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TMFEditorsDesk (< 20)

The Recession's Over! Now Good Luck Finding a Job...

Recs

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August 11, 2009 – Comments (14)

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.

Fool on!

- Eric Bleeker (TMFRhino)

14 Comments – Post Your Own

#1) On August 11, 2009 at 12:02 PM, ReadEmAnWeep (40.24) wrote:

"The consensus seems to be that even in a recovery we could see persistent elevated levels of unemployment."

 

Ya, I have heard that a lot too. I think since employment is a lagging factor it will recover a lot slower.

 

As far as ground work experience: My wife was laid off last summer just before the major part of the crash happened and we have been looking for work for her ever since. It has been a huge pain and stress creator for us to say the least. Luckily we can still pay rent and get groceries on my pay.

 

So it has been tough and it seems to be getting harder. When we started looking last summer/Christmas, there were jobs but just lots of competition. Now it seems there is lots of competition for no jobs.

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#2) On August 11, 2009 at 12:26 PM, TMFEditorsDesk (< 20) wrote:

Thanks for the feedback Readem.

I think a chart like this:

http://2.bp.blogspot.com/_8rpY5fQK-UQ/Snwm21Ys7pI/AAAAAAAAHnE/LGL6Z0pG67Y/s1600-h/length2.png

Shows the conundrum many like you and your wife are in. There's a huge glut of the population slipping past the half-year mark (and beyond...) of being unemployed. 

Best of luck with your wife's job search. With stories like that it's easy to see why so many people are ending their search for a job and becoming the "shadow" unemployed I referenced above.

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#3) On August 11, 2009 at 12:27 PM, bigcat1969 (92.80) wrote:

I blogged about this a while back and what was frightening to me was "long term unemployment of over six months jumped from 1.661 million one year ago to 4.934 million now."  That is just among folks still being counted.  As you point out the workforce % is also falling as people simply slip off the official unemployment roles.

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#4) On August 11, 2009 at 12:35 PM, TMFEditorsDesk (< 20) wrote:

Bigcat1969,

I found your blog and liked it so I'll re-post it here for other to read:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=240049&t=01003987816791251843

Also, here's another post on jobless numbers that generated a lot of conversation:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=240124&t=01004382569071098967

 

-- Eric (TMFRhino)

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#5) On August 11, 2009 at 12:41 PM, ayekappy (< 20) wrote:

Being a server is about the only thing I could find.  Of course, less people with jobs means less tips! :(

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#6) On August 11, 2009 at 1:11 PM, Rehydrogenated (32.18) wrote:

I'm a government contract manager. I got people trying to headhunt me on a monthly basis. I also work for a construction company. Even though revenues are only down 20% or so, which is actually phenomenal considering the environment, we aren't going to hire anyone new for at least the next 6-9 months. Even more troubling is that the auto mechanic who works on our fleet is going out of business. He claims that the last couple months were the worst he has ever experienced in 30 years after having above-average revenues earlier this year when everyone was repairing their used cars instead of buying new ones. I think there is going to be another negative wave soon.

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#7) On August 11, 2009 at 1:18 PM, motleyanimal (83.72) wrote:

I applied for a job recently over the telephone. Their ad said they wanted friendly and energetic people. I told the lady I spoke with that I wasn't interested in the enegetic job since I didn't feel like doing much of anything, but I could probably fake the friendly job, even though I don't like really people and provided their customers weren't a bunch of assholes.

She hung up on me! Imagine that.

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#8) On August 11, 2009 at 1:27 PM, TMFRhino (98.25) wrote:

Motleyanimal,

Haha! Great stuff... Something tells me you would've been fired anyway when you showed up the first day and weren't wearing the requisite 15 pieces of flare ;).

- Eric (TMFRhino)

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#9) On August 11, 2009 at 1:35 PM, bigcat1969 (92.80) wrote:

Thanks for the repost!  Now if you all could just get a spell checker on here... ;)

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#10) On August 11, 2009 at 1:49 PM, VintageCat (< 20) wrote:

LOL motleyanimal!  Thanks for the laugh.  Seriously I think that people are going to have to make their own jobs rather than relying on business to create employment until things right themselves.  

There are still service business opportunities for those that can stand up to physical labor or can manage personal details that people have jobs continue to be willing to pay for such as pet sitting/walking, housewatch, house cleaning, snow removal, lawn care etc.  Will those businesses make 100K a year salary for the owner/operator?  Doubtful, but it's better than food stamps and a big black "no ambition" hole in one's resume. 

In my city there are still opportunities for such services especially reliable, affordable service.  I know this because we have sought some of these services very recently to allow us to travel.  There are waiting lists for many of them.  It's something to research and consider if one has been unemployed for a longish period of time.

Alternatively write the great American novel while one waits for employment....or head off to med school or nurse training, the opportunities in these fields continue to grow in spite of the recession/depression. 

 

 

 

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#11) On August 11, 2009 at 2:02 PM, CAPTAINWACK (< 20) wrote:

Sorry folks but the recession is far from over. Don't listen to what the government paid number crunchers throw at you. These are the same people who told us we were in a recession 9 months after it started. 

ReadEmAnWeap, your story holds true for many Americans, our poilitians will just look the other way until your wifes benefits run out then she'll no longer be considered unemployed. The'll use the fresh data to feed people a butch of crap until we start believing unemployment and the economy is better. It's called brain washing.

Remember, things are run by those of us that show up.

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#12) On August 11, 2009 at 5:58 PM, cbwang888 (25.41) wrote:

The US want us to believe that the recession will be over this year so they told us in March. Then they came out of lots of plans to help large banks. I don't need to mention those plans.

No help for small and medium business. They are dying just like CIT is now. 

For bigger firms with heavy debts, they were told that they have liquidity issues. So they have to raise more cash with more borrowing costs from banks since their credit ratings have greatly plunged. So banks are enjoying more interests now and those firms who borrow more have to find ways to cut costs. How? Cut salaries, benefits, downgrade healthcare plans, outsourcing more jobs to India and China, laying-off more people, stop donations, ...

Unemployment won't peak @ 9.5%. We haven't seen nothing yet ... unless there are major shifts coming in the federal government policies to stimulate sustainable job growth. (No, cash for clunker is not a sustainable way to grow auto-sales) 

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#13) On August 12, 2009 at 4:31 PM, RaulChapin (< 20) wrote:

Hi, Accountant for a personnel agengy here. (In Canada so a little different than the USA but should be close enough)

 We got a 10-15% salary reduction 4 months after a 10% workforce reduction. We all had to adapt to the new pay, we also had to adapt to the increased workload.

 We just started the budget process for our next fiscal. There are no rehires in that budget, the 10% reduction is not coming back, some benefits are coming back but not all of them. There are three main reasons for this:

a) Even though the company has kept up with the covenants, the bank is just not willing to keep the same kind of operational line of credit, this means any growth has to come from retained earnins... the cheaper the company runs, the higher retained earnings (in the short run, till employees actually find a better job and quit... but in the current economic times, it is easier to find a good employee to replace the previous one, than to find money lying around). Also upon renewal of the line of credit, the bank provided stricter covenants... so any return in salaries would have to be aproved by the bank, which is not going to happen until they believe the employees will otherwise quit.

b) the owners and higher management are worried that this might be a slow recovery, so they do not want to start uping the fixed costs just to have to go right back to cutting them if things slide back or do not improve as expected.

c) as the work is still getting done, and there have not been obvious short term implications, management is begining to think: we were too soft, people were not giving their 100% before, we can be lean in bad times, we can also be lean in good times.

 Being in management and also and employee i see both sides of the coin. So from the employee point of view:

 a)there is a lot of supply of qualified labour at the moment, so we go on sale.

b)the same way a company can become leaner in bad times, so can employees, the same way the company can do with 10% less work force, one can reduce the personal expenses by 10% for ever, think of the extra chanels on cable, the restaurants, buying a lunch vs packing one, far away vacations vs minivacations or closer to home ones.

c) we might need to invest in ourselves to become a more desired item. The company recently refused to send me to Vegas for a convention on the ERP software we are just about to install... I have seen that attending would mean i can learn how to use a reporting tool that will allow me to provide business inteligence without the cost of getting a data warehouse and costly analysts/programers... so i am working on getting a student loan and paying the $4000 it will cost me to go. When the time comes i will have three options: a) do the work and surprise the boss with my newly aquired knowledge but "lose" the $4000 b)say, i took the training out of my pocket and developing these reports and tools will cost you at least what i paid (not in those words :)) c)get the education, update my resume and start looking for better pay while still gainfully employed.

my 2 cents :)

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#14) On August 31, 2009 at 12:33 AM, ozzfan1317 (82.46) wrote:

Motley Animal and TMF Eric I love my flare though..;)

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