Whoopee, the economy is in recovery mode! But where are the pompoms (and the enthusiasm) when you need them?
If you're an economist, indeed we have officially left the recession in the dust, or maybe in the mud. If, however, you're unemployed or feeling like you're hanging onto your job by your (slipping) fingernails, where's your economic love?
That's the not-so-secret dirty secret of the labor markets: they tend to peak shortly after the economy peaks, but tend to recover well after the so-called recovery has began. For those unlucky enough to have been impacted by the 2001 recession (a pretty minor one by most economic standards), you may recall that the labor market took a fairly big hit, and then it didn't start to rebound in any significant way until more than a year after the recession was officially declared dead. Judging by the depth of this recession, and the anticipated weak recovery, it could be like that this time around too.
The "official" U.S. unemployment rate today is 10.0%, but the real unemployment/underemployment rate is far higher. By by the broadest government measure of unemployment, which includes some of the "underemployed" (normally full-time workers working part-time to get by) and those who have given up on looking for employment right now, the rate is 17.5%, or about one-sixth of the labor force. In a few of the harder-hit states, the rate exceeds 20%. If you add in the full-time workers who've accepted jobs outside of their chosen profession and/or at wages well below what they had been accustomed to making, the rate is easily a few points higher than 17.5%.
So, with about one-fifth of labor market participants unemployed or underemployed in some fashion, where is the jobs recovery? (When 60 Minutes interviewed President Obama recently and the topic switched to jobs, he said he'd prefer to keep talking about Afghanistan instead, which is understandable, considering the millions of jobs that have been lost since his inauguration).
There will indeed eventually be be a jobs recovery, but it's likely going to be in the second phase of the overall recovery, when growth reaches the the level where employers feel more confident, and have a pressing need to expand their workforces. Right now though, most employers are extremely reluctant to begin hiring and to expand their fixed costs, even as business conditions have started to improve. Many -- if not most -- employers are still shell-shocked from the 2008-2009 period.
The good news for now is that it appears the labor market is bottoming, or possibly that we have already hit bottom (only history will tell). The November job loss count of just 11,000 jobs nationally (seasonally adjusted) was the lowest monthly tally of job losses in nearly a year and a half. If December's data is similarly good, than maybe we are at the bottom, If not, then we'll probably just skim around the bottom for a while before turning upward sometime in the first half of 2010.
Additional good news, in form of increased temporary worker hiring, is already happening. In November 52,000 temporary workers were hired, and these count as "employed," and this contributed significantly to the low number of total job losses reported last month. Eventually, businesses will feel comfortable enough to start converting some of these temporary worker slots into full-time "regular" employees.
So, what does this impending recovery mean for wages? First of all, don't expect much of an up-tick anytime soon. Recovering labor markets are like a Sloth on a Sunday stroll (slooooow moving), since it's a supply/demand market. As long as the supply of labor exceeds demand, there's not much impetus for hiring wages to increase (and those who remained employed will mostly receive very modest pay increases in 2010 and beyond). So, until the supply/demand equation gets re-balanced, don't expect much on the upside. Demand will eventually pull wages upward, but not until most of the excess supply is soaked up.
This labor market funk will pass within the next few months, and we'll be at the bottom or moving slightly upward soon. Don't expect an upward surge though, but a bottom for sure (my fingers crossed), and then a slow but steady improvement.
Cheers and Happy New Year to you all, and to a better 2010 for workers and businesses alike!
Doug Sayed, SPHR, CCP, is Principal at Applied HR Strategies, a Seattle-area compensation consultancy, and the developer of the StrategicPay Series, a series of "hands on" do it yourself (DIY) guides to developing sound, strategic compensation programs. The first guide in the Series, the Base Pay Toolkit is now available.
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