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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!

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.

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.

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.

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." 

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".)

    Now it's your turn ...

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.

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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

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.

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.

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:

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).

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:

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.

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.

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.

Now, where were we before ...

we were rudely interrupted by some disturbing macro-economic pronouncements? If you recall, last month in this space we addressed some major bad news, or should we say predictions, about the economy -- mainly, a well-respected economic consultancy as well as statements by Fed Chair Bernanke that the sky is or will be falling. Well, since then, the only big crash was in the form of snow-laden trees and branches in the mid-Atlantic and New England because of an early season snowstorm. The economy actually improved in Q3 with GDP growth of 2.5 percent, which was an improvement from Q2's 1.3 percent growth and Q1's 0.4 percent gain. In early July (in the June employment report), despite some very discouraging signs at the time, we said that the second half of the year would be better than the first. And despite the Fed lowering their forecast for economic growth earlier this week from their last forecast in June, we still stand by our statement.

Our original scheduled subject for this space was to discuss what could be done to create job growth. There are no easy answers and no single answer.

Glenn Gutmacher, founder Recruiting-online.com, e-mailed us and said, "Everyone calls this a 'jobless recovery,' but that's wrong: plenty of new jobs are being created by American companies, but increasingly overseas ..." and that's where labor is cheaper and there are plenty of college educated workers with technical degrees, many of whom got their education in the U.S. He went on to say that those with those advanced degrees used to "stay in the U.S. where they saw more promise for their lives than back home. ... these high-value workers fueled U.S. economic growth in the ever-important mathematical/technical/scientific areas."

No doubt that improving economies in many students' home countries are creating a bit of a brain drain here and those "brains" contributed to generating some U.S. domestic jobs. However, many in Europe complain they can't set up a technology business because of the critical mass advantage of the U.S. The U.K.'s Silicon Glen in Cambridge (a.k.a. the Cambridge Cluster) is one of the biggest in Europe but is a pale imitation to California's Silicon Valley. Not to totally discount the argument that jobs shifting overseas is due to cheaper labor, there are other factors in play: "what used to be a tactical labor cost-saving exercise is now a strategic imperative of competing for talent globally. ..." according to a study on the next generation of offshoring by Duke University, Fuqua School of Business.

Nearly every day, we read reports that employers cannot fill domestic jobs because the workers who are available do not have the right skills and / or education and training. We should point out that when employers complain they cannot find qualified applicants, they may really be saying they 'cannot find qualified applicants at the wages we are willing to pay' and, understandably, do not want to disrupt established, company-wide pay structures. We're pretty sure that staffing companies can fill those vacancies -- albeit at higher rates. After all, adjusting pay rates to fill shortages is what they do.

Regardless of the unwillingness, or inability, of employers to offer higher wages to attract qualified workers, some of the current unemployment is due to structural factors, or in the word of Fed Chair Bernanke at a news conference two days ago, ""Mismatches between worker skills and job opportunities, loss of skills ..."

Higher education, especially community colleges, have recognized this and are able to create programs -- often in partnership with local employers --  to re-train workers. But colleges may lack the resources to create the programs and the unemployed often lack both the money and the time to take advantage of those opportunities to be trained for the "new" labor force.

In addition, the housing / financial crisis has drastically reduced the mobility of the workforce -- many people cannot afford to sell their house and move to a location where the jobs are available that suit their skills. Or in the words of Fed Chair Bernanke at Wednesday's news conference: "... geographical mismatch ... "

Every month, more than 2,500,000 job openings remain unfilled. IMHO (in my humble opinion), getting workers into those openings would certainly be a move in the right direction, but even if all of those openings were filled in one month, the unemployment rate would only drop by about 1.5 percent. The financial crisis cannot be resolved overnight, a fortnight, or even many fortnights, but it must be fixed if the economy is to make anything more than baby-steps forward.

We've "mobil-ized"

Ever needed to know what is the unemployment rate before going into a presentation (or to settle a bet)? How many jobs were there last month and what is the current GDP growth rate? Well, other than that last one should be easy because we just told you in the first paragraph, we've created mobile / smartphone versions of several of our more popular webpages. Nothing too fancy -- no flaming logos, dancing babies, or angry birds -- just solid information. Check our our mobile home page at m.brucesteinberg.net as well as a mobile version of several important economic indicators at m.brucesteinberg.net/Economic_Indicators.htm. Even this monthly employment report is now available on smartphones everywhere at m.brucesteinberg.net/Jobs_Report.htm. If you would like to see mobile versions of any of our other information, let us know. You do know know that our monthly employment podcast is on iTunes, and has been since February 2006?

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.

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."

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:

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.

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.

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."

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.

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.

"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.

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.

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.    

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!

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."

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.

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?

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.

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.

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.

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 ...

How bad was it ...

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

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

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

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

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

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

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

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

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

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

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

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

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

What's in store for next year ...

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

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

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

Activities around the country ...

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

Enjoy these "soapbox" comments?

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

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

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

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

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

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

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

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

Is the recession "very likely over"?

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

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

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

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

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

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

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

"When will things get back to normal?"

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

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

What I said six years ago ...

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

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

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

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

It's that time of year again ...

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

Yes, the situation is getting better ...

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

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

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

As The Tide Turns ...

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

'Reselling the sold' ...

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

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

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

Twitter thee, Twitter dumb, Twitter smarter ...

Is it  time?

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

Quick  reminder ...

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

Are we there yet?

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

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

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

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

Is the end in sight?

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

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

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

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

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

And the word from the Fed is ...

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

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

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

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

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

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

When will the bad news end?

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

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

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

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

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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?

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.

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.

"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.

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.

"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.

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.

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”).

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.

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.

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!!!