurant I go for lunch. It is F.A.R.M. Cafe (Feed All Regardless of Means) and a 501 (c) (3) organization with the goal ".. to build a healthy and inclusive community by providing high quality & delicious meals produced from local sources, served in a restaurant where everybody eats, regardless of means." We -- I can say "we" because I am now on the board of directors -- do not turn away anyone; if someone cannot pay, they can work for an hour in exchange for a meal. As with most, if not all, small local non-profits, revenues from daily operations only partially covers our expenses.

 

Therefore, I am asking my readers and followers to make a donation -- no limit. Go to F.A.R.M. Cafe to learn more about us and then hit the "Donate" tab. As I learned in sales training the first month I was hired by a staffing company more than 30 years ago, ask for the order. This is me asking for a donation -- Bruce.

 

Latest Beige Book offers insights to staffing services trends around the country ...

 

In case you missed it, the Federal Reserve Board's periodical recap of the nation's economy -- commonly referred to as the Beige Book --  was published two days ago. We've taken a 15,000-word document and distilled it down by two-thirds, focusing on comments and developments regarding staffing services, wage and employment trends, and sectors / industries relevant to staffing services. Overall, there were numerous reports of overall wages rising about three percent. If the following statements are intriguing to you, then you owe it to yourself to read our summation of the last Fed Beige Book of 2018.

  • In at least one area of the country, "Most staffing firms reported increases in bill and pay rates, ranging from low single-digit increases to 10 percent ..."

  • In another area of the country, "... staffing firms in markets with lower unemployment rates report that their average wage is up as high as 6.5 percent over the prior year."

We do this as a public service for our readers for free although donations -- see first item above -- are certainly welcome and accepted.

 

October 2018 (published November 2, 2018) return to top

 

Uber is getting into the staffing business.

 

In a move that some are thinking could be a way for Uber to demonstrate it is diversifying its business ahead of an initial public offering planned for next year, transportation service Uber has created Uber Works. With a large database of drivers, Uber  looks to be pitching it as a business-to-business service ("a flexible, on-demand supply for our business partners") that is reportedly to provide a temporary workforce for corporate functions and special events with security guards and waiters.

 

It has been reported that after a trial run in Los Angeles, Uber Works is under development in Chicago where they are recruiting for a "City General Manager - Special Projects" to build a team and prospective candidates should have a "strong interest in the on-demand labor space." Uber Works, which will operate "as a start-up within Uber", is reportedly under the umbrella of their "Head of New Modalities" division. It is lead by a Uber executive that joined Uber in 2011, currently based in Washington, DC, and she was awarded that title just this past summer.

 

It will be interesting to watch how Uber will implement this new business. Although occasionally challenged, Uber drivers are classified as independent contractors -- how they plan to address the sticky and complex issue of misclassification of workers will be interesting to watch. As attention continues to focus on the "gig economy" -- the new term that appears to replacing the term "permatemps" of  the late 1990s -- so will the risk for employers. Yahoo Finance just posted a lengthy article about this subject yesterday, November 1, and the title says it all without saying it is a reason to use a staffing company: The Growing Gig Economy Brings New Worries for In-House Counsel.

 

Heh readers, it's time.

 

Through this monthly employment report, it has been my goal since for the past 15 years or so to provide an unbiased independent view and analysis of the employment and jobs situation with a focus on the staffing sector. And by looking at the stats from the email distribution service I use and feedback from readers, it appears that I have been successful for this free report. If you just noticed I sneaked in the word "free" pat yourself on the back for being very observant.

 

There are no plans to start to charge for this report -- but I do have a favor to ask.

 

Since I arrived in Boone, NC, coming up on five years ago, there is a non-profit, pay-what-you-can restaurant I go for lunch. It is F.A.R.M. Cafe (Feed All Regardless of Means) and a 501 (c) (3) organization with the goal ".. to build a healthy and inclusive community by providing high quality & delicious meals produced from local sources, served in a restaurant where everybody eats, regardless of means." We -- I can say "we" because I am now on the board of directors -- do not turn away anyone; if someone cannot pay, they can work for an hour in exchange for a meal. As with most, if not all, small local non-profits, revenues from daily operations only partially covers our expenses.

 

Therefore, I am asking my readers and followers to make a donation -- no limit. Go to F.A.R.M. Cafe to learn more about us and then hit the "Donate" tab. As I learned in sales training the first month I was hired by a staffing company more than 30 years ago, ask for the order. This is me asking for a donation -- Bruce.

 

September 2018 (published October 5, 2018) return to top

 

So, where are the workers coming from?

 

In our effort to demystify the employment picture, we are looking more closely at the labor force this month. Specifically, we are examining the size, participation rate, and employment status of the labor force by two major cohorts: those 55 years and older and those between the ages of 25 and 54, inclusive. And not to be accused of "burying the lead", here're the conclusions in the first paragraph: recent employment gains are coming almost solely from the older cohort -- and not just by a little, but by a factor of about ten. Yup, in the past 18 years, the number of employed who are 55 and older increased ten times greater than those 25 to 54. And, unless you closely follow age demographics (that's a big hint), the reason may not be what you think.

 

First, let's take a look at the cumulative change in the number of employed by those two age groups, using January 2000 as the base. From January 2000 to August 2018, the number of employed persons aged 55 years increased 18,516,000. For the same time period, the number of employed persons aged between 25 and 54 years increased only 1,897,000. Note how the recession barely changed the trend for the former and severely impacted the latter. (In case you are wondering why we chose to calculate these data in this manner of cumulative change, when done in a more conventional way -- change from the previous month -- the data charts to  very squiggly lines because of the month-over-month changes and makes it difficult to discern any trends. But, when the month-over-month changes are all summed from January 2000 to August 2018, the final figures for each cohort are the same as when calculated on a cumulative basis.)

 

If you conclude from the first chart that the recession negatively impacted the employment status of the 25 to 54 years olds, you would only be partially correct. Another reason would be how the demographic curve of the labor force changed and that can be seen by the middle chart. We need to take a little side trip now -- the definition of labor force which is people who are employed as well as unemployed. Furthermore, if a person is not looking for a job, they are no not considered in the labor force. No doubt this happens during a recession and for a period afterwards when people stop looking for employment because they believe no jobs are available.

 

Lastly, it's important to looking at the labor force participation rate, which is the labor force as a percent of the civilian noninstitutional population, regardless if the person is looking for a job or not.

 

The participation rate for the 25 to 54 year old cohort has generally been falling since from at least 2000 before reaching a nadir in late 2013 and again in late 2015 before starting to recover.  Note that in 2000, it was 84.0 percent and the nadir was 80.6 percent for this group and thus far in 2018, it has recovered to 82.0 percent. Clearly, this statistic -- at least for this age group -- does not vary greatly.

 

In contrast, the older group's participation rate increased from 32.4 percent in 2000 to 40.0 percent in 2009 and has basically remained at that level since that time to the present.

 

Since the participation rate for this older group has remained steady while the number of them who are employed has increased (refer back to the first chart), we can comfortably conclude that the reason is because there is simply a more of them.

 

Therefore, much of the employment gains -- and a persistently historical low unemployment rate -- can be attributed to more older people working.

 

August 2018 (published September 7, 2018) return to top

 

No charts or graphs this month...

 

One economic development that has had economists puzzling over is the lack of strong inflation, especially in the current environment of ongoing low unemployment. This is important because high inflation is an indicator that the economy is overheating and one way the Federal Reserve Board keeps inflation under control is by raising interest rates. "Inflation" is a general term and there are several metrics that attempt to measure it that the Fed studies.

 

Late in August, the Fed's held an annual economic policy symposium Jackson Hole, WY, where central bankers, academics, finance ministers, and other prominent financial market participants discussed this year's theme of "Changing Market Structures and Implications for Monetary Policy."

 

One piece of research presented by a Harvard associate professor and conducted with the National Bureau of Economic Research was entitled "More Amazon Effects: Online Competition and Pricing Behaviors." Although the 42-page paper is filled with statistical formulas and graphs, the academic paper suggests that "algorithmic pricing technologies" among both brick and mortar retailers along with the transparency of pricing via the internet has kept a lid on prices for consumer goods (read: low inflation) -- hence, "the Amazon effect." End of Jackson Hole Symposium discussion.

 

However, another explanation of the Amazon effect is that it may only be just-in-time supply chain systems on steroids that improve productivity from product development all the way to delivery to the end customer. As staffing professional and executives realize, many services provided by the staffing sector can be considered as 'just-in-time labor supply'.

 

Those in the staffing sector are more than aware of how vendor management systems / management service providers as well as development in the online labor market have and are disrupting staffing services, which we discussed in detail in May and June 2015 (click on the months to see those discussions). We did not make the connection at the time, but perhaps these systems and just-in-time labor supply aspect of the staffing industry are also helping to keep wage growth as well as inflation in check.

 

July 2018 (published August 3, 2018) return to top

 

Manufacturing revisited ...

 

We thought it long overdue to focus on manufacturing since it has been almost two years since our last visit to this major component to the employment economy.
 

In Q1 1989, when the manufacturing employment index was at its highest level, or zenith, from at least Q1 1987, manufacturing jobs were 20.2 percent of all private-sector jobs. In Q1 2010, when the manufacturing employment index was at its lowest point, or nadir, manufacturing jobs were 10.7 percent of all private jobs. As of Q1 2018 (the latest available data), despite the manufacturing employment index improving from its nadir eight years earlier, manufacturing jobs were only 10.0 percent of all private-sector jobs, ostensibly because non-manufacturing employment expanded at a greater rate.

 

Because manufacturing is one of the hot button political subjects, there are lots of 'facts' being banded about. But there is little disagreement that manufacturing share of gross domestic product (GDP) has continues to decline. The manufacturing share of GDP was 13.1 percent in Q1 2005 and, as of Q1 2018, it was 11.7 percent.


While looking at certain manufacturing metrics, we will use indices as not to be distracted by the raw numbers and measurements. All the indices presented therein have the same base year of 2009.

 

Regardless of the climate in Washington and the ever-changing tariff / regulatory environment, output per job, as seen in chart A below, in manufacturing has leveled off and have been pretty much unchanged since early 2010.  And manufacturing output, as seen in chart B has increased from early 2010. So how did total output grown while output per job has remained steady?

 

The obviously answer was to increase the number of jobs, or employment, which indeed has occurred as seen in chart A. And since more labor was used while the output per job remained unchanged, unit labor costs expanded, as seen in chart B.

 

So, if U.S. manufacturing is going to continue to increase output, it either has to increase productivity, or output per job, or add more labor, which is the path that it is currently taking. 

 

But, as unit labor costs increase, as seen in chart B, due to an increase in employment, manufacturers may eventually invest more in automation in order to control labor costs (which today many employment market observers connect with artificial intelligence, but we digress).  This will result in more output per job and lower labor costs per unit produced. But until that occurs, the path that manufacturers are choosing to increase output is by adding jobs, or workers since output per job, or productivity, appears to have been stalled since early 2010.

There are several informal theories why growth for output per job, as well as overall output in the next chart, has leveled off. One is that this flattening may be attributed to it being at a historically high level, a point that many critics fail to mention. Second, the leveling off now could be indicative of a technology plateau and / or under investment in infrastructure supporting manufacturing. We must also consider how the change in the mix of industries affects output and output per job with a shift toward higher value-added, capital intensive manufacturing (think electronics) and away from lower value and more labor intensive industries (think textiles and apparel).

It should come as no surprise that manufacturers and most other employers continue to face -- to put it politely -- challenges in adding to their labor force in today's environment of historically low unemployment. (This issue was discussed repeated by the Federal Reserve Board's most recent Beige Book published about two weeks ago.) Increasing output as well as productivity, or output per job, via automation / technology can be difficult and expensive and those are investments manufacturers may not be willing to make, especially with the air heavy with uncertainty in Washington. The other option is to bring in more staff, at which output can continue to rise and if being judicious when adding to staffing levels, output per unit labor costs can be reduced. Does that sound familiar? It's straight out of temporary help service selling 201!

June 2018 (published July 6, 2018) return to top

 

More detail about the shrinking "gig economy"????

 

After a 12-year hiatus, the U.S. Bureau of Labor Statistics revived its Contingent and Alternative Employment Arrangements report, which is a supplemental survey to its monthly Current Population Survey, or CPS, but more commonly referred to as the "household survey."

 

But, first a little history because I was active in the temporary help services sector at the time of the first C&AEA report when I was with the American Staffing Association's predecessor organization, NATS, with one "S" (National Association of Temporary Services). In March 1993, TIME magazine's cover story was entitled "The Temping of America" and it was -- to say the least -- not supportive of the still emerging temporary help services industry as well as the erosion of the traditional employer-employee relationship. Eventually, BLS decided to attempt to define and measure this development and I was tasked to liaison with BLS as their researchers went about creating a survey instrument. The first C&AWA survey was conducted in February 1997 and was replicated several times, the most recent attempt published last month.

 

But times change and what once perceived as a threat to the traditional employer-employee relationship and morphed into what some refer to as the "gig economy" -- think Uber, Lyft, Amazon Mechanical Turk marketplace, and other "gigs.". The topline results from the latest C&AWA report is that the gig economy is not as prevalent as is often reported by the media, which is quite understandable as the country is at record low unemployment levels with employers often scrabbling for workers.

 

Because of the changes and adjustments to the names and definitions of industries and sectors, the data from the three earliest reports do not necessarily fully align with the two previous reports, but we include all of the comparisons. Note how the portion of temporary help workers working in some sectors -- mainly manufacturing as well as education and health services -- has increased between 2005 and 2017.

 

The definitions of contingent workers and those in alternative employment arrangement used for the C&AWA report are: independent contractors, on-call workers, temporary help agency workers (the government's label, not ours), and workers provided by contract firms.

.

We plan to dive into more detail about the most recent version of this report once the micro data are released, but thought that the genres of activities of the work has changed for one defined element of contingent workers -- temporary help workers.

 

  May 2018 (published June 1, 2018) return to top

 

And now, time for some more squiggly lines ...

 

Last month in this space, we addressed how a possible interest rate inversion could be an advance sign of a recession. Ever vigilant on what is coming down the pike, we now add another measurement into the mix.

 

First, a brief explanation several major types of unemployment:

1) Frictional, which is simply normal employee turnover such as a worker who leaves a position before finding a new one or a college graduate who has not secured a job yet;

2) Structural, which is when a worker becomes unemployed because either their skill sets become outdated, the job is replaced by new technology, or the job is moved out of the country;

3) Cyclical, which is when workers are laid off because the economy slows down, or politely expressed as "economic instability;" and

4) Seasonal, which is for workers in sectors where demand, production, and employments are seasonal such as tourism, leisure, as well as some construction and retailing.

 

Oversimplified, the natural rate of unemployment (short-term) is the percentage of people whose unemployment is NOT caused by economic instability, but rather due to natural movements and developments in the workforce (frictional plus structural unemployment). The natural rate of unemployment can also be referred to as the "full employment" unemployment rate.

 

If the economy is slow or in trouble, unemployment dramatically rises above that natural level. No surprise that the unemployment rate rises a lot during a recession, as the chart illustrates. But also observe how the unemployment rate dipped below the natural rate of unemployment starting about two years before the onset of the 18-month 2008-2009 recession, stabilized about one year before the recession and then started to slowing rise, and then eventually breached the natural rate of unemployment just after the recession began and then increased in earnest during the recession.

 

Now note how the unemployment rate dipped below the natural rate of unemployment about 18 months ago at the end of 2016 and is currently further below the natural rate again, and also take note that the inflation rate has been slowly inching up since mid-2017. Although inflation is only slightly above at the Fed's target rate of around two percent, rising inflation is often considered a precursor to economic instability.

 

Although the unemployment rate did not rise above the natural rate of unemployment until the almost the end of the 2001 recession, that was a much shorter recession but the same general trend did occur. Also, how has technology reduced the time between jobs? More precisely, how has frictional unemployment been affected by the proliferation and acceptance of -- call them what you will -- online job sites, job boards, career resources?

 

The recession is not here yet, but it is a comin'. Of course it is coming ... but by paying attention to certain economic indicator may help determine how soon.

 

  April 2018 (published May 4, 2018) return to top

 

A better advance sign of a recession?

 

No doubt, business executives in all sectors are thinking about when the next recession will rear its ugly head. And it seems on almost a daily basis, we see something about an approaching interest rate inversion and that has historically been a fairly good indicator of a recession being just around the corner.

 

First, a quick definition of an interest rate inversion. Oversimplified, it's when short-term interest rates are higher than long-term rates (or when long-term rates are lower than short-term ones). "Interest rates" is a pretty broad term, so many pundits and economists (is there difference? but we digress) gravitate towards using the 10-year Treasury yields as a proxy for long-term and the two-year Treasuries for short-term. Longer-term bonds are considered a higher-risk investment because of the duration involved so their yields are typically higher.

 

To offset inflation, the Fed boosts interest rates. The intent is to slow down what it believes is an economy that is overheating and should be reined in. There's even an expression about this action taken by the Fed that is still used today that the late William Martin, a Fed Chair under five presidents (Truman, Eisenhower, Kennedy, Johnson, and Nixon), coined: "Take away the punch bowl just when the party gets going."

 

But when the shorter-term rates rise above longer-term rates, that's called an inverted yield curve and, as the chart shows, it has been a pretty accurate indicator of a recession when the difference between long-term and short-term rates drop below zero. Although not included in the chart, many financial experts feel when yields gap narrows to only 50 basis points (or 0.5 percent), which occurred a few weeks ago, it's going to continue to head lower and eventually lead to an inverted yield curve and a recession will follow.

 

Some say, including a number of Fed officials, do not feel a flattening of the yield curve is particularly worrisome or even unusual by historical standards for a variety of reasons. One such reason presented is that the economy is different today than in the past and the financial markets are fundamentally strong so rising interest rates and a flattening of the yield curve that may eventually become inverted will not result in a recession. That could be true, but probably is not. They said that the last time the yield curve started to flatten and eventually resulted in an inversion and subsequently there was a recession.

 

  March 2018 (published April 6, 2018) return to top

 

Changes in wages and salaries ...

 

Rising wages and salaries are closely watched by those looking for signs of inflation, but that may be a red herring, or perhaps only a pink herring. Although "cost-push" inflation -- for example,  inflation caused by rising wages -- does occur, it is generally seen as a short-term as well as a rare occurrence for reasons we do not have time to explore in further detail in this limited space. Therefore, the expansion of  the economy -- GDP continues to increase -- is likely driven by productivity increases despite the overall labor shortages. Although wages and salaries are indeed rising, significant increases are spotty both geographically as well as by skill level / occupation. Throughout most of the country and sectors of the economy wage and salary increases are generally described as "slightly" or "modest." (An overview of economic conditions throughout the country can be found here.) Apparently those spotty wage increases are being likely driven by increased value or a changes in skills called for by a sector or industry.

 

With that stated, the latest employment cost indices can provide some interesting strategic information that may be used for adjusting pricing strategies for staffing companies.

 

Buried deeper in the ECI data are how wages changed for different groups.

 

As seen in the chart, wages and salaries between major occupational groups tend to move in unison for the past several years.

 

Wages for all workers, as well as those in the service providing sector each rose 0.6 percent on a seasonally unadjusted basis. But wages for workers in the goods providing sector (a.k.a. blue collar workers) as well as for those in office and administrative support occupations, rose 0.5 and 0.7 percent, respectively.

 

The greater rate of wage and salary growth for some occupations can be an indication of qualified worker shortages that is translating into higher recruitment costs for businesses and companies needing those types of workers. Or "faster than overall" growth could be that because wages were so low in the first place.

 

This latest ECI data seem to track well with comments published in the latest Fed Beige Book, a summary of it that pulls out remarks relevant to staffing and IT staffing and solutions companies and can be found here. When Fed researchers talked with business owners and operators around the county in late January to February, they heard about rising wages but not alarmingly large except for a variety of some occupations in different areas of the country.

 

The evidence of the lack of significant wage "inflation" can be seen in looking at average hourly earnings. Although it is hard to discern a trend in the four squiggly lines in the second chart, there does not seem to be any outliers with the data in the last 18 months or so that would indicate significant wage increases. The wage increases for the past 18 months are only slightly more than the period from mid-2010 to early 2014.

 

Some believe that when average hourly earnings start to rise, the countdown starts to the next recession. Some say one year and others say five years. Let's face it, one to five years is not a prediction.

 

The current expansion started June 2009, which makes it 8 years and 9 months in duration; if it makes to to next summer, it will be the longest economic expansion in U.S. history. We are not saying that the economy is overdue for a recession nor are we saying that the current expansion will make it to ten years.

 

  February 2018 (published March 9, 2018) return to top

 

GDP and job growth -- what is GDP  telling us about the job market?

 

Since jobs are officially considered as a economic lagging economic indicator -- and GDP is a major economic indicator -- does it follow that GDP is a leading indicator of the job market?

 

First a little review. In brief, gross domestic product (a.k.a. GDP) is a broad measure a country's overall economic activity. Here's a good way to look at it: GDP = Personal Consumption + Business Investment + Government Spending + (Exports - Imports).
 

It is most often reported as the percentage change from the previous quarter. Since the GDP is the sum of the monetary activity of such a wide variety of areas that are made available on different schedules, it is reported in three phases: advanced estimate, second estimate, and third estimate, approximately one month part. Currently, the second estimate for GDP growth for Q4 2017 is 2.5 percent, meaning GDP increased 2.5 percent from Q3 2017. We include GDP along with other economic as well as employment indicators on our Economic Indicators webpage here or here for the mobile version.

 

So it may be help to look at the most widely report GDP figure -- quarterly change from the preceding quarter -- and the quarterly change in the number of jobs.

 

As the chart illustrates, job growth recovery lags after a recession ends. This trend is especially easy to see after the past two recessions. The red quarterly change in the number of jobs line does not begin to recover nor end up in growth territory -- above zero from negative changes -- until almost a year after those recessions were declared over. The reason for this trend should be well known to staffing marketing professionals and executives. Business is hesitant to hire and invest in more people as well as make a commitment for more employees until the recovery has a chance to prove itself. This is usually a period of good growth for temporary help services.

 

And just to muddy up the waters a bit more, the period between recessions is called an expansion. During the expansions, the change in the number of jobs is clearly in positive territory and so is GDP.

 

But the trend with change in the number of jobs and GDP as an expansion winds down and closer to the onset of and in the initial period of a recession is a little tougher to discern. Weakening GDP growth and weaker job growth seem to go hand-in-hand, indicating that fairly immediately prior to a recession GDP and job growth are coincident indicators, meaning they appear to occur roughly in tandem.

 

Since mid-2014, GDP growth appears to be weakening and so does job growth. But, as the chart clearly illustrates, GDP dipped below zero twice (and almost got to zero with only 0.1 percent growth in Q4 2012) during the current expansion, but job growth remained solidly in positive territory. Sort of an inverse to the reason that employers are hesitant to add to their own headcount when a recession ends until the expansion has a chance to prove itself, they are likely to want to preserve their human capital investment with employees that are already trained in case the downturn is only a hiccup.

 

However, growth for both indicators appears to be slowing. Tell us what you think the future holds (and when).

 

January 2018 (published February 3, 2018) return to top

 

What is our favorite recession indicator -- the Beveridge Curve -- telling us now?

 

It's been more than year since we last looked at the Beveridge Curve as a sign of an approaching recession. In September 2016, we concluded that "... absence of a catastrophic event that could tank the economy, we may not reach that corner [as in the economy turning the corner into a recession -- ed.] until later in 2017 or beyond." Obviously we were a bit pessimistic at the time, but not quite proven wrong -- at least, not yet.

 

The unemployment rate has clearly leveled off, but that does not necessarily indicate it's taking a pause before changing directions and rising. At under 5.0 percent, it may be lower than the economy's non-accelerating inflation rate of unemployment, which is also known as NAIRU level. NAIRU is the specific level of unemployment that is evident in an economy that does not cause inflation to rise up. But, anecdotal as well as some hard data seem to be showing that wages are rising in some sectors and with some demographic groups as competition for workers heats up. Regardless of which side of the ongoing debate if rising wages causes inflation or inflation causes wages to rise is the true reality, wages are rising.

 

Furthermore this recent leveling off of the unemployment rate does not necessarily indicate the trends are getting ready to reverse -- they have experienced several similar sideways motion for a few months during the current expansion. [Incidentally, there is no issue should the two trendlines cross -- it's just a statistical convenience that they use the same scale.]

 

There is a similar trend for the relationship between the unemployment rate and changes in private-sector jobs. Although the rate of growth for private-sector jobs has continued to remain fairly stable after quickly rising immediately after the recession, there appears to be some recent weakening; notice the recent peaking months are lower than the previous peaking months but the lows are actually a bit higher.

 

The items in each chart -- the leveling off of the unemployment rate and job vacancy rates in the first chart and the space between the end of the 2001 recession and the beginning of the most recent one -- deserve close monitoring.

 

Many people focus on the length of the recession and not the expansion, which is the period between the end of a recession and the start of the next one. So, where are we now in the expansion relative to past cycles?

 

For the 11 economic cycles from 1945 to 2009 when the most recent recession ended, an expansion has lasted an average of 58 months. There is a school of thought that the two recessions in the early 1980s, sometimes referred to as a "double-dipper," were not really two recessions, but a single event. Eliminate the 12-month expansion of 1982, and the average expansion since 1970 rises to 81 months.

 

However, the economy is fundamentally different now than in the 1940s, 1950s, 1960s, 1970s, 1980s, and even into the 1990s. Furthermore, if you accept the premise many of the efficiencies companies invested in starting in the 1980s (electronic data interchange, just-in-time systems, and supply vendor management systems) were able to improve efficiencies and create healthier companies, the end result should be shorter and milder recessions.  

 

Does this mean that the current 102-month expansion cycle has run its course? Again, if you accept the premise that the economy today is fundamentally different than the ones prior 2001, the current 102-month expansion we are currently in does not look very long-in-the-tooth. Although there are only three datum points, the average expansion from 2001 to the current time has been 97 months.

 

But, the wild card is how the current shifts in economic policy -- as well as proposed future political and regulatory shifts -- will play out and impact the economy.  As a traditional curse purportedly and suspiciously from China goes: “May you live in interesting times.”

2017

December 2017 (published December January 5, 2018) return to top

 

Could declining part-timers spell trouble for staffing services?

A little more than a year ago, a sender found it interesting "that part-time employment has barely budged from 2009 - 2016, hovering between 27 and 28 million workers for seven years."  At that time we examined that premised and found it to be correct. We concluded that the number of part-timers "...
has yet to return to pre- recessionary levels and it may never. The economy has and will continue to go under fundamental shifts as the nature of employment and jobs changes in this new economy. ... Today people have more and more alternatives to earn a good living other than having a job or being employed. The current measures and tracking of employment and jobs may be inadequate to capture these changes -- think Uber; think Airbnb; think eBay and Amazon. Some long-standing beliefs will change."

[FYI, full-time employment as tracked in these charts and as labeled by the U.S. Department of Labor as "persons who usually work 35 hours or more" and part-time as persons who usually work less than 35 hours." The overall cohort examined here is 16 years of age or older.]

The first chart looks at the raw numbers. Part-time employment (the orange lines) entered the recession at around 25 million recession and rose sharply during it to around 28 million. The first two charts confirm that the number of persons who generally work part time has been relatively unchanged between 27 and 28 million since the end of the recession until recently. Notice how the part-time employment is now at the lower end of the recent trend and is moving downward, but one part of a squiggly line does not necessary mean a trend. However, the trend for full-time employment has been steadily climbing since soon after the recession ended.

The second (and middle) chart plots a three-month moving average of year-over-year change that confirms that rate of change for part-time employment had hovered around zero, but appears to be now moving lower. (using conventional calculations such as sequential changes as well as annual change creates a 'static' line making it difficult to ascertain a clear trend). However, the three-month moving average for part-time employment has taken such dips before.
.
So does this mean that the economy had not been able to lower the number of persons employed part-time? The answer is an unequivocal "maybe."

By just examining the number of persons employed part-time only shows part of the trend.

The percent of part-time employment (the bottom chart) entered the recession at around 17 percent and understandably rose during the recession to a high of about 20 percent relatively soon after the recession ended. Do not forget that jobs and employment are officially a lagging indicator so it makes perfect sense that the trend didn't peak as well as change direction until after the recession was declared over and the economy entered an expansionary period. 
 
But, the part-time employment trend has yet to return to pre- recessionary levels and it may not, but is certainly trending downward as unemployment drops and businesses and employers find it increasingly important to "sweeten the pot" to draw workers into the full-time workforce, often from the ranks of the part-time workforce.

The implications for temporary help services are many as they lose a major portion of its workforce to businesses offering full-time jobs. Of course, "temp-to-perm" services should be playing a bigger role for staffing services. But by implementing a variety of recruiting and retention incentives to appeal to the widest variety of workers, successfully use innovative sourcing techniques, can convince their clients that bill rates need to rise in order for the staffing services to meet their needs, as well as being able to train / up-skill workers in an efficient and cost-effective manner are just some ways that staffing services will be able to find success in 2018.

November 2017 (published December 8, 2017) return to top

 

Latest Fed's Beige Book offers strategic planning guidance for staffing companies ...

 

If you received our email last week about the latest Federal Reserve Board's latest Beige Book -- and read our summation of it highlighting developments about and affecting staffing companies' interests -- then congratulations and you can skip down to the current November employment report below.

 

But, if you did not, then you may be keen to learn how the economy, employment, and wages have developed over the last six weeks or so on both a regional as well as industry / sector basis.

 

The Beige Book, so-named for the color of the cover when published in hardcopy, is a compilation of anecdotal information gathered via interviews with local key business contacts, economists, and market experts on current conditions in each of the Board's 12 district banks.

 

For example, the Federal Reserve Bank of Boston found that overall hiring was "modest, partly because of short supplies of labor, and wage increases were becoming somewhat more widespread. ...  At staffing firms, bill rates and pay rates have reportedly begun to rise at a faster pace, and clients were offering more generous signing bonuses, paid leave, and other perks to attract talent." This sentiment was echoed at the Federal Reserve Bank of Minneapolis that report, "A Minneapolis-St. Paul staffing contact said his firm was seeing "a ton of wage pressure this year," with increases of 5 percent to 7 percent."

 

And the Federal Reserve Bank of Chicago said, "To address the challenge of finding qualified workers, firms reported that they were raising compensation, increasing advertising for positions, and training less-qualified new hires. Hiring was focused on professional and technical, sales, and production workers. That said, a staffing firm that primarily supplies manufacturers with production workers reported little change in billable hours."

 

This is just a sample of the kind of information contained in our summation that is free and can be downloaded from here. In addition, you will be able to sign up for a notification when the next report is released.

 

October 2017 (published November 3, 2017) return to top

 

Latest employment projections focusing on temporary help services to 2026 now available ...

 

We've again put together a free, ten-page report pulling out information that we feel is very relevant to staffing industry executives. It's heavy on data in tables and graphics but not words -- that way we can pack in a lot information in those ten pages.

 

With the release of biennial employment projections covering 2016 to 2026, data are again available at a very granular level. It shows good future prospects for temporary help services that is projected to grow by 9.6 percent to 2026, which is greater growth than all employment that is projected to increase by 7.4 percent.

 

We include not just how specific jobs and jobs groupings fit into the temporary help services picture, but also show how those THS jobs fit into the overall job picture. 

 

For example, there were 711,900 transportation and material moving jobs in 2016, or about one in every four THS jobs, and by 2026 they are expected to increase 11.6 percent, which is faster than overall THS growth. Although only 6.9 percent of all Transportation and material moving jobs were within THS in 2016, this is expected to rise to 7.3 percent by 2026. And by drilling down deeper into the occupation grouping, we learn that 20.2 percent of a specific job with that grouping -- packers and packagers -- will be employed by THS by 2026.

 

But we don't stop with information about only temporary help services. Other information that staffing professionals can use for long-term planning include several tables that show the industries and sectors with the fastest as well as the largest numerical job growth And we also include information about occupations / jobs that are projected to have the fastest as well as the largest numerical growth.

 

The report, which is free, can be downloaded from here. In addition, you may find the previous report, which covered the 2014 to 2024 time period, enlightening how the landscape has changed in two years; it can be downloaded here.

 

September 2017 (published October 6, 2017) return to top

 

Will there be enough workers?

 

Recently we explored the apparent disconnect between low unemployment and fairly stagnant wages / low inflation as the Phillips Curve appears to no longer be functioning properly. With unemployment rate at or near historic lows, will there be enough workers available to fuel future economic growth? As we've seen through several sources, such as the Federal Reserve Board's Beige Book, there are many reports of labor shortages throughout many sectors in many areas of the country. Putting immigration issues aside for the time being, the question remains that when wages rise, where will  the workers come from?

 

Discouraged workers are those who are available and want to work but are not actively looking for myriad reasons including they do not think no jobs are available, could not find work, lack training, etc.. And because they are not actively looking for work, they are not counted as unemployed. As expected, the trend with the number of discouraged workers tracks with the unemployment rate -- as the unemployment rate declines, so does the number of discouraged workers and conversely as the unemployment rate increases, so does the number of discouraged workers. (Note: the series of discouraged workers only started in 1994.)

 

However, the trend of discouraged workers compared with the unemployment rate and the labor force participation rate is not as consistent. There had been a slight lag with the relationship between both the number of discouraged workers and the unemployment rate with the labor force participation rate. This is logical as more people -- resulting in a declining unemployment rate -- secure jobs so the labor force participation rate will eventually rise.

 

But that changed after the last recession. Prior, the labor force participation rate had remained fairly steady between 66 and 67 percent until the past recession when it slipped below 66 percent and subsequently fell to below 63 percent in late 2013 where it has basically remained despite the unemployment rate falling since late 2009.

 

And the same inconsistent trend occurred between the number of discouraged workers and the labor force participation rate both pre and post the last recession. Of special note is how the labor force participation rate continued to decline as did the number of discouraged workers. Some of that drop could be due to structural changes in the economy as displaced workers find it difficult or not even possible to find a new jobs because their skill sets are no longer relevant.

 

There are many possible explanations for the drop in the labor force participation rate -- and too involved to discuss in this space.

 

Suffice to say, one contributing factor is the decline in the labor force participation rate could due to a demographic shift as more people are retiring, which is evidenced by a rise in the number of social security claimants as well as those eligible aged 65 and older. In addition -- and at the other end of the demographic scale -- young people not seeing an abundance of opportunities during the recession, continued their education to obtain an extra degree (or two or three). Since the recession was over more than nine years ago, theoretically, these holdouts should be now active participants in the labor force. And the rise of a "gray cash economy" may also have an effect on these data.

 

With that stated, despite evidence, both anecdotal and data-driven, of people working longer and shifting demographics, questions remain if there are enough non-working persons willing or able to become active members of the labor force in the future to fuel the country's future economic growth.

 

August 2017 (published September 1, 2017) return to top

 

Potential explanation why wages do not appear to be rising as unemployment rates at record lows

 

Recently we looked at the apparent death of the Phillips Curve, which is the inverse relationship between unemployment rates and inflation. In brief, we concluded that the Phillips Curve does seem to be broken on a macro / national level, but still somewhat valid at a micro / detailed level in some regions and for some industries / sectors. To review that discussion that included several factors that influence wage inflation especially at the micro level, click here.

 

As you may be aware, some, but not all, economists have been scratching their collective heads why wage inflation has been below expectations in the current low unemployment environment. (The ones that are not puzzled by this either do not believe in "cost-push" inflation or, at the least, is not sustainable long-term. For those in this school, the current trend is not necessarily evidence of "wage inflation" underperforming, but is evidence that is isn't there. But we digress.)

 

There may be an answer -- or at least, a partial explanation -- for the lack of inflation in the current low unemployment environment. It's no surprise that low unemployment is being driven by the increase in the prime-age labor force, which is defined as those between 25 and 54. And that increase -- and please don't shoot the messenger -- is being driven "in particular, prime-age women and especially women without a college degree" according to two economists at the Atlanta Fed. They also discuss and separate the changes due to demographics compared to behavioral / cyclical changes.

 

The reason for the boom in employment for the less-educated is fairly easy to explain. Those jobs are usually the first to be eliminated during a recession and the last to be created as the economy improves. And here is where the analysis from others gets really interesting.

 

Those lower-skilled jobs tend to be concentrated in service industries that some believe do not attract men. Of course, plenty of men work in low-skill jobs. But the situation is more than men not willing to work in certain jobs as The Economist magazine reports that researchers point out "there is a correlation between the number of women an industry employs, as a percentage of its workforce, and how many non-managerial jobs it has recently created."

 

And now gender wage gap and labor force issues also come into play. Some postulate because a significant portion of lower unemployment is being driven because of the influx of women without college degree into low skill jobs and additionally factoring in the gender wage gap, overall wage inflation is not showing up as expected in the overall current low unemployment environment at the macro level.

 

If you wish to look at this issue in further detail, the Atlanta Fed macroblog post is here and The Economist's article, "Women alone are driving a recovery in workforce participation",  referenced is linked here.

 

With that said, there are wage increases in some sectors and / or regions, which could be a result of those sectors / regions are emerging that are driving the next stage of the recovery. For example, the impact of technology and the new preference for many consumers for buying "stuff" affects those industries / sectors in the business of selling and supplying that "stuff." But, supplying "experiences", which is of course a service industry, will continue to need lots of people and cannot be easily mechanized, although many are trying.

 

Do you have another view of this subject? Let us know.

 

July 2017 (published August 4, 2017) return to top

 

Is there anything wrong with a little self-promotion / "we told you so"?

 

It's summer, we are relaxing a bit, and with a new puppy to look after (R.I.P. labradoodle Izzy; long live labradoodle Louie!), we thought it expedient to bring back a past column. And since we have a number of new followers, we thought all our readers would be well served what we said a dozen years ago  -- and may give staffing executives an interesting insight of how staffing services improve the efficiency of the employment economy.

 

It was 12 years ago next week -- August 11, 2005 -- that we publicly labeled the then real estate boom a Ponzi scheme that will inevitably implode. Our tip-off was a Nobel Prize winning economic theory of how asymmetrical information influences economic markets. It is a sound economic theory that reinforces why businesses and companies should use staffing services.

 

To read my original treatise, which was published in the Financial Times, click here.

 

June 2017 (published July 7, 2017) return to top

 

What is the Phillips Curve and is it dead? ... the definitive answer: maybe, maybe not

 

Staffing and HR professionals should familiarize themselves with the Phillips Curve, which looks at the inverse relationship between unemployment and wage inflation. In a nutshell, low unemployment means high wage growth according to Phillips.

 

William Phillips (1914-1975) was a neo-Keynesian economist who spent a majority of his academic career at the London School of Economics. Other economists have built upon the Phillips Curve concept to look at overall inflation since the prices a company charges are closely influenced by its wage structure. Obviously, all of this has strong implications when it comes to setting monetary policy.

 

In the most recent edition of the Federal Reserve Board's Beige Book, there was an observation from the Federal Reserve Bank of Philadelphia that "Contacts from staffing firms in labor markets with lower unemployment rates have noted greater wage pressure, while contacts operating in markets with higher unemployment rates report minimal wage pressure." That almost sounds like a textbook definition of the Phillips Curve, but the author was probably careful not to call it that. That's because there is a fair amount of controversy associated with the Phillips Curve because many believe that the connection between low unemployment and wage increases and hence, general inflation is influenced by a host of other factors.

 

One current economic trend that has many somewhat baffled is that recently the Phillips Curve does not seem to be working, going as far as to say "The Phillips Curve Is Dead: Why Lower 'Unemployment" No Longer Causes Inflation". Unemployment has been low, but the expected wage growth / inflation has barely materialized, at least on a national basis.

 

There are several explanations for possible end of the Phillips Curve lead by  serious questions of the unemployment rate's reliability and ultimate value as an inflation indicator. For examples, the unemployment rate does not take into account the potential labor pool (if a person is not actively looking for work, they are not considered unemployed), the number of hours worked (the underemployed are considered employed, even if that means only working one hour a week), the quality of work (a person working well below their potential; e.g. a physicist flipping burgers is not unemployed, but we would venture to say that physicist would say they are), as well as taking into account growth in productivity.

 

As the economy transforms into another phase, looking at macro / national developments and trends could obscure what's going on and create a break of the Phillips Curve. But at a more micro / local level, the Phillips Curve does appear to be occasionally valid as the table illustrates. Although with a few exceptions -- that could be attributed to unique economic characteristics of an individual state -- the ten states with the lowest unemployment rates have significantly higher wage growth that the ten states with the highest unemployment rates.

 

And with the risk of being politically incorrect, the problems with some macro data can easily be illustrated by saying that the so-called "average" American citizen is about half male and half female (or more precisely, 49.1 percent male and 50.9 percent female), at least according to the 2010 Census.

 

May 2017 (published June 2, 2017) return to top

 

Tight Labor Market's Negative Impact on Temporary Help Services ...

 

Two days ago the Federal Reserve Board released the latest version of its Beige Book, which is a compilation of anecdotal observations about various aspects of the economy gathered by each of the Fed's 12 district banks via staff interviews with local sources in a wide variety of industries and sectors.

 

Although the original document is nearly 15,000 words, we distill it down to less than 5,000 words to focus on developments relative to the staffing sector, including IT staffing, as well as overall regional labor trends and other sectors of special importance to all staffing sectors.

 

The May Beige Book should be of special interest to staffing professionals and observers because it contained a number of comments about the tightness of the labor market and how temporary help services as well as IT staffing services are coping with the situation. Overall, business clients recognized the tightness of the labor market so staffing services are generally able to increase pay and bill rates.

 

The tight labor market appears to have hit New England staffing services especially hard: "All of the contacted staffing firms in New England saw revenues decline year-over-year for their temporary placements, while one respondent saw an overall increase in revenue because of strong activity on the permanent placements side of the business. Although one firm recently lost a big client and seeks to broaden its listings, the revenue declines mostly reflect difficulty recruiting applicants."

 

The section contributed by the Federal Reserve Bank of Cleveland, which covers Kentucky, Ohio, and parts of Pennsylvania and West Virginia, reports "Banking contacts noted significant wage pressure for IT staff and compliance personnel. High turnover remains an issue in the freight transportation industry. In order to retain drivers, one firm increased driver pay by 3 cents per mile, equating to a 7.5 percent wage increase. Attracting qualified applicants for low-skilled manufacturing jobs is difficult, and many newly hired workers prove to be unreliable. That said, competition for low-skilled workers is strong and is driving up starting wages."

 

And this Beige Book offers some insights on how some staffing services are coping with the tight labor market. "Firms are brainstorming and trying new ways to recruit people to fill their clients' jobs. Two firms are spending more money on recruitment. Two firms are working with non-profits to find and attract more qualified employees. One firm hired an additional internal staff member who will focus on social media as a recruitment tool. Two firms raised their referral and signing bonuses and one firm will pay college tuition for qualified employees to receive a degree related to their job. [However,] Looking forward, staffing firms are not as optimistic as they were last quarter."

 

To see our summation -- and to sign up to receive future summations -- go here.

 
April 2017 (published May 5, 2017) return to top

 

Another Way to Look at Labor Market Slack ...

 

Slack in a labor market is an interesting concept. Technically, it's defined as the difference between the unemployment rate and the natural rate of unemployment, and a complete explanation is beyond the scope of our brief opening analysis. So, let's look at this concept of slack in a different way. There are two primary components of labor market slack: 1) people who want to work full-time but only working part-time (often referred to as underemployed) and 2) hidden unemployment, which consists of people not actively looking for work -- and therefore not officially considered as unemployed -- but would join or rejoin the workforce if they think they could get a job.

 

But here's a different way -- and one not necessarily officially recognized -- of looking at labor market slack. It incorporates two very different measurements of employment and jobs of different aspects of the labor and job market. As you may know from reading our reports, the monthly employment situation is actually composed of results from two separate and distinct Bureau of Statistics programs. One, the current employment statistics program, or CES, but often referred to as the jobs report, surveys a sample of employers and asks how many paychecks they issued; the other is the current population survey, or CPS, but often referred to as the household survey, queries people regarding their employment status. Since these two programs are looking at different aspects of the employment / jobs economy, they do not get the same results. This is why in any given month, more people may report that they are employed than employers say they have jobs, or vice-a-versa. Although it rarely happens, there have been the isolated occurrence of employers adding jobs while fewer people report they have a job.

 

If an employer issues a paycheck, regardless for full-time or part-time work, it counts as a job  for the CES so if they have one employee who worked five hours during the survey week and another who worked 40 hours, that is counted as two jobs. Or if one employee worked three hours, another worked nine hours, and a third worked 15 hours, that is marked as three jobs by the employer.

 

On the other side of the employment situation, if a person worked and was paid, they are considered as employed, regardless if they worked and was paid for five hours in a week or worked a full 40-hour week.

 

So, we thought it would be a good idea to look at the number of jobs per employed person over time. And we offer a disclaimer that these two data series -- the CES and the CPS -- technically should not be compared to each other, but change in the ratio between the two series is an interesting exercise nevertheless.

 

As the chart shows, from at least 1998 to early 2000, as the economy was doing well, the number of jobs per employed person trended downward but began to rise before the recession of 2001 hit. Then after the 2001 recession ended, the number of jobs per employed persons began to rise until leveling off about half way through to the start of the next recession, which many have labeled as the Great Recession because of it lasting 18 months. 

 

Then after the end of the Great Recession, the ratio began to rise again, but not a steeply as after the previous recession, perhaps because it was already at a relatively high level. During 2010 it began to decline until early 2016 when the ratio leveled off and has been relatively unchanged since then.

 

What does this all mean? Since this ratio is not really part of any official economic indicators, we can only make some conjectures. People are now working at fewer jobs per person during the second half of economic expansion between the 2001 and Great Recessions, but more than expansion prior to the 2001 recession. And the recent leveling off of the jobs per person ratio could indicate a new "normal" and since it's at a level lower than before the Great Recession, there could be fewer jobs per person now, there are fewer people qualified for the jobs that employers are creating, there is insufficient slack in the labor market to absorb the number of jobs, and / or people don't need to be working at more than one jobs as much. Or, and taking into considerable the two recessions were ten years apart, the sharp rise in multiple job holders after the 2001 recession could have been a function of the number 16-to-25 year olds in the labor pool who are more likely to have part-time jobs, ostensibly because of working schooling.

 

What do you think? Let us know here.

 

March 2017 (published April 7, 2017) return to top

 

What is the Beveridge Curve telling us now?

 

For many years we have been looking at the Beveridge Curve as a sign of an approaching recession. We last looked at our version of the Beveridge Curve last September and concluded "a recession could be just around the corner. It just depends on what your definition of 'just' is." With a change of administration, political parties in charge and proposed economic policies, we thought it would be a appropriate time to take a snapshot of this measurement.

 

The unemployment rate has pretty much leveled off, but that does not mean it's taking a pause before changing directions, or does it? At under 5.0 percent, it could be past its NAIRU level, or the non-accelerating inflation rate of unemployment. NAIRU is the specific level of unemployment that is evident in an economy that does not cause inflation to rise.

 

As you may be aware, inflation is a major focus of the Federal Reserve Board and weighs heavy in its interest rate decisions. Less than four weeks ago, their Federal Open Market Committee's statement recognized that "Inflation has increased in recent quarters, moving close to the Committee's 2 percent longer-run objective ... " However, despite "Market-based measures of inflation compensation remain low ..."  the Fed feels that "labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term." The FOMC's full statement can be read here.

 

Furthermore this recent leveling off of the job vacancy and unemployment rates do not necessarily indicate the trends are getting ready to reverse -- they have experienced several similar sideways motion for a few months during the current expansion. [Incidentally, it is not an issue should the two trendlines cross -- it's just a statistical convenience to use the same scale.]

 

There is a similar trend in in private-sector jobs. Although the rate of growth for private-sector jobs has continued to remain fairly stable after quickly rising immediately after the recession, there appears to be some recent leveling off.

 

And as we saw earlier in 2016, the items in each chart -- the leveling off of the rates for unemployment, job vacancy, and private-sector job growth -- deserve vigilant monitoring.

 

February 2017 (published March 10, 2017) return to top

 

So how big is the labor force?

 

For the past two month in this space we addressed labor force trends by focusing in on the trends by different ago groups or cohorts. One astute reader pointed out that we were remiss by not discussing a very basic point -- the actual definition of the labor force. (We would like to point out that this was before the president, in the State of the Union address last week, brought up the issue of labor force size.)
 

The answer is pretty straightforward, sort of. The labor force is all individuals 16 years of age and older who are either employed or unemployed. That's where the straightforward part pretty much ends.

 

To be considered as employed, the answer is fairly simple -- the person did at least one hour of work as a paid employee or "worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family." There are further explanations that even if a person had a job, but did not actually work during the survey week because of being on vacation, bad weather, etc. regardless if the person was paid or unpaid, that counts as being employed.

 

The situation gets a bit more complicated defining unemployed. It boils down to the person had to be looking for work at one point during the immediately four weeks prior to the survey week. Basically, the person has to be actively looking for work to be considered as unemployed. If not, they are not counted as part of the labor force. However, if the person is waiting to be recalled from a layoff and did not look for other work for that period, they are still considered as unemployed.


But, the reality of the situation can be a bit different. Often when people cannot find suitable employment, they stop looking for work. So if they stopped looking more than four weeks but consider themselves as unemployed, officially, they are no longer in the labor force. This is why other metrics such as the labor force participation rate and employment-to-population ratio are important to keep an eye on.

 

The question remains -- and will unless the wording of the monthly survey changes -- how many of those sitting on the sidelines and officially considered as 'not in the labor force' will eventually return to the labor force? It's not an easy answer to come up with but apparently, buried deep in BLS measurements are those not considered in the labor force but want a job. So, out of the 94.4m not in the labor force, about 5.7m say they want a job.

 

 

 

 

 

January 2017 (published February 3, 2017) return to top

 

Employment growth by age cohort ... part two

 

Last month in this space, we examined the trends with different age groupings to determine which ones are growing faster than the others. We found that  the year-over-year employment growth for the 25 to 34 cohort -- a major portion of whom are millennials --  is indeed out performing all other age groups, which is good news for the ability for staffing companies to expand their workforce. If you wish to review that analysis, click here.
 

As one of our reviewers pointed out, just looking into the trends with the number of workers in various ago cohorts is not the complete story. So, and based on the feedback we received, we think a trip deeper into "the weeds" of labor force trends may be in order.

 

The top chart looks the trends from 2006 to 2016 with the size of the labor force 20 years old and above, their labor force participation rate, and the employment-to-population ratio of this group. The trends are fairly easy to discern: 1) the size of this labor force expanded, 2) their labor force participation rate, which had been fairly stable before the recession and began to decline during the recession, has somewhat stabilized in the past couple of years, and 3) the population-to-employment ratio, which declined dramatically during the recession, has been making a recovery -- albeit slowly -- for the past few years.

 

Just looking at the 20 years old and above cohort doesn't give a very detailed picture of the situation, but looking at their participation rate in the labor force should provide a little more granularity..

Note the seasonality the youngest group -- those 20 to 24 years old -- peaks in June and July as well as higher leading into and during the recession, but fairly steady since its conclusion. Perhaps after the end of the recession, more were able to continue their education but many still work during the summer.


At the other end of the age spectrum, the 65 and over group has steadily increased their participation rate but still is the lowest ratio of all the other groups (note that the scale for this group is on the right-side y-axis). And the group just below the oldest -- the 55 to 64 year olds -- has been very steady in their participation in the labor force, ostensibly as their careers are ending and they leave at a fairly stable rate.

 

While the bursting of the financial bubble may have forced some boomers (technically, those 51 years old to their early 70s) to stay in the workforce, the participation rate for those 65 years old and above has been rising steadily since the late 1990s, implying something more than household finances are in play. Some researchers have labeled the workers seen in this phenomenon as "Encore Career," "Next Act," or "Third Act" workers, which means the increases in workforce participation rate are here to stay by those 65 and above and not just a residual from the last cyclical downturn.

 

All the other groups from 25 to 54 years old have all followed the same basic trend, with the labor force participation rate the highest among the 35 to 44 year-old cohort. Although the trend is subtle, the cohorts from 25 to 54 years old was steady leading into the recession, began declining during the recession until the past couple of years when it has appeared to somewhat stabilized.

 

With the unemployment rate at historic lows, the question remains where will the workforce come from to fuel more job growth. Although the labor force participation rate does appear to have some room to grow for the bulk of the workforce (the 25 to 54 year olds), productivity improvements may mean that more workers are not needed to increase production.

 

Nowadays, individuals retiring in their 50s or 60s may no longer want to work full-time, but also cannot see themselves playing golf or feeding the pigeons in the park for several decades. These "Encore Career" individuals may gravitate to new and different careers including changing a hobby into a business, provide mentoring that leverages their years of experience, or perhaps just a meaningful part-time job. And staffing services could find this group fertile ground for recruiting.

 

2016

December 2016 (published January 6, 2017) return to top

 

Employment growth by age cohort ... Are millennials the fastest growing group?

 

Recently a reader presented us with an observation seen in various reports that employment of millennials was the faster growing age group. And since this age cohort is also a major portion of the staffing industry's workforce, we thought it worthy to examine in closer detail.
 

First, we need to define millennials. Although some of the literature identifies this demographic group as between 18 and 34 years of age in 2015 while other sources are narrower with an identification of those between 25 and 34. However, every year people get older, so instead of trying to tracking this cohort backward, we will simply examine the changes in the trends for employment for various age groupings.

 

And it remains that two cohorts -- those between 20 to 24 and those 25 to 34 -- are important components to the staffing industry's workforce and therefore, so are knowing the trends for those groups.


The top chart looks at the year-over-year growth in percent of several different age groupings. Notice how the earliest group (20 to 24) experienced higher percentage growth before the recession -- in January 2007 this group's growth was second to only the 55 to 64 group. However, as the recession took hold, that youngest group experienced the greatest percentage decline while the older age cohorts -- 55 to 64 as well as 65 and older -- fared much better. Although the recession spared no single age cohort, clearly the younger age groups -- possibly because of their lack of experience, skills, and / or seniority -- suffered more than older workers. The next age cohort (25 to 34) was at about the same point in terms of year-over-year percentage job growth before the recession, was not as hard hit during the recession as the youngest group and recently is the second fastest growing and only bested by the 65 and over group.

But it is a markedly different story when looking at job growth by age cohort in terms of the change in the number of employed.

As expected, the shape of the trend lines for the number of employed roughly follows the trend lines for the percentage change. However, although the youngest group started off about in the middle of the pack in terms, their current position is pretty much at the bottom. One possible explanation is that with the employment situation improvements some of these 20 to 24 year olds are continuing their education and therefore do not have a job.

 

In contrast, the next cohort (25 to 34) is at the top of the pack in terms of year-over-year employment gains surpassing all other age groups. And this group has been pretty much at the top for this metric since the end of 2013. Although year-over-year employment growth for this group has been trending downward in the end of 2016 so have some of the other groups.

 

In conclusion, the year-over-year employment growth for the 25 to 34 cohort -- a major portion of whom are millennials --  is indeed out performing all other age groups, which is good news for the ability for staffing companies to expand their workforce.

 

November 2016 (published December 2, 2016) return to top

 

How are your markets doing?

 

The quarterly GDP (gross domestic product, or the sum of all products and services, minus imports) released earlier this week showed that the U.S. economy grew 3.2 percent in Q3 2016. More technically,  the "real" GDP was 3.2 percent higher in Q3 than the previous quarter. The "real" factors in inflation. There are other measures of GDP -- mainly "current dollar" GDP that is also referred to as nominal GDP. Take out the inflation factor, and Q3 2016 "current dollar" GDP was up 4.6 percent in Q3 2016.
 

It's an important distinction because current dollar GDP removes inflation and some consider it a more realistic measure of the world we live in. Because nominal or current dollar GDP is normalized into real GDP to take away the effects of inflation, it makes one year's data comparable to another year's data.

Therefore, we felt that a comparison of nominal or current dollar GDP growth by state would be of interest to our readers to see how the economy is doing in the more localized market. (States with the same change in GDP were given the same rank and the chart is organized by change in current dollar GDP for the year 2015 with the strongest at the top of the list.)

Because smaller measurements are subject to larger variations, state current dollar GDP can move more dramatically than the national GDP and impacted by developments in a single sector or even by a major employer.

Look at some oil patch state economies. For example, Oregon, which was at the bottom of the pack in 2013 and 2014, ends up at the top in 2015 and its high ranking continued into Q1 2016. Conversely, North Dakota was devastated by oil's collapse as it went from one of the country's top economies in 2013 and 2014 (ranked sixth with growth of 5.0 percent and second with growth of 7.1 percent, respectively) to one of the worst in 2015 ranking 49th with a decline in state GDP of 6.8 percent.

These data are also available in a market / metropolitan as well as by major sector basis. And if you want to get really granular, to benchmark your operations against your local market, see our Strategic Planning Tools described below.

October 2016 (published November 4, 2016) return to top

 

It all depends how you look at it ...

 

We received an email the other day commenting that the sender found it interesting "that part-time employment has barely budged from 2009 - 2016, hovering between 27 and 28 million workers for seven years."  But, is it true but perhaps more interesting how has part-time employment trended in relation to full-time?

 

[BTW, full-time employment as tracked in these charts and as labeled by the U.S. Department of Labor as "persons who usually work 35 hours or more" and part-time as persons who usually work less than 35 hours." The overall cohort used is 16 years of age or older.]

 

Part-time employment entered the recession at around 25 million recession and rose sharply during it to around 28 million. The first two charts confirm that the number of persons who generally work part time has been relatively unchanged between 27 and 28 million since the end of the recession. The first chart looks at the raw numbers.

 

The second (and middle) chart plots a three-month moving average of year-over-year change that confirms that rate of change for part-time employment has hovered around zero (using conventional calculations such as sequential changes as well as annual change creates a 'static' making it difficult to ascertain a clear trend).

.

So does this mean that the economy had not been able to lower the number of persons employed part-time? The answer is an unequivocal "yes and no."

 

By just examining the number of persons employed part-time only shows part of the trend.

 

The percent of part-time employment entered the recession at around 17 percent and understandably rose during the recession to a high of about 20 percent relatively soon after the recession ended. Take note that jobs and employment are officially a lagging indicator so it makes perfect sense that the trend didn't peak as well as change direction until after the recession was declared over and the economy entered an expansionary period. 

 

But, it has yet to return to pre- recessionary levels and it may never. The economy has and will continue to go under fundamental shifts as the nature of employment and jobs changes in this new economy.

 

Twenty years ago, the U.S. Bureau of Labor Statistics attempted to measure the so-called contingent workforce for the first time (economist Audrey Freeman is credited with first coining the the term "contingent work" in about ten years prior in 1985, but we digress).

 

Today people have more and more alternatives to earn a good living other than having a job or being employed. The current measures and tracking of employment and jobs may be inadequate to capture these changes -- think Uber; think Airbnb; think eBay and Amazon. Some long-standing beliefs will change -- after all, the Cubs finally won!

 

++++++++++++++++++++++

 

A closing comment ...

 

We don't think we need to remind everyone to vote. While talking to some friends recently, I mentioned that 'our national nightmare will soon be over.' Someone else commented, "No, regardless of the result, it's probably just beginning." I stand corrected.

 

September 2016 (published October 7, 2016)  return to top

 

Is the Beveridge Curve telling us a recession is right around the corner?

 

There are many indicators for an approaching recession -- many financial, some quite scientific, and others just plain wacky. For many years we have been looking at the Beveridge Curve as a sign of an approaching recession. We last looked at our version of the Beveridge Curve in February and ultimately concluded "of course a recession is lurking out there -- it's only a question of when. Although it looks like the next recession will hold off for at least the next 12 months, anything is possible. Regardless, whoever is elected the next U.S. president will likely be burdened with one."  It's been eight months since we said that so is the recession closer now?

 

The unemployment rate has clearly leveled off, but that does not necessarily indicate it's taking a pause before changing directions. At under 5.0 percent, it's could be at NAIRU level. No NAIRU is not the misspelling of a Indian jacket that gained some notoriety in Europe and America in the 1960's and 1970s, but rather an acronym for non-accelerating inflation rate of unemployment (NAIRU) is the specific level of unemployment that is evident in an economy that does not cause inflation to rise up.

 

Furthermoore this recent leveling off does not necessarily indicate the trends are getting ready to reverse -- they have experienced several similar sideways motion for a few months during the current expansion. [Incidentally, there is no issue should the two trendlines cross -- it's just a statistical convenience that they use the same scale.]

 

There is a similar trend for the relationship between the unemployment rate and changes in private-sector jobs. Although the rate of growth for private-sector jobs has continued to remain fairly stable after quickly rising immediately after the recession, there appears to be some recent weakening; notice the recent peaking months are lower than the previous peaking months and the lows are lower.

 

And as we saw earlier this year, the items in each chart -- the leveling off of the unemployment rate and job vacancy rates in the first chart and the space between the end of the 2001 recession and the beginning of the most recent one -- deserve closer monitoring.

 

Many people focus on the length of the recession and not the expansion, which is the period between the end of a recession an the start of the next one. So, where are we now in the expansion relative to past cycles?

 

For the 11 economic cycles from 1945 to 2009 when the most recent recession ended, an expansion has lasted an average of 58.4 months. Limiting the period somewhat from 1970, there have been seven cycles with an average expansion of 71.0 months. Since, June 2009, when the last recession ended and, by definition, the current expansion cycle started, it has now been 88 months.

 

However, there is a school of thought that the two recessions in the early 1980s, sometimes referred to as a "double-dipper," were not really two recessions, but a single event. Eliminate the 12-month expansion of 1982, and the average expansion since 1970 rises to 80.8 months.

 

Does this mean that the current 88-month expansion cycle has run its course? Not necessarily as there are no hard and fast rules.

 

Since 1945, there have been eight expansions shorter and three longer in duration than the current one.

 

To answer the question posed in the headline: of course a recession could be just around the corner.  It just depends on what your definition of "just" is. Considering the weakness of the construction / housing sector (see that section of our Economic Indicators that are regularly update) and a recession is defined as two consecutive quarters of declining GDP, absence of a catastrophic event that could tank the economy, we may not reach that corner until later in 2017 or beyond.

 

August 2016 (published September 2, 2016)  return to top

 

A different look at manufacturing ...

 

There is a lot of talk of how productivity improvements could be one of the root causes of manufacturing job losses. There is little doubt that manufacturing isn't what it used to be in terms of the number of jobs as well as productivity. But, how different?

 

This month we will look at a few different measurements of the manufacturing economy -- and although often mentioned in the media -- these metrics are often just footnotes or lightly mentioned as support to a bigger story. But, let us take a closer look at additional measurements of the manufacturing economy that many either do not bother to explore or gloss-over at best.

 

We will use indices as not to be distracted by the raw numbers and measurements. All the indices presented therein have the same base year of 2009.

 

First let's look at the trend for manufacturing employment. No great surprise here as the number of manufacturing jobs has declined dramatically in the past 30 years. From 1987 to the early 1990s, there was a limited decline, and from mid 1992 to 2000 the situation was fairly stable and then manufacturing jobs began a serious decline before hitting bottom in late 2009. The situation has improved somewhat steadily since that time, but the growth clearly does not outpace the previous rate of decline.

 

In comparison, as the number of jobs has essentially declined for the past 30 years, the output per jobs has steadily increased. There have been a few hiccups along the way, courtesy of a few recessions. However, for the last five years or so from around 2011 to the present, output per job has leveled off while the number of jobs increased.

 

There are several informal theories why growth for output per job, as well as overall output in the next chart, have leveled off. Its flattening may be attributed to it being at a historically high level, a point that many critics fail to mention. In addition, the leveling off now could be indicative of a technology plateau and / or under investment in infrastructure supporting manufacturing. We must also consider how the change in the mix of industries affects output and output per job with a shift toward higher value-added, capital intensive manufacturing (think electronics) and away from lower value and more labor intensive industries (think textiles and apparel).

 

As expected, overall output has grown for the past 30 years, but more erratically. If one defines 'manufacturing growth' as the sector's total output, growth has been fairly steady since 2009, although output growth has slowed recently. As for unit labor costs, which are pretty much what it sounds like -- costs for labor per 'thing' manufacturer -- they tended to move in the opposite direction of output during times of economic uncertainty. This is likely because that during those periods, not as may 'things' are being manufactured if people are not buying them and the manufacturing workforce is not quite in timely balance with demand. Therefore, the unit labor cost rises as the output declines.

 

The countercyclical movement in per unit labor costs during "periods of uncertainty" reflects general risk aversion by management. Until management is certain that the market has picked up, it will cover increased output by offering overtime to existing workers. Only after they are certain that the uptick is the real thing will they hire new staff, at which point per unit labor costs go down. Does that sound familiar? It's straight out of temporary help service selling 101!

 

Because manufacturing is one of the hot button political subjects, there are lots of 'facts' being banded about. But there is little disagreement that manufacturing share of gross domestic product (GDP) has continues to decline. According to FRED® (Federal Reserve Economic Data), the manufacturing share of GDP was down to 11.8 percent in Q1 2016; ten years ago, it was 13.1 percent. And the  job losses are quite real as well. For that same ten-year period (from Q1 2006 to Q1 2016), manufacturing jobs declined by 13.3 percent, which represents a loss of about 1,890,000 jobs. The manufacturing job loss for 30-year period presented in the above charts (from Q2 1987 to Q2 2016) was 29.9 percent, or about 5,240,000 jobs.

 

And of course, there are many other non-manufacturing jobs that are closely linked to manufacturing, which will continue to be a vital part of the U.S. economy.

 

July 2016 (published August 5, 2016)  return to top

 

Is the labor market really tightening?

 

One trend we are seeing being reported with increased frequency is the apparent tightening of the labor market ... employers are saying that their companies' growth would be greater if they could find more qualified workers. In addition to this issue being discussed in the business media more, this theme has made it into the Federal Reserve Board's most recent Beige Book, (a summation of the latest edition highlighting comments about staffing and the sectors of most interest to those sectors can be found here).

 

Corporate executives are always finding reasons / excuses why they are not generating more revenue, but, at least, is the part about the labor market tightening true? The short answer is -- yeah, probably. Of course it depends upon the specific industry / sector, but by comparing the trends of hires to job openings, a picture of a tighter labor market seems to be emerging. And, just for grins, we laid the overall unemployment rate behind those two metrics.

 

As you can see, the number of private-sector job openings as well as hires has a bit of an inverse relationship with the unemployment rate. To state the obvious, during a period of rising unemployment, there is less hiring as employers hold back on creating new job openings. 

 

But in early 2015, the number of openings surpassed the number of hires and the gap appears to be widening.  (Trendlines were incorporated because the monthly data varies a bit month-over-month. so a trendline eliminates some of the statistical "static.")

 

The trend of openings surpassing hires as well as the timing is similar for professional and business services although the trendlines crossed in a little later than for all private-sector employment -- around mid-2015.

 

However, although the overall trend of job openings surpassing hires was similar in the manufacturing sector, the timing was clearly different. In manufacturing, the number of openings surpassed the number of hires much earlier than  overall private sector jobs as well as for professional and business services. The 'switchover' occurred much earlier -- late 2012 to early 2013.

 

We found this development quite curious, so what trend would emerge if we plotted manufacturing hires and openings against the total number of manufacturing jobs? The last chart is a result of these comparisons.

 

As seen in the lower charts plotting manufacturing, the number of manufacturing hires has only incrementally changed from early 2010 while the number of manufacturing jobs has increased, albeit fairly weakly, but have been essentially flat since early 2015.

 

Generally speaking, if the number of jobs increases while hiring is essentially flat, the number of openings would need to increase. And this is what appears to be occurring in manufacturing.

 

Currently, the number of manufacturing openings exceeds the number of manufacturing hires. In the last six-months (December 2015 to May 2016), the number of manufacturing openings has exceed the number of hires by about 76,000. For the previous six-month period (June 2015 to November 2015), this figure was about 36,000.

 

The employers filling open positions is more complex than this quick comparison between hires and job openings. For example, productivity -- in manufacturing as well as throughout the jobs economy -- has generally made large upwards gains resulting in more production with fewer employees, who, in turn, have different if not higher and more skills than their predecessors. In manufacturing, capacity is running around 75 percent, which is off the last high of 85 percent or so in the mid-1990s. How much pressure does this factor place -- or not place -- on manufacturers to create jobs immediately. If they can increase output immediately because of excess capacity, perhaps they are being more judicial in filling open positions.

 

 

June 2016 (published July 8, 2016)  return to top

 

Looking at a traditional and a new metric for Temporary Help Services, part two ...

 

Last month we looked at the portion of the job market occupied by temporary help services through two metrics: the jobs and the amount of payroll dollars. We received comments from a  number of our readers wanting to know a little more -- mainly, if the market share of temporary help services is higher or lower in right-to-work states. The question is there higher demand for temporary help services in markets where organized labor is encouraged or discouraged or is there lower or lower demand for temporary help services where labor laws make hiring and firing easier for employers.

 

In answering that query, we came across some interesting trends.

 

In terms of temporary help services jobs market share. There are 14 states with a job market share above the national average of 2.01 percent for the period under examination. Of those 14, nine -- or 64.3 percent of them -- are right-to-work states. And that leaves the 38 markets (we include the District of Columbia as well as Puerto Rico) below the national average of this metric. Of those 38, only 16  -- or 42.1 percent of them -- are right-to-work markets.

 

However, regarding the median point (the middle value in a series), there are only 14 right-to-work states -- or 26.9 percent -- in which temporary help job market share is above the median point of 1.72 percent.

 

In terms of the market share of payroll dollars, there are 20 states with a payroll market share above the national average of 1.16 percent. Of those 20, 11 -- or 55.0 percent -- of them are right-to-work states. Regarding the median point, there are 15 right-to-work markets -- 28.8 percent -- in which temporary help job market share is above the median point of 1.08 percent.

 

And wouldn't it be interesting to see how these two metrics shape up within a state ... market by market, county by county? Although right-to-work laws and regulations appear to have some influence on the concentration of temporary help services, the stronger driver is likely the amount of jobs in the industries and sectors that drive temporary help services.

 

[Technical note: the data presented are for the period from Q1 2015 to Q3 2015, inclusive. The jobs data are the average of those three quarters; the payroll dollar data are the sum of the payroll dollars for that period. BTW, West Virginia is now a right-to-work state as of July 1, 2016.]

 

SPOILER ALERT: HERE COMES THE PITCH -- AGAIN ...

 

Yes, we offer that service ... it is part of our Interactive Temporary Help Services Interactive Data Book and more information about it can be found here.

 

May 2016 (published June 3, 2016)  return to top

 

Looking at a traditional and a new metric for Temporary Help Services ...

 

The other day one of our subscribers asked us if the weakness in temporary help services earlier this year is sign that the economy is heading into a recession. After referring the reader to several of our past posts (short answer: the "Uber" economy, coupled with advances in technology could be acting to disintermediate staffing services from the staffing process and may be negatively impacting the number of temporary help jobs), the question got us thinking about temporary help services market share of overall jobs, which is sometimes also referred to as "penetration rate." Then, we started to think on a more granular level -- what does temporary help services's market share look like on a state-by-state basis. So we took a look and the first chart is the result.

 

[Technical note: the data presented are for the period from Q1 2015 to Q3 2015, inclusive. The jobs data are the average of those three quarters; the payroll dollar data are the sum of the payroll dollars for that period.]

 

It's certainly interesting to see how the jobs market share data 'clumps.' And also it's interesting to see which states and areas of the country have a greater concentration of temporary help jobs.

 

Then we started to think about a different measurement, one that we may not have seen before. What is the percentage of the temporary help services payroll dollars of overall payroll dollars? As the second chart shows, it's less than the job market share, which is logical considering parts of the jobs market serviced by temporary help services.

 

What is quite interesting, is that although Tennessee and South Carolina have similar market share in term of the number of jobs, South Carolina has a markedly greater amount of the state's payroll dollars than Tennessee as well as the rest of the country. And the data for the market share of payroll dollars also 'clumps' but not to the extent of the jobs market share percentage.

 

Do any of you care to make some speculations as to why there is just a wide variety of temporary help market share in terms of jobs as well as payroll vary so much?  Let us know and we may include your comments in this space next month (and anonymously, if requested).

 

And wouldn't it be interesting to see how these two metrics shape up within a state ... market by market, county by county?

 

SPOILER ALERT: HERE COMES THE PITCH ...

 

Yes, we offer that service ... it is part of our Interactive Temporary Help Services Interactive Data Book and more information about it can be found here.

April 2016 (published May 6, 2016)  return to top

 

The State of Manufacturing Jobs, an update ... ...

 

We decided to look more closely at the jobs trend for the manufacturing sector for two main reasons. First, manufacturing has been -- and continues to be for many -- a significant source of business for the staffing sector. Second, inasmuch as the current political climate heats up with politicians vowing to bring back good-paying, middle-class manufacturing jobs, we thought it would be an appropriate time for a 'reality check.' [note to self: research a potential solution to climate change by placing restrictions on exhaling by all politicians.]

 

The first chart illustrates that the number of U.S. manufacturing jobs were on a downward slope before the start of the Great Recession-- note the year-over-year change is below or at zero percent. During the recession they pretty much fell off the cliff and then started a slow recovery when the recession ended.

 

Presently they are at a somewhat higher level compared to their status at the end of the recession (the blue dotted line), but still below the level at the beginning of the recession (the blue dashed line). It's interesting to note that when the trend from a few years before the start of the recession is carried through to the present (the blue, solid line from the beginning to the start of the recession and then the dashed line to the present), the number of manufacturing jobs today appears to be at a point where they would have been regardless of the recession.  

 

Moving to the second chart of all U.S. jobs, the year-over-year change trendline (in red) appears to be similar, but there are two important differences with the manufacturing jobs year-over-year trendline (also in red in the first chart). First, the all jobs year-over-year changes before the recession are above zero percent; and second, the year-over-year changes after the recession are not higher than the trendline before the recession.

 

However, the level of all jobs is at a higher point today then at the start of the recession. But, note that the dashed projection line from the start of the recession to the present is at a slightly shallower angle than the actual number of all jobs to the point leading up to the start of the recession. 

 

The issue of the decline of U.S. manufacturing is complicated with numerous moving parts.

 

It brings up free trade, the North American Free Trade Agreement (NAFTA) of 1994 between the U.S., Canada, and Mexico, as well as how the U.S. economy has evolved. But has the manufacturing sector be hurt by only free trade. Many suspect that outsourcing -- but not necessarily offshoring -- no doubt has had a tremendous impact on manufacturing jobs. Certainly some of the strong growth in professional services (e.g. systems design and management, accounting, product design and engineering as well as in other sectors, including manufacturing) can be directly traced back to outsourcing. And how have productivity gains, which by definition is making more product with fewer resources and that includes labor, since 1994 affected the number of manufacturing jobs?

 

And as for offshoring, an argument could be made that U.S. manufacturers are able to keep their products competitively priced (and ultimately sell more units) by offshoring low-skill functions. In a very real way, NAFTA and other free trade deals saves high-value add U.S. manufacturing jobs that would have been lost along with those low-skill jobs.

 

There is little doubt that manufacturing jobs continue to decline and play a diminishing part of the overall employment economy.

 

However, the public discourse about it simply cannot be limited to media sound bites.

March 2016 (published April 1, 2016) return to top

 

Low wage outrage -- not new, and not limited to the United States ...

 

Say what you will about this year's crop (note that's only a different vowel away from what we really think) of presidential candidates, when the name-calling and posturing who can win against the other party's despicable candidates (we're not taking sides here -- it runs in both directions) fades, the issue of low or no wage growth for American workers emerges as a campaign issue.

 

You may be surprised to learn that this is not a new development for the U.S. economy.  The British Broadcasting Corporation (BBC) recently broadcast an in-depth report on "Why Wages Are So Low." And low or no wage growth is not only a U.S. occurrence and has been around for 40 years in many other economies and in other developed countries such as Japan and Germany. No doubt, in the U.S. the issue of stagnant wages for workers in the middle was advanced by the Great Recession.

 

When the Iron Curtain parted, much cheaper workers were available to (West) German industry, so western trade unions reluctantly accepted lower wages and more flexible solutions. In Japan, the implied promise of lifetime employment has burst and when workers change jobs, they start from a lower wage base. The BBC reports points out that much of the American middle class -- and well paying jobs -- were in factories but today their work continues to be replaced with machines / robots. So the American employment economy is being driven by either end -- low as well as skilled services jobs -- as the middle class workers are displaced by automation and technology. But, what will happen as the jobs at either end of the spectrum are replaced with and by technology? That's more of rhetorical / discussion question.

 

As the top chart shows, the 12-month change in average weekly earnings in the private sector as well as in private service providing sector have pretty much followed the same trend.  The average weekly earnings for the goods producing sector, which is clearly more volatile, generally trends below the service providing sector. Although there have been times when the change in the rate of inflation,  which is commonly tracked via the Consumer Price Index for all urban consumers or CPI-U, has generally been lower than the change in the average weekly earnings trend, there have been some exceptions since at least March 2007.

 

Now let's compare wage growth in a high skilled sector (computer systems design and related services) with the manufacturing sector, which is often thought to be a base for the middle class, and see how they look against inflation. [We use a six-month moving average calculation to remove much of the statistical clutter -- especially for Computer systems design and related services.]

 

After the recession and as the relationship between these three metrics stabilized post-recession, the relationship between average weekly earnings of these two sectors  and inflation has remained fairly steady.

 

Moreover, since early 2014, the growth in average weekly earnings for the manufacturing has pretty much moved in tandem with inflation. And wage growth for this sector -- which can serve as a proxy for the middle class -- is barely higher than the rate of inflation.

 

But, the trend is somewhat different for average weekly earnings in the Computer systems design and related services sector -- which can serve as a proxy for high-skilled workers -- since early 2014. Take note that the rate of wage growth for this sector is considerably higher than the rate of inflation and the gap appears to be widening recently.

 

Will high-skilled professionals continue to enjoy a faster-than-inflation growth in wages? Only time will tell, but technology is making strides in automating many of services such as personal financial planning since there're now "apps for that" and many other services provided by high-skilled professionals. Elsewhere in the financial industry, a new report from Citi believes that financial technology is bring retail / consumer banking to a "tipping point" that could accelerate staff reductions from 2 percent a year to 3 percent, which would mean a 30 percent reduction by 2015.

 

February 2016 (published March 4, 2016) return to top

 

Renewed scrutiny on outsourcing and alternative work arrangements ...

 

It's been 23 years since March 1993 when Time magazine did a cover story entitled "The Temping of America." Needless to say it was not a favorable look at temporary work and its growing prevalence in American companies. But, hard data and formal definitions were tough to come by regarding the varying definitions of "temporary" and contingent work. Some in Congress were outraged and demanded more information. The media of course, picked up on this emerging trend and the media was flooded with stories, reports and first-hand accounts of the horrors of outsourcing, off shoring, temporary help services, and the decline of the American workforce. By 1995, the U.S. Department of Labor / Bureau of Labor Statistics published the results from its first "Contingent and Alternative Work Arrangements" survey. BLS refined and repeated the survey several times, but interest, and / or budgetary support, eventually waned and the last survey on this subject was published in February 2005.

Fast forward and now it's the rise of the "gig economy" that is attracting increasing attention -- and not all of it good. And companies and sectors that outsource non-core functions are again being painted as evil. And technology -- more specifically, smartphone apps -- have given birth to this apparently new way of working. And the dearth of information and hard data about this allegedly new "tech-driven expansion of the gig or on-demand economy" means that the BLS will be bringing back what looks like the "Contingent and Alternative Work Arrangements" survey being rebranded as a Contingent Worker Survey in May 2017. Sort of reinforces the adage, "what was old, is new again." This recent blog post from Secretary of Labor Tom Perez should get you up to speed on this development.
 

As the criticism, which is only a trickle at this time, picks up steam (okay, so we mixed our metaphors -- you gotta a problem with that?), we would like pass on what one of our reviewers pointed out. "... Luddite criticism and action against change brought about by technology and 'progress' has had an exceedingly poor outcome... . Few buggy whips survive and trade unions are mostly struggling to remain relevant. People have progressively taken charge of their own lives and seem to be the happier and wealthier for it. Making a career out of trying to preserve the status quo has not been a stellar choice."

 

Regional economic conditions update ...

 

Earlier this week, the Federal Reserve Board published its Beige Book that provides an extensive overview of the state of the economy in each of its 12 bank districts. Although this publication is quite lengthy (more than 18,000 words), we post a summation of it pulling out information relevant to the staffing industry, many of the sectors serviced by staffing services, as well as relevant labor developments. You can access our 3,800-word summation, which includes a link to the full Beige Book, here or through the home page our newly designed website.

 

January 2016 (published February 5, 2016) return to top

 

We keep coming back to the Beveridge Curve ... and is a recession lurking out there?

 

Almost four years ago we first examined a Beveridge Curve, which looks at excess demand in a market place, and tried to relate it to the employment economy. Some intriguing trends emerged from that initial examination, so we looked at it again more than a year later and most recent one year ago and concluded, "The 'so-called' weakness of the current recovery may actually help extend it given the fairly large degree of resource reallocation as a result of the recession." We think that conclusion has held for the year but it's a good exercise to see what the Curve could be telling us now.

 

Obviously, we see how severe the recession had been with the unemployment rate rising as the number of job vacancies declined. Currently, the post-recession trend of a declining unemployment rate and a rising job vacancy rate continues but the trend for the past few months could be -- and we stress "could be" -- a trend to pay closer attention to because both metrics appear to have leveled off and are going sideways for the past couple of months.

 

Although this recent leveling off does not necessarily indicate the trends are getting ready to reverse -- they have experienced several similar sideways motion during the current expansion. [Incidentally, there is no issue should the two trendlines cross -- it's just a statistical convenience that they use the same scale.]

 

There is a similar trend for the relationship between the unemployment rate and changes in private-sector jobs. The rate of growth for private-sector jobs has continued to remain fairly stable after quickly rising immediately after the recession. Of course, many would like there to be the growth rate be greater now, but it is firmly in positive territory and complaints about the recovery not generating as many jobs as it should are nothing new.

 

But, an item in each charts -- the levels off of the unemployment rate and job vacancy rates in the first chart and the space between the end of the 2001 recession and the beginning of the most recent one -- deserve closer monitoring.

 

Many people focus on the length of the recession and not the expansion, which is the period between the end of a recession an the start of the next one. So, where are we now in the expansion relative to past cycles? From 1945 to 2009 when the most recent recession ended, there have been 11 economic cycles and the expansion has lasted an average of 58.4 months. Limiting the period a bit from 1970 to 2009, there have been seven cycles with an average expansion of 71.0 months. Since, June 2009, when the last recession ended and, by definition, the current expansion cycle started, it has now been 80 months.

 

However, there is a school of thought that the two recessions in the early 1980s, sometimes referred to as a "double-dipper," were not really two recessions, but a single entity. Eliminate the 12-month expansion of 1982, and the average expansion since 1970 rises to 80.8 months.

 

Does this mean that the current 80-month expansion cycle has run its course (by 0.8 of a month, to be silly precise)? Not necessarily as there are no hard and fast rules.

 

Since 1945, there have been seven expansions shorter and four longer in duration than the current one. Excluding the current expansion cycle and if the counter starts with the 1970 expansion, there have been three longer and three or four (depending if one considers 1982 as a separate expansion) shorter.

 

To answer the question posed in the headline: of course a recession is lurking out there -- it's only a question of when. Although it looks like the next recession will hold off for at least the next 12 months, anything is possible. Regardless, whoever is elected the next U.S. president will likely be burdened with one.

 

2015

  December 2015 (published January 8, 2016) return to top

 

New employment projections focusing on temporary help services to 2024 now available ...

 

We've put together a free, ten-page report pulling out information that we feel is very relevant to staffing industry executives. It's heavy on data in tables and graphics but not words -- that way we can provide a lot information in those ten pages.

 

With the release of biennial employment projections covering 2014 to 2024, data are now available at a more granular level. So instead of only being able to report projections for the entire employment service sector -- which include temporary help services, professional employment organizations, employment placement agencies, and executive search services -- as in the past, we are able to focus in on only temporary help services.

 

We include not just how specific jobs and jobs groupings fit into the temporary help services picture, but the place those THS jobs fit into the overall job picture. For example, there were 664,600 Transportation and material moving jobs in 2014, or about one in every four THS jobs, and by 2024 they are expected to increase 17.2 percent, which is faster than overall THS growth. Although only 6.8 percent of all Transportation and material moving jobs were within THS in 2014, this is expected to rise to 7.6 percent by 2024. And by drilling down deeper into the occupation grouping, we learn that 20.3 percent of a specific job with that grouping -- Packers and packagers -- will be employed by THS by 2024.

 

But we don't stop with information with only temporary help services. Other information that staffing professionals can use for long-term planning include several tables that show the industries and sectors with the fastest as well as the largest numerical job growth And we also include information about the occupations / jobs that are projected to have the fastest as well as the largest numerical growth.

 

Call us crazy -- you wouldn't be the first -- because all of this valuable information is free. The report can be downloaded from here. And check out the bookmark function in your PDF viewer ... it enables the reader to skip around the report and also is a de facto table of contents.

 

Note that the download is only available from our new website that is up and running now, but still in beta (read: still cleaning up some html issues and transferring all of our information). We hope to have the new website finalized by Q2 2016.

 

   November 2015 (published December 4, 2015) return to top

 

How's the economy doing in your markets?

 

Two days ago, on Wednesday, December 2, the Federal Reserve Board released its collection of comments from businesses and other contacts from around the country. The latest Beige Book covers the period between October 6 and November 20 and the comments from a wide variety of sources and markets tell a story of a varied economy and labor market throughout the country. As you may be aware, we pull out passages relevant to a large majority of our readers -- ostensibly recruitment, staffing, employment services, IT services sectors, and the sectors they service -- to help our readers gauge business activity meaningful to their business.

 

For example, in the Federal Reserve Bank of Boston's service area, which includes CT, MA, ME, NH, RI & VT, the staffing sector is apparently doing very well: "Staffing contacts report continued growth in the New England region, with year-over-year revenue increases in the 10 percent to 25 percent range." The tight labor supply created an environment in which "number of companies are relying on staffing firms for recruitment. ... The rate of temporary-to-permanent job conversion remains strong."  The Beige book even goes as far as to list a number of occupations for which the shortage is more acute. These generally upbeat comments about the staffing sector were not limited to this part of the country, but there were exceptions.

 

In contrast, the Federal Reserve Bank of Chicago, which covers IA, IL, IN, MI & WI, "Staffing firms reported slower activity, with one firm noting a widespread decline in orders across industries and skill types." However, regarding general labor trends, "labor demand continued to be strongest for skilled workers, especially in many professional and technical occupations, sales, and skilled manufacturing and building trades." And from the Federal Reserve Bank of Minneapolis, which covers MI, MN, MT, ND, SD & WI, "Across the District, numerous sectors reported difficulty finding workers. A staffing services executive in southeastern Minnesota noted that labor tightness had shifted from skilled labor to general labor."

 

If you want to read our summation of the Fed's latest Beige Book, click here.

 

It is still looking likely that the Fed's highly anticipated rate increase will come to pass when the Federal Open Market Committee (FOMC) meets in about ten days. Janet Yellen, speaking at the Economic Club of Washington in Washington, D.C., earlier the same day that the December Beige Book said, "... Were the FOMC to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession. Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and thus undermine financial stability."

 

   October 2015 (published November 6, 2015) return to top

 

When is it coming? part trois

 

For the previous two months in this space we discussed the next recession. Last month we concluded by mentioning that one of our editorial review board member mentioned "'the when [the next recession will occur] is not as important as to the why.' We will hold that discussion for another time." Three hypotheses -- and the first two don't count -- what we are going to discuss this month.

 

Just as the basis of the current recovery / expansion cycle can be found the past recession, the genesis of the next recession may be found in the current expansion. There are two basic types of recessions. One is driven by internal weakness or fundamental internal changes and the other is the opposite -- driven by outside forces not fundamentally related to the structure or capacity of the economy.
 
The immediate previous 2007-2009 recession / financial crisis is an example of the former. In the early 2000s, baby boomers started saving for retirement so housing demand waned and was off considerably. Housing sales, including speculative purchases, peaked in early 2005. But the economy did not change gears because residential construction ignored the sales declines and continued to build new homes.  By 2007, two new homes were being built for every new household formed. The mortgage industry created and tried new products ('liar or scary loans' and zero-down mortgages) to entice buyers and shore up the housing market. But the buyers simply weren't there and the market finally collapsed when the inventory of unsold homes became unsustainable. [FYI, we saw this coming back in 2005. Click here to see our Financial Times Letter to the Editor published on August 11, 2005 -- ed.] Eventually these practices (supported by public policy, but we digress) put the entire financial sector at risk and the pain trickled down into the rest of the economy. The recovery required major restructuring of the financial sector and a shift in the economy away from its dependence on construction activity. Let's call this type of recession endogenous.

 

The other type of recession is the result from some outside force but not directly related to the internal structure or capacities of the economy. The technical term for this version is an exogenous recession. The economy gets sucker punched to the gut and the wind knocked out of it, pulls itself back up through minor adjustments, and then continues on along the same path as before. The 1973 Oil Shock recession has, literally, become the textbook example of an exogenous recession. Should the current slowdown in China, which we mentioned last month in this space, lead to a recession here, it would fit this category.

 
Since an endogenous recession is caused by internal weaknesses or fundamental internal shifts, the engines that drive the recovery will be different from those going into the recession. Think of an endogenous recession as a car changing gears.  Until the new gearing is set, the car slows down depending only on momentum.   

 

Exogenous recessions are, by definition, less predictable.  After all, it’s called a “sucker punch” because the victim never sees it coming. But, on the other hand, an exogenous recession does not require significant internal restructuring.  A business can often just hunker down and wait for its current markets to recover from an exogenous recession.  However you may need to go back to the drawing board to prepare for a recovery that follows an endogenous recession. 


Today, there are signs of both types of recessions in the offing, but we tend to see more exogenous than endogenous factors developing. So whether it will be an exogenous recession your business should be able weather and wait out or an endogenous one that requires serious reassessment of your market positions, client bases, and service offerings, you should be prepared for both.

 

   September 2015 (published October 2, 2015) return to top

When is it coming? part deux

 

Last month in this space we discussed the next recession. Have no doubt that there will be one -- there's no issue as to the "if," but opinions abound as to the "when." As one of the members of our editorial advisory board mentioned to us, "Economists are no better than anyone else at guessing the timing of business cycles ... well, maybe a little better -- but not much."  This month we will expand on the current state of the employment economy and will look for further signs if a recession is somewhere on the horizon.

 

Here is our interpretation of a Beveridge Curve, which we have discussed several times in this space (April 2012, November 2013, and most recently in February 2015). We keep coming back to it because rarely do we see such symmetric relationships between data for different metrics. And we like symmetry.

 

About a year prior to the last recession, the two data series started to diverge -- the unemployment rate started to inch up as the job vacancy rate started to sink and this movement accelerated throughout the recession. Move forward to the current economic cycle, the two series continue to converge -- the job vacancy rate continues to rise as the unemployment rate declines. If the pattern holds true for the next recession as it unfolded for the last recession, then the next recession is likely no sooner than one year away -- and very well could be longer.

 

Unfortunately, the job vacancy rate data series only began in December 2000, so our premise of how these two data series could be predictors to an economic slowdown or recession is quite limited. Although the two data series appear to be approaching a point when the two trend lines cross -- and hence begin to diverge instead of continuing to converge -- that could very well be a "red herring" because each data series would not be changing directions as they did prior to and during the last recession.

 

However, if the two data series should cross that could be an indication of stronger wage inflation as it would mean that there is a higher rate of job vacancies than unemployed people available to fill them. Actually, it would likely mean that there are clearly not enough people with the proper skills to fill the existing job vacancies and that would indeed drive up wages and hence inflation would become more severe.

 

But there are at least two other "howevers" regarding how tight the labor market actually is today with unemployment at a level that many once considered "full employment." First, the last time the unemployment rate was 5.0 percent was in early 2008 and the labor force participation rate was more than 66.0 percent; in September 2015, the unemployment rate was 5.1 percent, the labor force participation rate was 62.4 percent, and this could suggest a labor market with a lot more slack today and hence not a lot of pressure building for higher wages.  Second, the growing use of telework and outsourcing mean less regionally restrictive labor markets muting some wage increases. For example, if a skill shortage starts to significantly drive up wages in a certain market, today some employers can hire workers who may be available in a different geographic market without such a shortage via telework and without necessarily increasing their wages.

 

BTW, our editorial review board member went on to explain that "the when [the next recession will occur] is not as important as to the why." We will hold that discussion for another time.

 

   August 2015 (published September 4, 2015) return to top

 

When is it coming?

 

We ended last month's analysis / commentary musing about the timing for the next recession saying it could be soon or as long as five years away. Let's start off that we have no crystal ball and for every argument on one side of the "when?" debate, there are equal and compelling evidence for the other.

 

Arguments that a recession is not on the immediate horizon is that 1) the recovery has been weak, so it still has some room to run 2) the labor market remains quite strong, and 3) the recovery has been handling a very messy geo-political situation quite well and for some time (think Ukraine, the Middle East, Greek debt, etc., etc., etc.).  U.S. GDP has been strong, new jobless claims remain at post-crisis lows, spending on R&D is at a peak (which bodes well for the future), and industrial capacity is below levels leading to inflation. In addition, recessions usually do not happen until about five years after the Fed starts to tighten the money supply, which has not even begun yet so (although it could be soon). And despite the developments in China, U.S. exports to China are less than 1.0 percent of U.S. GDP.

 

Arguments for a recession starting sooner rather than later is the Chinese economy is likely worse than China says it is and it's apparent coming apart at the seams and could cascade through other many major economies that are important U.S. trading partners. Although just about everyone knows not to trust the data coming out of China, countries that export into China are reporting major declines to China and since so many other countries exports are dependent upon China buying their stuff (and those exporting countries' data can be trusted), when China's imports decline, it could bring down the whole house of cards. The huge monetary overhang in many economies could cause inflation (e.g. When the Soviet Union was dissolved in 1990/1991 that left an excess of money in circulation, the monetary overhand lead to hyperinflation). Global growth is weak as China, most of Europe, and Japan are in the dumper.

 

The weak equity markets may begin to diminish the wealth effect and reduce spending, especially domestically and that will slow things down. Apparently Fed policy has been to keep the markets high to encourage consumer spending, which is two-thirds of GDP.

 

So it may not be a case of believing if the glass is half empty or half full, but rather if products and services are being added fast enough to a leaking glass to maintain an acceptable level.

 

Just something to think about this Labor Day weekend. Be safe, have some fun, and don't work too much. We suppose it should be called anti-labor day weekend!

Did you miss it?

 

Earlier this week, the Fed published its latest Beige Book, which is a roundup of regional economic and employment developments. Although it is 18,000 words, we pull out staffing and IT sectors, developments in major industries that drive the staffing industry, as well as general employment trends. It's interesting to see that in some areas of the country staffing companies report "robust growth" while in other areas, there is weakness. One fairly consistent trend in many parts of the country is that 'temporary-to-permanent' activities have picked up in the past few weeks and occasionally at the detriment of the temporary side of the business. Although shortages for some positions -- mainly, but not exclusively, high skill jobs -- are driving up some wages, overall, wages are relatively stable. If you want to read out summation, which includes a link to the full report, click here.

 

   July 2015 (published August 7, 2015) return to top

 

Changes in wages and salaries ...

 

Last week, Q2 2015 data regarding employment costs were released and it caused quite a stir because at only a 0.2 percent rise, it was the smallest quarterly gain since 1982. This led some to speculate that with wage pressure and inflation nowhere to be seen, the Fed will be in no rush to raise interest rates.

 

Regardless of how the employment cost index (ECI) may or may not affect Fed monetary policy, the latest ECI data do provide some interesting strategic information that may be used for adjusting pricing strategies for staffing companies.

 

Buried deeper in the ECI data are how wages changed for different groups.

 

(Note: this accompanying chart shows only wage and salary information and on an unadjusted bases whereas the ECI that rose 0.2 percent in Q2 2015 that was widely reported is for total employment costs that includes benefits and is seasonally adjusted. Seasonally adjusted data are not available at the level of detail that are presented in the accompanying chart. The y-axis is the Index, which measures wage change over time; December 2005 = 100)

 

As seen in the chart, wages and salaries have tended to move in unison for the past two years, but some categories appear to break with that trend in Q2 2015.

 

Wages for all workers, as well as those in the service providing sector each rose 0.3 percent on a seasonally unadjusted basis. But wages for workers in the goods providing sector (a.k.a. blue collar workers) as well as for those in office and administrative support occupations, rose 1.0 and 0.9 percent, respectively.

 

The greater rate of wage and salary growth for some occupations can be an indication of qualified worker shortages that is translating into higher recruitment costs for businesses and companies needing those types of workers. Or "faster than overall" growth could be that because wages were so low in the first place.

 

This latest ECI data seem to track well with comments published in the latest Fed Beige Book, a summary of it that pulls out remarks relevant to staffing and IT staffing and solutions companies and can be found here. When Fed researchers talked with business owners and operators around the county in late June to early July, they found that wages pressure was fairly muted to non-existent except for a variety of some occupations in different areas of the country.

 

The Fed can see rising wages as one signal to start tightening monetary policy. In addition, some also believe that when average hourly earnings start to rise, the countdown starts to the next recession. Some say one year and others say five years.

 

The current expansion started June 2009, which makes it 74 months in duration. The expansion leading up to the start of the past recession was, coincidentally, 73 months; the expansion before that was 120 months long and the one prior to that was a stretch of 92 months. We are not saying that the economy is overdue for a recession nor are we saying that the current expansion still has five or more years to run.

 

If we don't do it, who will?

 

And now just a little self-promotion and a shout out to none other than Barry Ritholtz, author, wealth manager, as well as producer of one of the more widely followed financial and economic blogs The Big Picture, for reTweeting one of my Tweets last week  ... And although I didn't know it at the time, Barry was one of the few economists who saw the housing implosive in advance. Another one was moi, as evidenced by our letter in the Financial Times published ten years ago this month comparing the then red-hot housing market to a Ponzi scheme that was doomed to failure because of a Nobel Prize winning work on asymmetrical information as well how that economic theory could be used to explain the IT bubble as well as the benefits that staffing companies bring to the table. Yup, you read that right -- a Nobel Prize winning theory explains the  benefits of the staffing industry.

 
  June 2015 (published July 2, 2015) return to top

 

More on staffing industry disruptions ...

 

We received a number of comments regarding the discussion presented last month in this space about the possibility that online technologies are chipping away at some of the staffing industry's core competencies. If you missed it, you can review last month's commentary here.

 

A regional marketing director for a national staffing company who requested to remain anonymous doesn't see this development of much of an issue. "... at this point or even in the future I don’t see them as an all out threat. ... I meet with customers large, giant and small all of the time and most have what I would call tool-fatigue. They are tired of how the technology is replacing the human interaction that helps them fill their positions."

 

The commentator goes on to draw a connection about last month's discussion to MSPs -- "When you look at the large programs there are MSP providers that do not allow the supplier of temps to talk to the vendors. As I am hearing more and more complaints about this, I have started to wonder how long will MSP’s be around. Customers are recognizing that these super low cost models, with lack of personal interaction and engagement is giving them less than stellar results."  [A few weeks after this staffing executive's initial comments, they mentioned to us that a prospect mentioned it was "getting rid of their MSP ... [because] they were not getting the support that they need -- more recruiting support." -- ed.]

 

This is certainly nothing new -- I recall moderating a panel about MSPs more than a dozen years ago when those same comments, some of them very heated --  were expressed. The demise of MSPs for many of those same reasons were predicted at that time.

 

However, this commentator also offered some thoughts about the development of online technologies for the other side of the staffing formula. "As it relates to candidates using these tools -- there are some that would. I believe the majority wouldn’t, and the ones that would are the higher skilled workers" since the lower skilled workers -- for a variety of reasons -- cannot or will not access these online opportunities.

 

And that brings us to another development in the online labor market that cannot be ignored. And one that pretty much deals with repetitive, low-skilled tasks.

 

What if we told you about a "...service [that] gives businesses access to a diverse, on-demand, scalable workforce and gives Workers [sic] a selection of thousands of tasks to complete whenever it's convenient." You would probably think it's marketing copy for a staffing service -- and pretty standard wording at that.

 

Were you aware that Amazon -- yes, that Amazon -- is also in the business acting as a clearinghouse between labor and business? It's called Amazon Mechanical Turk and it's been around for almost a decade and recently doubled the commission it takes from 10 percent of the total paid to 20 percent plus an additional 20 percent more than ten people are needed.

 

In a nutshell, MT is built around what are labeled Human Intelligence Tasks or HITs by giving users (e.g. businesses) access to an on-demand workforce and allow people a way to find quick and easy online work. Currently, they have more than 300,000 HITs available, many that look like suitable assignments for staffing services. Check it out here.

 
  May 2015 (published June 5, 2015) return to top

 

Another potential disruption to the staffing industry ...

 

There is little argument that the technology and the internet has disrupted many sectors and industries while simultaneously creating new ones. For example, peer-peer lending is beginning to disrupt the predominate banking model. For the staffing industry, more specifically temporary help services, technology and the internet have generally been a big plus especially in terms of efficiencies and reach. We could write a book's worth of material explaining how technology has helped the entire human capital universe, but if you don't already know this, you could be in the wrong business.

 

Although some technologies have slowly chipped away at parts of temporary help services, the sector has done a good job rising to the challenge and even capitalize on new and merging technologies as well as creating new business models and new services to meet some of those changes. (The sector has also benefited by servicing those technologies with qualified professionals as well as providing direct services and solutions, but we digress.)

 

Just as job boards / employment web sites rewrote the business model for the print media's revenue machine of classified ads, a new type of business model may be emerging that could effectively eliminate one of the temporary help services major operations on both sides of the staffing formula (candidates and client companies).

 

Workpop, currently active only in Los Angeles, specializes in matching hourly and part-time workers and employers. And they do it for free -- both for workers and employers. So how do they plan to make their money? As a start-up, they are still working that out but according to their website they "intend to offer premium services that employer and candidates have the option to pay for."  According to a WSJ blog post, these may include on-boarding of new hires, handling the scheduling of shifts, and probably some background check tools. That all pretty much sounds like many of the selling points that temporary help services salespeople use to sell their services. A major difference is that Workpop does not appear to have any eyes on becoming the employer as the temporary help services industry has vigorously defended for its members. Regardless, this start-up looks to be chipping away at the business model of temporary help services.

 

We addressed this subject earlier this year informing you of a cover story in The Economist magazine about startups that are building systems that match jobs with independent contractors on the fly.

 

And it's not just the temporary help services portion of the staffing industry that could be dismantled. PEOs are facing Zenefits, another California-based start-up with a recent valuation of $4.5B, gives away its cloud-based HR software with its payday coming when its product is used to buy health insurance, choose a payroll provider, or other HR-related product or service.

 

It's no great secret that staffing companies, either internally or via a vendor, have automated many of their processes and even some key competencies. But the danger is that non-staffing companies can develop applications to provide those same services very quickly possibly via an Internet-based business practice of "sunrise product development" in which product development times can be slashed with networks of collaborators passing the work off to another developer eight time zones away, so three days work can be done in any single 24-hour period.

 

What do you think? Are these developments really a threat to the staffing industry and how can staffing companies address it? Let us know what you think and we'll share your comments (anonymously, if you want) in a future post.

 

Did you miss it?

 

Federal Reserve Board's latest Beige Book, which was released two days ago on Wednesday, June 3, had some interesting observations for a wide variety of sectors and industries about job trends and developments on a geographical basis. Although this report is quite voluminous, we pull out passages relevant to as well as specifically about the entire staffing industry universe. Our summation, which includes a link to the full publication, can be found here.

 
   April 2015 (published May 8, 2015) return to top

 

The Fed doesn't appear to be too concerned ... why?

 

Despite very weak March job growth and Q1 2015 GDP growth that could barely move out of its own way (up only 0.2 percent), the Fed has not indicating any interest to call back previous statements about removing their 'patience' about the timing for raising interest rates.  Therefore, everyone who is watching interest rates does not seem to be focusing on the "if" regarding raising interest rates as speculation persists as to the "when."

 

We have previously discussed some of the economic and employment indicators that the Fed presumably looks at to judge the health of the economy including prospects for inflation and we now are adding another dimension to that review. Addressing and dealing with inflation is an explicit part of monetary policy that the central bank is tasked with managing. FYI, although some believe that wages, salaries and benefit costs are major drivers of inflation, others do not and many monetarists claim the only driver of sustained inflation is excess money supply.

 

With that said, and as these two charts show, growth in wages and benefits have been steady. So, perhaps, the Fed thinks the economy is ready and can support an interest wage hike.

 

Instead of looking at changes with the cost of employment (wages and benefit costs) in terms of dollars and cents, it is probably easier to spot movement if looking at these metrics in terms of baseline indices. We thought it interesting to compare how wages and benefits for some major occupations compare to one another.

 

And since so many of our readers are involved in the staffing industry -- and wage and benefit growth can act as a proxy for labor shortages and skill demand -- we included a trendline for office and administrative support occupations. Note how the wage and salary index for that classification has been higher than for all workers indicating strong demand for those types of workers.

 

Incidentally, inflation currently remains below the Fed's target rate of 2 percent. As long as inflation remains below their target level, they seem reluctant to raise interest rates despite but -- hopefully -- the nation's central bankers are aware of the long-term harmful effect of the current, loose monetary policy.  Like the alcoholic who 'just has to make it through the day,' the Fed is grappling with their essentially zero interest policy and reluctant  to give up the habit should the economy start to experience the delirium tremens. Or to paraphrase from the movie Airplane, the Fed realizes whenever it changes course, it will be 'choosing the wrong day to give up drinking." 

 

And thank you ...

 

Last month, we asked for your feedback regarding a change in our URL as well as our website design and layout.

 

The results are in and the changes to both will be made -- eventually. As several respondents pointed out, we still have a lot of work to do on the website design. But, client work takes priority, so it will be some time before the changes are completed. Like the Fed, it's not a question of "if," but of "when." Or, in the words of Bret Maverick, "I'm workin' on it." (Reference is here at "Shady Deal at Sunny Acres".)

 

   March 2015 (published April 3, 2015) return to top

 

   Now it's your turn ...

 

Since mid-2006, you have been providing our monthly employment report with an analysis of a specific subject to you free of charge. No, we are not going to start charging for it, but in return for our last eight-plus years of sending this gratis report, we would like you to complete a brief survey (four questions, and that includes an optional open comment box).

 

The reason for this development is because of a total screw-up by our web hosting company that took a week for them to rectify after they deleted our website (not to mention, the time and effort for us to deal with the situation). Not knowing anything for a number of days if the problem would even be addressed or fixed, we secured another URL and new web hosting company. We apologize to anyone who were not able to see our latest summation of the Federal Reserve's Beige Book, which presented some anecdotal reasons for the January and February decline for temporary help services.

 

With that said, we would like your feedback about a possible new URL as well as a new website. Please keep in mind that the new website is not quite finalized (let's just say it's "in beta"), but most of the bits and pieces are there and should be working but it sill needs some refinement. Before you complete the survey please make sure to visit the potential new website design at test.SteinbergEmploymentResearch.com and you may also want to revisit our current website at www.brucesteinberg.net.

 

   February 2015 (published March 6, 2015) return to top

 

We keep coming back to the Beveridge Curve ... and is a recession lurking out there?

 

In April 2012 we first examined a Beveridge Curve, which looks at excess demand in a market place, and tried to relate it to the employment economy. Some intriguing trends emerged from that initial examination, so we looked at it again in November 2013 and concluded at the time that the Curve, "suggests that the unemployment rate still has some room to decline going into the new year [2014]." Since that was more than a year ago, we thought it time to see what the Curve could be telling us now.

 

Obviously, we still see how severe the recession had been with the unemployment rate rising as the number of job vacancies declined. Currently, the post-recession trend of a declining unemployment rate and a rising job vacancy rate continues and this is a good thing. The data do not suggest that this trend will change in the near-term future. [Incidentally, there is no harm should the two trendlines cross -- it's just a statistical convenience that they use the same scale.]

 

Likewise for the relationship between the unemployment rate and changes in private-sector jobs. The rate of growth for private-sector jobs has remained fairly stable after relatively quickly rising immediately after the recession. Of course, many would like to be the growth rate be greater now, but it is firmly in positive territory and complaints about the recovery not generating as many jobs as it should are nothing new.

 

But, when looking at the charts -- specifically, the space between the end of the 2001 recession and the beginning of the most recent one, the hairs on the back of our neck stood at attention. Many people focus on the length of the recession and not the expansion, which is the period between the end of a recession an the start of the next one.

 

So, where are we now in the expansion relative to past cycles? From 1945 to 2009 when the most recent recession ended, there have been 11 economic cycles and the expansion has lasted an average of 58.4 months. Limiting the period a bit from 1970 to 2009, there have been seven cycles with an average expansion of 71.0 months. Since, June 2009, when the last recession ended and, by definition, the expansion started, it has now been 68 months.

 

However, there is a school of thought that the two recessions in the early 1980s, sometimes referred to as a "double-dipper," were not really two recessions, but a single entity. Eliminate the 12-month expansion of 1982, and the average expansion since 1970 rises to 79.0 months.

 

Does this mean that we are overdue for a recession? Not necessarily as there are no hard and fast rules. The 'so-called' weakness of the current recovery may actually help extend it given the fairly large degree of resource reallocation as a result of the recession. Since 1945, there have been seven expansions shorter and four longer in duration than the current one. If the counter starts with the 1970 expansion, there have been only three shorter and four longer.

 

Food for thought (locally grown, gluten free, non-GMO, free-range, and without hormones, of course).

 

   January 2015 (published February 6, 2015) return to top

 

Some new labor market indicators ...

 

Looking at new job creation and the unemployment rate every month is certainly a good way to get a bead on what is happening in the labor market and the employment economy. But, if two labor market indicators are good, what about two dozen? Economists at the Federal Reserve Bank of Kansas City recently developed two new indicators that they have labeled, appropriately enough, Labor Market Condition Indicators, or LMCI.

 

The LMCI consolidates data from 24 labor market variables.

 

The researchers who developed the LMCI do provide technical information about how it is constructed -- e.g. "a principal component analysis on the 24 variables and examine the eigenvalues of the covariance matrix. ..." -- but we think our readers would be more interested in what it shows and tells.

 

And not to get too technical ourselves, we think it's sufficient to explain that a positive value signifies labor market conditions are above its long-run average and a negative value indicates conditions below.

 

The LMCI Level of Activity indicator has improved significantly during the recovery. But it is still at a level well below pre-recessionary levels.

 

The LMCI Momentum indicator has been well above average for some time; it started to improve as the recession was in its last stage and has been in positive territory since 2010.

 

According to the researchers, "based on the historical relationship between the LMCI and the unemployment rate, recent declines in the unemployment rate have overstated improvements in labor market conditions." Additionally, "The increase in the unemployment rate during the Great Recession also overstated the deterioration in labor market conditions as measured by the LMCI." 

 

In other words, the employment / jobs economy isn't doing as good nowadays as the decline in the unemployment rate may indicate but the employment economy also wasn't as bad during the recession either.

 

We have added the LMCI to our constantly updated list of major employment as well as other economic indicators, all of which can be seen here or here for the mobile version.

 

Follow-up from last month ...

 

Referencing a recent cover story from The Economist magazine, last month in this space we addressed how technology is changing how businesses are sourcing workers and how the nature of careers are changing.

 

Here's a TED talk from more than two years ago that takes those concepts further. Watch, listen, and learn.

 

2014

   December 2014 (published January 9, 2015) return to top

 

The biggest threat to the staffing industry in a generation is here ...

 

Almost 22 years ago, Time magazine's had a cover story entitled "The Temping of America" that was critical of America's employers growing use of temporary workers. Some in the staffing industry saw it as an out-and-out assault on temporary help services, some saw the article as an opportunity to show how one onerous employer regulations had become for business and how temporary help services could help them, and others used it to demonstrate how temporary help services help workers provide jobs and provide opportunities.

 

In the interim period, the staffing industry has generally flourished (sans a recession or slowdown or two).

 

This week, The Economist magazine published a cover story entitled "Workers on tap" that every staffing executive should read and read carefully. It makes a strong case that technology "will reshape the nature of companies and the structure of careers."

 

Some will dismiss this threat for several reasons. 'That article is about freelancers, freelancers have been around for a long time and this doesn't apply to staffing companies since we are the employer.' In addition, many of the applications discussed in the story are in areas where staffing never operated in anyway and technology has actually opened up more opportunities for staffing services.

 

But think Uber. And if you don't know why we just said "think Uber," you're going to be waiting for a taxi that isn't going to come for you. Much of the technology discussed in the article is changing the on-demand labor market, which is a significant portion of the staffing industry, to such a degree that those changes could totally disenfranchise that major part of the staffing sector.

 

The Economist article is here and if that link is gone by the time you are reading this, try this one.

 

This development may not significantly affect large users of temporary help services since they fully understand the value of the employee / employer relationship protection from using a staffing services (and almost by definition, large staffing companies as well as VMS & RPO).

 

It's the small and medium sized enterprises that will be most impacted. London may not be burning today, but the conditions are right for a firestorm that could change the face of the staffing industry -- and possibly other employment services including job boards -- in a very short time.

 

If you have any thoughts about this -- or other subjects you would like us to address this year -- let us know.

 

   November 2014 (published December 5, 2014) return to top

 

Last Beige Book of the year sees signs of wage growth ...

 

Two days ago, the Federal Reserve Board published its last Beige Book of 2014. For those who are unfamiliar with it, the Beige Book is collection of economic and employment points-of-view gathered by the Fed from business executives throughout the country. In layperson's terms, it's sort of a briefing book about the economic, financial and employment situation in each of the Fed's 12 Federal Reserve Bank districts. It's a lengthy publication (the most recent one was more than 17,000 words), but we pull out and highlight passages relevant to the staffing industry, as well as sectors of major importance to the staffing industry, which reduces it down to about 25 percent of its original size.  You may want to review our summation of the Federal Reserve's latest Beige Book.

 

  Overall, the economy is starting to see signs of wages rising and skill shortages emerging. For example, this Beige Book tells us:
  • Employment grew in the software and IT sector in Boston.

  • Many of the districts noted increases in temporary help as well as in temporary-to-permanent activity.

  • Employers had challenges filling jobs for IT and engineering, legal and health care services, management, skilled manufacturing and building trades, as well as in transportation and warehousing

  • A few areas were mentioned that retailers were spending on IT equipment and software to support e-commerce.

  • There was upward pressure on wages for some occupations and for skilled workers.

  • In at least three cities (Chicago, New York, and San Francisco), employers were "adjusting compensation" to secure well-qualified candidates and / or giving raises to long-term, high-value current employees.

If you you already don't subscribe to our email notification when our summation is posted, you can do that from the current summation webpage or from the update your subscription link at the very bottom of this email.

 

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And as 2014 draws to a close, I wish everyone good health and success in everything that's important in your life. See you in 2015!

 

Bruce

 
   October 2014 (published November 7, 2014) return to top

 

The story with wage growth (or lack thereof) ...

 

The Fed made an expected move last week when it ended its bond-buying program because of the strengthen economy and resulting in renewed speculations about rising interest rates. But discussions among monetary policy makers and Fed-watchers persist about the apparent lack of wage growth in the current economy. With so many other employment metrics showing an improving employment situation, the question remains why is the labor market not tighter? The answer likely lies in wage growth (or the lack thereof). There are myriad reasons why this metric is part of the bigger picture so it's important to know why and what has been occurring with it.

 

Many other employment market indicators (unemployment rate, new job creation, insured unemployment, growth of the labor force, which we have previously examined in detail) are showing an economy that is expanding, but wages, although increasing, are apparently rising below what the Fed would like to see. Officially, the Fed may not have an official "target" for wage growth as it does for inflation at 2 percent. "Inflation running persistently below its objective could pose risks to economic performance," according to an official Fed transcript from a June news conference. The Fed's current inflation projections are 1.5 to 1.7 percent in 2014 and 1.6 to 2.0 percent in 2016 [yes, 2016 -- ed.].

 

Although it is generally understood the changes in wages  are tracked through the Employment Cost Index (which also tracks total compensation, which includes benefit costs), it is only released quarterly.

 

Therefore, we have used another data set that is available monthly. Even though wages are rising about 2 percent (also what the ECI shows) on a seasonally adjusted basis -- as this chart shows -- the Fed considers a 2 percent increase as "essentially flat rather than rising, and real wage growth really has not been rising in line with productivity."

 

And the change on the average weekly pay shows wage growth that has been fairly stagnant for some time after dropping during the recession and recovering in the early stages of the recovery. Wage growth has clearly not returned to the pre-recessionary level.

 

When wages rise more rapidly than inflation, people experience a real increase in take-home pay. And, within limits, when that occurs across the labor market, it could be a sign of a tighter labor market. Wage growth at a greater rate of inflation should also translate into greater buying power among workers which, in turn, could  encourage increases in consumer spending, which is growing at a healthy pace now. However, the up tick in consumer spending now not necessarily because of higher wages but possibility because a) consumers have improved their personal balance sheets and eliminated the debt overhang from the last recession and b) low interest rates do not provide any incentives for savings.

 

Just for grins, let's take a look at two sectors relevant to the staffing industry -- the major sector of manufacturing and computer systems design that is dominated by technology. Unfortunately, seasonally adjusted data are not readily available at this level. In order to partially compensate for the "static" in the not seasonally adjusted series, we've also presented the six-month moving average trend lines and made them prominent.

 

As the six-month moving average shows, nominal wage increases in manufacturing have not changed much after rising briefly after the recession ended. Perhaps that rise was a strategy to attract workers as the recession left the sector short of enough staff as the manufacturing sector picked up post-recession.

 

But, the six-month moving average for the computer systems design and related services sector tell a different story. Pre-recession wages in this sector were growing rapidly year-on-year, but plummeted during the recession likely as businesses that used the services of this sector stopped or put IT projects on hold. And since that drop, wage growth -- as a manifestation of demand for professionals with those skills in the computer systems and design and related services sector -- has not recovered to the pre-recessionary trend. However, this phenomena may be due to an increase of outsourcing so labor shortages for these skill sets may very well exist, but are showing up in other sectors.

 

   September 2014 (published October 3, 2014) return to top
 

Another important labor market indicator -- Insured Unemployment

 

Last month in this space, we discussed the Federal Reserve Board's views about labor market slack and we presented several labor market indicators that the Fed looks at every month. (FYI, we also track several economic and labor market indicators, which can be found here.)

 

This month we'll address another measurement -- unemployment insurance claims, which is a widely-followed employment and economic indicator. Just as there are limitations to the unemployment rate reported by the Department of Labor's Bureau of Labor Statistics every month, the UI information reported by the Department of Labor's Employment and Training Administration also has its limitations. But, each fills in a piece of the labor market picture to help present a more complete evaluation of the state of the labor market.

 

There are several reasons why UI information is important when evaluating the state of the labor economy. Because the unemployment rate as reported by the Bureau of Labor Statistics has its limitations, another set of data about unemployment trends brought to the table can be very useful. Also, the UI information can assist in forecasting when wages may be rising. Almost by definition, declining UI claims mean that the labor market is tightening so, in order to attract and / or retain workers, employers need to raise wages.

 

Returning to the subject at hand -- and as we see in the chart to the right -- the widely reported initials claims for unemployment insurance (IC) have recently fallen to below 300,000 and are at pre-recessionary levels.

 

In addition, the lesser-reported rate of insured unemployment (IUR) has also fallen from recessionary levels and is also at a point consistent with an economy in an expansion period.

 

You've undoubtedly have heard that wages have been fairly stagnant throughout the recovery and that situation may be changing soon. As we see in the accompanying chart, UI claims have essentially returned to pre-recessionary levels and wage inflation could be just around the corner, which is just one more reason that many economists have opined that interest rates will be rising as the economy may be healthy enough to support such action.

 

And just to tickle your brain, one member of our editorial review committee pointed out, maybe with a hint of irony, that "UI claims are highest when staffing companies are doing worst in a recession, so now things must be good." That got us to thinking, so we came up with another chart comparing the IUR and the job market share of temporary help services. No great surprise that there is an inverse relation. (Technical note: the exact shape of the IUR trend line are not the same in both charts because the IUR data are for the corresponding week of the month in the chart comparing it to THS market share; all the data in the top Insured Unemployment chart are weekly.)

 

   August 2014 (published September 5, 2014) return to top

 

'Show me the slack' -- in the labor markets, that is ...

 

There's been a lot of talk about the 'slack in the labor markets,' so we thought we try and show it to you.  In case you missed it, the labor market was the subject of the Fed's recent summit in Jackson Hole, Wyoming, where Fed Chair Yellen said, "Estimates of slack necessitate difficult judgments about the magnitudes of the cyclical and structural influences affecting labor market variables, including labor force participation, the extent of part-time employment for economic reasons, and labor market flows, such as the pace of hires and quits."

 

There's a lot of information in these four sets of charts -- much more than we have space here to elaborate on. Depending upon the indicator, the optimal relative position of the different colored dots varies. You will just have to work it out yourself.

 

First, a bit of a technical note. The National Bureau of Economic Research, which determines the business cycles, pegged December 2007 as a peak, which also means that's the month that the recession began. And they said that June 2009 was a trough, which means that's the month the recession ended and the recovery started.

 

Since a single month's datum for any measurement can be a little misleading, we present quarterly or other three-month figures of the data. Therefore, on all of these charts, the blue dots (when the recession started) are Q4 2007 data or December 2007, the green dots (when the recession ended and the recovery started) are Q2 2009 or June 2009 data, and the brownish dots (labeled as "current") are for Q2 2014 or June 2014.

 

Therefore, since the blue dots represent labor market measurements when the economy was at a peak, the space between them and the brownish dots could be said to be the "slack"  that needs to be tighten up. When the brownish dots get closer to the blue dots -- and further away from the green dots -- then the labor market is tighter, perhaps too tight since the blue dots represent the indicators as the recession started. The green dots are pretty much the recession at its lowest level although some indicators will continue to decline for a short time in the early stage of a recovery.

 

For example, in the top chart in the first set of charts, the current unemployment rate (the brownish dot) has nicely moved away from the where it was at the end of the recession (the green dot) and is approaching what was a time of a very tight labor market (the blue dot). There's some, but not too much, slack for this labor market indicator.

 

But, one measurement cannot describe the entire labor market.

 

Let's look at Quits, which is when people voluntary leave their jobs. This is seen as a good development because it is a manifestation of a strong job market -- someone leaves a job because they are confident they will get or be getting another job, which is likely a better job. Notice how this indicator was much further along when the economy peaked (the blue dot) than it is currently (the brownish dot). But it has improved as seen by the current reading being away from the place it was at the end of the recession (the green dot). Clearly an improvement for this indicator has taken place, but there is still some room for more.

 

[Technical explanation: the "three-month percent change" and "three-month net change" is the change from three months prior; for these data, it's the change from the last month of the previous quarter.]

 

When the recession started, the three-month net change in December 2007 for total nonfarm jobs was 297,000. When the trough was reached in June 2009, it was negative 1.5 million. In June 2014, it was 831,000. As the economy peaked in December 2007, job growth slowed down and today is much strong then at that time.

 

At the bottom of our Economic Indicators webpage, we provide a brief overview of most of these labor market indicators that may assist you in interpreting all the information presented in these three sets of charts. BTW, we are currently transitioning the format and appearance of our economic indicators, starting with this month's jobs and employment data. Check it out.

 

   July 2014 (published August 1, 2014) return to top

 

The issue of growing part-time employment rears its head -- again.

 

We've seen it before. When an administration starts to take credit for an improving employment situation and job growth, others start talking about the poor quality of those new jobs and the employment status of the workforce.

 

A few weeks ago, The Wall Street Journal (July 14, 2014) published an opinion piece from none other than Mortimer Zuckerman, chairman and editor-in-chief of U.S. New & World Report. Entitled "The Full-Time Scandal of Part-Time America," he drew readers in by starting off with one fact -- 268,000 jobs were created in June and, for want of a better term, an 'almost fact' -- "Full-time jobs last month plunged by 523,000 ... . What has increased are part-time jobs. They soared by about 800,000 ... ."

 

The reason we call that second statement an "almost fact" is that by referring to the part-time numbers as "jobs" and not the more correct  term of "employment," he created a direct connection between his two statements where, technically speaking, a connection should not be made. The 268,000 new job number came from the establishment survey while the decline of 523,000 full-timers came from the household survey. According to the U.S. Bureau of Labor Statistics, "The numerous and methodological difference between the household and establishment surveys result in important distinctions ... ." Mr. Zuckerman clearly did not make any distinctions in his piece. Any labor market observer worth his or her salt knows this. No soup for you! (What? You're surprised we are fans of Seinfeld?)

 

Granted, it may look like we are being overly picky, so let's look at the bigger picture and trend occurring with full-time and part-time employment.

 

In both charts, the top edge of the bars is total employment that has been inching upward since the end of the recession. But is part-time employment pushing that edge up as Mr. Zuckerman implies? Actually, no.

 

The longer term trend (one or two months do not make a trend) is that full-time employment is driving overall employment growth. The top chart shows that the difference between full and part-time employment has been fairly consistently rising since after the recession, with a few hiccups along the way. The bottom chart slices the same data a different way and again -- with several exceptions along the way -- the part-timers' portion of total employment has been declining since the recession ended. True, June showed a rise in part-time and a drop in full-time, but that type of movement is not really that unusual on an isolated basis.

 

As the next election cycle heats up, we will be hearing more about this issue. And because part-timers are often referred to as temporary workers, this increased scrutiny could cause headaches for the image of the staffing industry, specifically, temporary help services, as it has in the past.

 

And least you think that we are picking on just two little items in Mr. Zuckerman's piece, he also mentioned  that "Last month [June 2014] involuntary part-timer swelled to 7.5 million, compared to 4.4 million in 2007." Well, the recession didn't start until December 2007, so the low number of part-timers are pretty much from a peak in the economic cycle so naturally part-time employment would be at a low level. Instead of going back seven years to find a datum point to support his misguided opinion, he failed to mention that only a year ago, in June 2013, there were 8.2 million involuntary part-timers. Still, no soup for you Mr. Zuckerman!

 

   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.

.

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:

  • 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.

  • 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.

  • 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:

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

  • the value of private investments, domestically,

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

  • 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.steinbergemploymentresearch.com as well as a mobile version of several important economic indicators at m.steinbergemploymentresearch.com/Economic_Indicators.htm. Even this monthly employment report is now available on smartphones everywhere at m.steinbergemploymentresearch.com/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:

  • Structural changes in the economy.

  • 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.)

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

  • 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.

  • 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.steinbergemploymentresearch.com/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!!!

 

 

© 2005-2023, Bruce Steinberg, All rights reserved.

last updated January 04, 2023