Thursday, March 11, 2010

Hyperventilating Unemployment

(Cue Maroon 5)

“When it gets cold outside and you got nobody to love”

The Cold, Hard, February Facts

- The unemployment rate was 9.7%, unchanged from January. 14.9 million people were unemployed and a net 36,000 jobs were lost.

- The underemployment rate was 19.8%, down from 19.9% in January (Gallup). Approximately 8 million people are working part-time for economic reasons.

- 6.13 million workers were unemployed for more than 26 weeks, down from 6.3 million in January (Gallup)

- The unemployment rate for people with a bachelor’s degree or higher was 4% and appeared to have just peaked. (The highpoint during the last recession was around 3%).

- There have been 8.4 million jobs lost during this recession. In addition, 2.7 million jobs that should have been created during the time period were not. Therefore, there is a current deficit of 11.1 million jobs. (NY Times).

What it Means

Once again the pundits on both sides tried to politicize the data. It is not great news, but it not alarming news either.

Back in October, I wrote that the experts were forecasting job growth to begin sometime between February and May of this year and unemployment to peak between 10-11%. Job growth should begin in March and unemployment may have topped out at 10.1% in October. So the forecasts appear to be very accurate and we are doing somewhat better than expectations.

The good news is that the employment situation appears to be bottoming out and is not getting any worse. There was an increase in job openings in January and layoffs were significantly lower. In addition, demand for temporary workers (leads demand for permanent workers by about four months) has been increasing for several months.

The bad news is that hirings have not increased. Companies are conserving cash and trying to squeeze more productivity out of current workers even as sales increase. Business confidence remains low.

A December Head Fake

The government reported a small net job gain in December. I also previously reported that two good friends received job offers in December after looking for over a year. In addition, there was an increase in people getting job offers in the job seeker groups that I belong to. All this positive data coming in the traditional worst month for hiring, led me to conclude that the job market was getting considerably better.

But it was just a “head fake”. My theory now is that many companies had job openings in 2009 that they delayed filling due to the struggling economy. They could afford to wait because there were many available applicants and the economy was recovering slowly. These job requisitions were set to expire at the end of the year, so many companies finally pulled the trigger in December. Job listings for larger companies have increased some so far this year, but hiring remains slow.

This is Not Your Father’s Recession

During previous recessions (before 2001), if your father was laid-off from the factory he collected unemployment until orders improved. He then went back to work at the same company, doing the same job.

This time, millions of degreed professionals have been downsized and will not be returning to their previous jobs. Many of these people have a bachelor’s degree or better, years of experience, and have been unemployed more than six months.

Commentators and analysts continue to write articles about the unemployment situation using historical data to reach their conclusions. But their conclusions are usually faulty because this recession is very different. The old rules no longer apply.

Most people don’t understand how difficult it is to get a job in the current market, although that is changing. A recent cartoon went like this:

Woman: “So what do you do for a living?”
Man: “I’m between jobs”
Woman: “Oh, so you’re optimistic?”

If you are a “good” candidate, it is taking about 8 to 14 months to find a new position (my analysis). This of course this can vary depending on personal factors, expertise and geography.

“How dare you say that my behavior is unacceptable
So condescending, unnecessarily critical”.

Some commentators have stated that the unemployment rate remains so high because extended unemployment benefits are acting as a disincentive for people to go back to work. While this may have been true at times in previous recessions, is not true in this one. The people in my job seeking groups are trying hard to find jobs, but there too few openings for professionals available.

“I have the tendency of getting very physical
So watch your step cause if you do you’ll need a miracle”

If you said to my job-seeking buddy Craig, “Hey why don’t you get off of unemployment and go find a job?” you had better be ready to either duck or run. Likewise, my friend Lori, who is a very pleasant soccer mom, might be tempted to split your goalposts.

The Forecast

Expect the job growth number in March to turn positive. Any impact of the February snow blast will be gone and there may even be some carry over. Construction jobs should also improve due to the weather. Economic growth should continue to add some jobs. Census jobs will add to the total (while some commentators are dismissing census jobs as special circumstances, I say thank God they are happening at a time people desperately need work).

Economists from IHS Global Insight and RBS Securities Inc. expect job growth of 100,000 to 200,000 a month to start soon and then increase to around 300,000 to 400,000 in Q4. While this is good news, the unemployment rate is still expected to be in the 9.0% - 9.5% range at the end of the year.

We’re still on a slow road to recovery.

“When it gets cold outside and you got nobody to love
You’ll understand what I mean when I say
There’s no way we’re gonna give up
And like a little girl cries in the face of a monster that lives in her dreams
Is there anyone out there, cause it’s getting harder and harder to breathe”

1 comment:

  1. As a degreed professional who has been in transition for a year now, I can attest that this has been no ordinary downturn in the economy. The quality and quantity of available jobs just have not been as prevalent as in other times. The best example I can provide for this was the last time there were large scale job cuts, 2001. At that time, I only had been out of college for a few years and didn't have nearly the amount of experience that I have now. I looked in the newspaper classifieds and I went to some recruitment agencies. I would get calls from companies for interviews at least every other week. I was back to work in 6 months. Now, I'm in job groups, I work with a job developer, I'm networking, I'm telling everyone I know that I'm in transition. When I send resumes, in the last paragraph, I tell the hiring manager that I will call THEM to set up an interview! In 12 months I have been in transition, I've been on 20 interviews. The majority of them have been for jobs where I'm informed at the end of the interview that I would be brought on as an Independent Contractor (no employee benefits and no guarantee of income) or as a PRN (I would only work "as needed.").

    The other drastic change that I've seen since 2001 is the use of the internet for a job search. It has made looking for a job significantly easier, and that's not always good. That also means that it has made it easier for other displaced workers to find and apply for the same jobs, which means increased competition for fewer available positions.

    If that weren't enough, the internet has also aided prospective employeers. It has aided them in weeding out the massive amounts of resumes that are sent to their email inboxes. What used to be a process that lasted no more than 2 interviews and a couple of weeks, now can go on for as many as 5 interviews over the course of 6 to 8 weeks. Plus, all while this is going on, companines are viewing your Linkedin profile, seeing what you're up to on Facebook and Twitter, calling ALL of your references, running background checks, criminal background checks, credit score checks and if you are finally offered a position... a drug screen! Then after all of that is over, you go to work at a job that you probably "settled" for. After all of that due diligence on the part of both parties, job satisfaction is as low as it's ever been.