BLS Analysis for January 2012

Bob Marshall’s BLS Analysis; 2/3/12

 

January BLS Preface

 

Welcome to 2012!

I write these monthly BLS analyses to not only counterbalance the negative press reporting of our economic state but, more than that, to remind all of my recruitment readers that, at the level we work, there is no unemployment and so we must recruit to find the candidates our client companies so desperately need.  Always keep in mind that we are not in an HR business, but in a ‘circumventing the time factor in the hiring sequence’ business—and adding value to our client companies.

Adding Value

According to the ‘Multiple of Compensation Method’ of valuing an employee (Google it), an employee’s value to their company is often computed at five times their salary.  So, for instance, if your Job Order calls for a salary of $100K, then the value that person should bring to your client company is $500K per year.  Your service charge, on the other hand, is only 25% of their realistic first year’s earnings, which, in this case, is only $25K.  Or, to look at it another way, your fee is only 5% of this position’s value to the client company and that’s only for the first year!  The client company benefits from the $500K value each year the candidate remains employed.  You get your fee only once.  When you look at your fee structure in this way, you are definitely a bargain.

Conversely, taking the value of this position at $500K per year and realizing that there are 2080 work hours in a year, the client company is hemorrhaging $240. per hour for each hour that this position remains vacant.  Think about it!  That’s about $2,000 per workday, $10,000 per workweek, etc.  Two and a half weeks with this position open will basically equal your fee, and the client company will still have that vacancy.

So, keep in mind as you read these analyses that you are in the hottest recruitment marketplace ever, if you conduct your business correctly.  And that you are worth every penny you charge!

 

Small & Mid-sized Companies

 

Every month, when I read the new ADP National Employment Report*, I am reminded of the job creation impact that small and mid-sized companies have on our economy.  This month’s report, covering January 2012 employment, was no exception.

*Re:  BLS and ADP; trying to reconcile government reports with private industry reports is a bit of a challenge—especially when Macroeconomic Advisers, LLC, processes it’s info in a different time frame (12th of the month) and pulls from roughly 337,000 business clients representing more than 21,000,000 US employees.  So, it’s a little bit like comparing apples with oranges.  At the best, the ADP report has a mixed track record at presaging the government’s monthly report.  That being said…

On February 1st, ADP reported that employment in the U.S. nonfarm private business sector increased by 170,000 from December to January on a seasonally adjusted basis.  The estimated advance in employment from November to December was revised down to 292,000 from the initially reported 325,000. 

Employment in the private, service-providing sector rose 152,000 in January, which is down from an increase of 273,000 in December.  Employment in the private, goods-producing sector increased 18,000 in January (down from an increase of 52,000 in December), while manufacturing employment increased 10,000 (down from an increase of 22,000 in December).

Employment in the construction industry increased 2,000 (down from an increase of 26,000 in December).  Employment in the financial services sector increased 9,000 in January (up from a decline of 1,000 in December) and represents the largest gain in two years.

But here is the good news for those of you who include small and mid-sized companies in your specialty niches (as I strongly recommend):

In January…

Small business (those with up to 49 employees) payrolls rose +95,000, down from the 148,000 jobs created among small businesses last month.  Of the 95,000 jobs created by small businesses, 11,000 jobs were created by the goods-producing sector (down from 18,000 in December) and 84,000 jobs were created by the service-producing sector (down from 130,000 in December).

Medium business (50-499 employees) payrolls rose +72,000.  This is a decrease from +140,000 in December.

Large business (500+ employees) payrolls increased by only +3,000.  This is a decrease from +37,000 in December.  This follows an increase of +12,000 in November and follows declines in October of and in September of .

So, the combined small and medium-sized company employment growth of 167,000 (down from 288,000 in December) accounted for 98.2% (up from 88.6% in December) of the total 170,000 (down from 325,000 in December) job growth in January, 2012.

Bottom-line:  To my audience of recruiters, always remember this:  Our ‘bread and butter’, especially on the contingency side of the house, has historically been, and continues to be, small and medium-sized client companies.  Along with the large companies, these companies need to be in your marketing mix!

One last thought…

On February 7th, the BLS reported that there were 3,400,000 job openings on the last business day of December—up from 3,100,000 job openings announced for November (revised).  That number reflects published openings comprised of jobs that are advertised either online or in print format.  (The Conference Board, on February 1st, released a report that approximately 4,380,000 jobs are advertised online in the US alone).  As we recruiters know, that 3,400,000 number only represents 20% of the jobs currently available in the marketplace.  The other 80% of job openings are unpublished and are filled through networking or word of mouth or by using a RECRUITER.   So, those 3,400,000 published job openings now become a total of 17,000,000 published and hidden job orders.

In January there were 12,758,000 unemployed workers.  Why were those job openings open?  Two Words:  Structural Unemployment.  If we can’t figure out how to educate and/or reeducate those 12,758,000 unemployed, then they will keep reappearing each month as a BLS unemployment statistic—as they have.  In the meantime, our recruitment marketplace flourishes!

 

The January BLS Analysis

 

The unemployment rate is published by the Bureau of Labor Statistics, a division of the US Department of Labor.  The rate is found by dividing the number of unemployed by the total civilian labor force.  On February 3, 2012, the BLS published the most recent unemployment rate for January, 2012 of 8.3% (actually it is 8.263, down .248% from 8.511 in December, 2011).

The unemployment rate was determined by dividing the unemployed of 12,758,000 (down from the month before by 339,000—since January, 2011 (one year ago), this number has decreased by 1,161,000) by the total civilian labor force of 154,395,000 (up by 508,000 from December, 2011).  Since January 2011, our total civilian labor force has increased by 1,145,000 people. 

(Strange BLS Math:  It seems the BLS has increased the total Civilian Working Population to 242,269,000 (up from December by 1,685,000) and the Civilian Labor Force to 154,395,000 (up from December by 508,000).  Subtract the second number from the first number and you get 87,874,000 Not In the Labor Force. That is an increase of 1,177,000 in one month.  Where did 1,177,000 potential workers disappear to?  I am assuming they still have to eat and pay their rent.  They still need money, don’t they?  Because of these new numbers, our Employment Participation Rate—the population 16 years and older working or seeking work—is now at 63.7%, which is at a new 30 year low.  Final take on these numbers:  Fewer people looking for work will always bring down the unemployment rate). 

And finally, remember that our first (of three) GDP estimates for the final quarter of 2011 came in at 2.8%.  This is a little less than the 3.0% quarterly GDP increase that is necessary to keep up with population growth and stop the unemployment rate from rising.  If we were experience strong job growth, then our GDP would be growing more as well.

Anyway, back to the point I am trying to make.  On the surface, these new unemployment rates are scary, but let’s look a little deeper and consider some other numbers.

The unemployment rate includes all types of workers—construction workers, government workers, etc.  We recruiters, on the other hand, mainly place management, professional and related types of workers.  That unemployment rate in January was fixed at 4.3% (this rate is .1% higher than last month’s 4.2%).  Or, you can look at it another way.  We usually place people who have college degrees.  That unemployment rate in December was fixed at 4.2% (this rate is .1% higher than last month’s 4.1%).

Now stay with me a little longer.  This gets better.  It’s important to understand (and none of the pundits mention this) that the unemployment rate, for many reasons, will never be 0%, no matter how good the economy is.  Without boring you any more than I have already, let me add here that Milton Friedman (the renowned Nobel Prize-winning economist), is famous for the theory of the “natural rate of unemployment” (or the term he preferred, NAIRU, which is the acronym for Non-Accelerating Inflation Rate of Unemployment).  Basically, this theory states that full employment presupposes an ‘unavoidable and acceptable’ unemployment rate of somewhere between 4-6% with it.  Economists often settle on 5%, although the “New Normal Unemployment Rate” has been suggested to fall at 6.7%Nevertheless (if you will allow me to apply a ‘macro’ concept to a ‘micro’ issue), if this rate is applied to our main category of Management, Professional and Related types of potential recruits, and/or our other main category of College-Degreed potential recruits, we find no unemployment!  None!  Zilch!

 

THE IMPORTANCE OF GDP

 

“The economic goal of any nation, as of any individual, is to get the greatest results with the least effort.  The whole economic progress of mankind has consisted in getting more production with the same labor…Translated into national terms, this first principle means that our real objective is to maximize production.  In doing this, full employment—that is, the absence of involuntary idleness—becomes a necessary by-product.  But production is the end, employment merely the means.  We cannot continuously have the fullest production without full employment.  But we can very easily have full employment without full production.”

Economics in One Lesson, by Henry Hazlitt, Chapter X, “The Fetish of Full Employment”

 

IT IS IMPOSSIBLE FOR UNEMPLOYMENT EVER TO BE ZERO

 

‘Unemployment’ is an emotional ‘trigger’ word.  It conjures up negative thoughts.  But it is important to realize that, while we want everyone who wants a job to have the opportunity to work, unemployment can never be zero and, in fact, can be disruptive to an economy if it gets too close to zero.  Very low unemployment can actually hurt the economy by creating an upward pressure on wages which invariably leads to higher production costs and prices.  This can lead to inflation.  The lowest the unemployment rate has been in the US was 2.5%.  That was in May and June 1953 when the economy overheated due to the Korean War.  When this bubble burst, it kicked off the Recession of 1953.  A healthy economy will always include some percentage of unemployment.

 

There are five main sources of unemployment:

 

1.  Cyclical (or demand-deficient) unemployment – This type of unemployment fluctuates with the business cycle.  It rises during a recession and falls during the subsequent recovery.  Workers who are most affected by this type of unemployment are laid off during a recession when production volumes fall and companies use lay-offs as the easiest way to reduce costs.  These workers are usually rehired, some months later, when the economy improves.

 

2.  Frictional unemployment – This comes from the normal turnover in the labor force.  This is where new workers are entering the workforce and older workers are retiring and leaving vacancies to be filled by the new workers or those re-entering the workforce.  This category includes workers who are between jobs.

 

3.  Structural unemployment – This happens when the skills possessed by the unemployed worker don’t match the requirements of the opening—whether those be in characteristics and skills or in location.  This can come from new technology or foreign competition (e.g., foreign outsourcing).  This type of unemployment usually lasts longer than frictional unemployment because retraining, and sometimes relocation, is involved.  Occasionally jobs in this category can just disappear overseas.

 

4.  Seasonal unemployment – This happens when the workforce is affected by the climate or time of year.  Construction workers and agricultural workers aren’t needed as much during the winter season because of the inclement weather.  On the other hand, retail workers experience an increase in hiring shortly before, and during, the holiday season, but can be laid off shortly thereafter.

 

5.  Surplus unemployment – This is caused by minimum wage laws and unions.  When wages are set at a higher level, unemployment can often result.  Why?  To keep within the same payroll budget, the company must let go of some workers to pay the remaining workers a higher salary.

 

Other factors influencing the unemployment rate:

 

1.  Length of unemployment – Some studies indicate that an important factor influencing a workers decision to accept a new job is directly related to the length of the unemployment benefit they are receiving.  In early 2009, eligibility for unemployment benefits was extended from 26 weeks to as much as 99 weeks.  Studies suggest that this reduces the incentive of the unemployed to seek and accept less desirable jobs.

 

2.  Changes in GDP – Since hiring workers takes time, the improvement in the unemployment rate usually lags behind the improvement in the GDP.

 

WHERE RECRUITERS PLACE

 

Now back to the issue at hand, namely the recruiting, and placing, of professionals and those with college degrees.

 

If you take a look at the past few years of unemployment in the January “management, professional and related” types of worker category, you will find the following rates:

 

January 2010               5.0%

January 2009               4.1%

January 2008               2.2%

January 2007               2.0%

January 2006               2.1%

January 2005               2.4%

January 2004               3.0%

January 2003               3.2%

January 2002               3.1%

 

Here are the rates, during those same time periods, for “college-degreed” workers:

 

January 2010               4.9%

January 2009               3.9%

January 2008               2.1%

January 2007               2.1%

January 2006               2.1%

January 2005               2.2%

January 2004               2.9%

January 2003               3.0%

January 2002               2.9%

 

So, while January’s 2012’s rates for these two categories, of 4.3% and 4.2% respectively, are not huge when looking at the big picture, it’s not anything to be very happy about either—especially when we see how well we had it during the 2002-2008 time frame.  But regardless, these unemployment numbers usually include a good number of job hoppers, job shoppers and rejects.  We, on the other hand, are engaged by our client companies to find those candidates who are happy, well-appreciated, making good money and currently working and we entice them to move for even better opportunities—especially where new technologies are expanding.  This will never change.  And that is why, no matter the unemployment rate, we still need to market to find the best job orders and we still need to recruit to find the best candidates.

 

Below are the numbers for the over 25 year olds:

 

Less that H.S. diploma – Unemployment Rate

 

12/08

10.9%

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

12.0%

12.6%

13.3%

14.8%

15.5%

15.5%

15.4%

15.6%

15.0%

15.5%

15.0%

15.3%

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

15.2%

15.6%

14.5%

14.7%

15.0%

14.1%

13.8%

14.0%

15.4%

15.3%

15.7%

15.3%

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

14.2%

13.9%

13.7%

14.6%

14.7%

14.3%

15.0%

14.3%

14.0%

13.8%

13.2%

13.8%

 

1/12

13.1%

 

H.S. Grad; no college – Unemployment Rate

 

12/08

7.7%

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

8.1%

8.3%

9.0%

9.3%

10.0%

9.8%

9.4%

9.7%

10.8%

11.2%

10.4%

10.5%

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

10.1%

10.5%

10.8%

10.6%

10.9%

10.8%

10.1%

10.3%

10.0%

10.1%

10.0%

9.8%

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

9.4%

9.5%

9.5%

9.7%

9.5%

10.0%

9.3%

9.6%

9.7%

9.6%

8.8%

8.7%

 

1/12

8.4%

 

Some College; or AA/AS – Unemployment Rate

 

12/08

5.6%

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

6.2%

7.0%

7.2%

7.4%

7.7%

8.0%

7.9%

8.2%

8.5%

9.0%

9.0%

9.0%

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

8.5%

8.0%

8.2%

8.3%

8.3%

8.2%

8.3%

8.7%

9.1%

8.5%

8.7%

8.1%

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

8.0%

7.8%

7.4%

7.5%

8.0%

8.4%

8.3%

8.2%

8.4%

8.3%

7.6%

7.7%

 

1/12

7.2%

 

BS/BS + – Unemployment Rate

 

12/08

3.7%

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

3.8%

4.1%

4.3%

4.4%

4.8%

4.7%

4.7%

4.7%

4.9%

4.7%

4.9%

5.0%

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

4.9%

5.0%

4.9%

4.9%

4.7%

4.4%

4.5%

4.6%

4.4%

4.7%

5.1%

4.8%

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

4.2%

4.3%

4.4%

4.5%

4.5%

4.4%

4.3%

4.3%

4.2%

4.4%

4.4%

4.1%

 

1/12

4.2%

Management, Professional & Related – Unemployment Rate

 

12/08

3.3%

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

4.1%

3.9%

4.2%

4.0%

4.6%

5.0%

5.5%

5.4%

5.2%

4.7%

4.6%

4.6%

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

5.0%

4.8%

4.7%

4.5%

4.5%

4.9%

5.0%

5.1%

4.4%

4.5%

4.7%

4.6%

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

4.7%

4.4%

4.3%

4.0%

4.4%

4.7%

5.0%

4.9%

4.4%

4.4%

4.2%

4.2%

 

1/12

4.3%

 

Or employed…(,000)

 

12/08

52,548

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

52,358

52,196

52,345

52,597

52,256

51,776

51,810

51,724

52,186

52,981

52,263

52,131

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

52,159

52,324

52,163

52,355

51,839

51,414

50,974

50,879

51,757

51,818

52,263

51,704

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

51,866

52,557

53,243

53,216

52,778

52,120

51,662

51,997

52,665

52,864

52,787

52,808

 

1/12

53,152

 

And unemployed…(,000)

 

12/08

1,802

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

2,238

2,137

2,292

2,164

2,373

2,720

3,034

2,925

2,859

2,593

2,530

2,509

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

2,762

2,637

2,600

2,464

2,450

2,644

2,687

2,762

2,381

2,417

2,525

2,468

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

2,557

2,435

2,381

2,196

2,419

2,598

2,742

2,671

2,450

2,410

2,336

2,303

 

1/12

2,410

 

For a total Management, Professional & Related workforce of…(,000)

 

12/08

54,350

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

54,596

54,333

54,637

54,761

54,629

54,496

54,844

54,649

55,045

55,574

54,793

54,640

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

54,921

54,961

54,763

54,819

54,289

54,058

53,661

53,641

54,138

54,235

54,788

54,172

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

54,423

54,992

55,624

55,412

55,197

54,718

54,404

54,668

55,115

55,274

55,123

55,111

 

1/12

55,562

 

Management, Business and Financial Operations – Unemployment Rate

 

12/08

3.9%

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

4.6%

4.5%

4.5%

4.4%

4.6%

4.8%

4.9%

5.0%

5.2%

5.4%

5.4%

5.2%

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

5.2%

5.1%

5.4%

5.1%

4.9%

4.8%

4.7%

4.9%

4.3%

5.0%

5.5%

5.7%

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

5.3%

4.9%

4.8%

4.6%

4.9%

4.6%

4.6%

4.6%

4.6%

4.7%

4.6%

4.4%

 

1/12

4.5%

 

Professional & Related – Unemployment Rate

 

12/08

2.9%

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

3.7%

3.5%

3.9%

3.6%

4.2%

5.1%

6.0%

5.6%

5.2%

4.2%

4.1%

4.2%

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

4.9%

4.6%

4.3%

4.1%

4.3%

5.0%

5.2%

5.3%

4.4%

4.1%

4.1%

3.8%

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

4.3%

4.1%

3.9%

3.5%

4.0%

4.9%

5.3%

5.1%

4.4%

4.1%

4.0%

4.0%

 

1/12

4.2%

 

Sales & Related – Unemployment Rate

12/08

7.0%

 

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/09

11/09

12/09

7.7%

8.4%

8.9%

8.6%

8.9%

9.1%

8.3%

8.7%

8.9%

9.5%

9.1%

8.9%

 

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

10.1%

10.2%

9.7%

9.2%

9.6%

9.4%

10.1%

9.0%

9.4%

9.1%

8.8%

8.3%

 

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/11

11/11

12/11

9.3%

9.0%

8.5%

8.5%

9.4%

9.7%

9.4%

8.6%

9.4%

8.2%

7.8%

7.7%

 

1/12

8.2%