The Recession's Over! Now Good Luck Finding a Job...
First of all, I don't actually believe the recession's over yet, but there’s some questions below on employment once the economy actually regains traction.
KPMG just released their new bi-annual business outlook survey. The survey essentially measures forward optimism in the manufacturing sector for a basket of countries that includes some emerging markets and Europe.
Like many other recent surveys, it’s positive in nature. January EU nations scored a minus 10.2 net balance, but in the recent July survey they shot up to a positive 28 net balance, the highest since early 2008. BRIC countries did even better, with Brazil having the highest manufacturing outlook. Now, you’re missing context on just what a “net balance” is or the calculation methodology, but that isn’t entirely important with where I’m going. Just knowing that countries in the survey have seen a dramatic rebound in optimism about production trends should be the key take away.
Here’s the interesting part though: according to The Financial Times, despite all the optimism about production, a majority of countries surveyed still expect to cut jobs over the next 12 months.
Maybe there’s not a pot of gold for workers at the tail end of the recession rainbow.
Of course, I am extrapolating one data point amongst thousands of surveys to draw a conclusion, but here’s a few key areas to consider:
· The last three recessions (2001, 1990, and 1981) saw the longest recovery times of any recession in the post-WWII era. In 2001 it took 46 months to recover all job losses relative to previous peak employment. In 1990 it took 30 months. In 1987 it took 27 months. Each recession is different, but there has been a trend of increasing lengths of time before job losses are recovered. Since the losses in this recession have been so drastic and we’re already almost 20 month in, it wouldn’t be unreasonable to one-up the amount of time it took to recover jobs from the 2001 recession.
· Unemployment did slightly improve last month, hitting 9.4%. However, that number heavily benefited from people leaving the workforce. This isn’t a positive trend by any means; it’s in essence just creating a “shadow” unemployment that will creep back when positive economic signals returns. As the contingent of workers that left the work force begins competing for jobs again, it’ll put an additional upward pressure on the unemployment rate.
· Finally, as evidenced by this survey, for the time being it appears employers are looking to maintain a lean workforce even if their business outlook improves.
Now, I don’t bring this up as some kind of original thought, I’m more-or-less parroting what several well known economists have said. The consensus seems to be that even in a recovery we could see persistent elevated levels of unemployment.
So I’m looking for thoughts from the Fool community. Does anyone have any on the ground experience talking to employers? Would the sentiment expressed above match what you’re hearing? More importantly, are we seeing a trend of longer job recoveries during recessions? I know this survey was based on a manufacturing index, but the data on job recoveries seems to indicate that as the US has become a more services-oriented economy, recessions have been harder on the unemployed. Is this something that should be addressed?
Left you with a mouth-full there ;), but let me know what you’re thinking in the comments box below.
- Eric Bleeker (TMFRhino)