Economics & Recruiting - Where Are We Headed?
Posted by Paul Siker on Thu, Oct 07, 2010 @ 06:29 PM
Geez, it's been awhile - in fact, quite a while. Between personal and professional travel, search assignments, training engagements, and a few other odds and ends, I just haven't had much time to write - until now. I wanted to briefly address the economy and how prevailing economic trends are likely to impact the recruiting landscape for the near-term.
While anyone who follows the news, even passively, is undoubtedly aware of the fact that the National Bureau of Economic Research (NBER) officially declared that the recession which began in December of 2007, officially ended in June 2009. All in all, the recession lasted 18 months, which is quite long by most economic standards.
We all know that employment is a lagging indicator, so it makes sense that even though the recession ended over a year ago, for many it sure doesn't feel that way - does it? That said, every recession seems to operate a little bit differently. The people impacted, the root causes, and the long-term ramifications are seemingly unique.
I absolutely believe that a recovery is underway. But, and I don't count myself to be particularly prescient in stating that it will likely be a choppy recovery with tangible fits and starts. I talk with lots of recruiters - in house and 3rd party alike - and the general sense is that things are improving, but not in a manner that makes anyone feel overly secure. So, I try to pay attention to interesting news stories about the marketplace, and especially the employment marketplace.
I was en route to the airport last week, and found myself listening to Charles Osgood, who was talking about those who have been impacted by unemployment. Interestingly, Osgood was speaking with Timothy Smeeding, of the Institute for Poverty at the University of Wisconsin, who said, ""Low-skilled labor is really in trouble in this economy. The demand for their services is shrinking like crazy. The traditional ways that they moved into the middle class - manufacturing, construction - are dead in the water."
Anthony Mason, another CBS correspondent, added this perspective, "The great divide is a college degree: the unemployment rate for college graduates is less than 5%. For those with just a high school diploma, it's more than 10%. And according to another study, the median income for a college grad - nearly $56,000 - is more than double that of workers who finished only high school."
Furthermore, I read a fascinating piece in the Washington Post, entitled, "Why It Doesn't Feel Like A Recovery," by Neil Irwin, that addressed the "Output Gap." The Output Gap is essentially the difference between what U.S. companies produce, and what they are capable of producing. The current Output Gap is estimated to be in the neighborhood of $900 Billion.
The bottom line conclusions of this article were that in order to bridge the Gap by 2012, we need our economy to grow at an annualized rate of 6%. If our economy only grows by a rate of 3%, the Gap doesn't close until 2020. And, if the economy grows at a rate of only 2%, the Gap wouldn't close, as potential output is always on the rise as a result of a growing population and increased worker productivity.
My personal belief is that the market will continue to improve, but in spasms. My genuine hope is that those who have been displaced will get training that enables them to be relevant in what increasingly is a services economy. My other genuine hope is that we see solid yet sustainable economic growth - I'd much prefer this scenario over a V type of recovery. Only time will tell.