BLS Analysis for October 2011

Bob Marshall’s BLS Analysis; 11/4/11

 
October BLS Preface

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.

According to the ‘Multiple of Compensation Method’ of valuing an employee, an employees’ 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

For the last couple of months, when a few of you asked me to compare the government numbers with those issued in the monthly ADP report, I have been reminded of a basic tenet of our economy:  That job creation comes from small and mid-sized companies. 

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 340,000 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 November 2nd, ADP announced that the private, service-providing sector rose 114,000 in October.  Although down a bit from an increase of 122,000 in September, this increase marks more than 20 consecutive months of employment gains.  Employment in the private, goods-producing sector declined 4,000 in October, while manufacturing employment declined by 8,000.

The two major declining industries continue to be construction which has decreased in employment by 2,131,000 from its peak in January 2007.  And financial services which has decreased by 686,000 over that same time frame.

But here is the good news for those of you who include small and mid-sized companies in your specialty niches:

In October…

Small business (fewer than 50 employees) payrolls rose +58,000.  This is slightly down from the increase of +64,000 in September.

Medium business (50-499 employees) payrolls rose +53,000.  This is up from the increase of +36,000 in September.

The only problem area…

Large business (500+ employees) payrolls declined by .  This follows a decrease of last month.

So, 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.  These companies need to be in your marketing mix!


One last thought…

What I reported in my August BLS Analysis Preface has remained the same:  The BLS is still reporting that there are 3,000,000 job openings.  Those are the published openings, which is comprised of jobs that are advertised either online or in print format.  As we recruiters know, that is only 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, that 3,000,000 now becomes a total of 15,000,000 published and hidden job orders.

In October there were 13,900,000 unemployed workers.  So why were those job openings open?  Two Words:  Structural Unemployment.  If we can’t figure out how to educate and/or reeducate those 13,900,000 unemployed, then they will keep reappearing each month as a BLS unemployment statistic—as they have.  In the meantime, our recruitment marketplace flourishes!

 

The October 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 November 4, 2011, the BLS published the most recent unemployment rate for October, 2011 of 9.0% (actually it is 9.012% down .073% from 9.085% in September, 2011).  This was determined by dividing the unemployed of 13,897,000 (down from the month before by 95,000—since October, 2010 (one year ago), this number has decreased by 979,000) by the total civilian labor force of 154,198,000 (up by 181,000 from September, 2011).  Since October 2010, our total civilian labor force has increased by 238,000 people.  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 October was fixed at 4.4% (this rate is the same as last month’s 4.4%).  Or, you can look at it another way.  We usually place people who have college degrees.  That unemployment rate in October was fixed at 4.4% (this rate is .2% higher than last month’s 4.2%).

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 October “management, professional and related” types of worker category, you will find the following rates:

October 2010              4.5%

October 2009              4.7%

October 2008              3.0%

October 2007              2.0%

October 2006              1.9%

October 2005              2.2%

October 2004              2.4%

October 2003              2.9%

October 2002              2.8%

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

October 2010              4.7%

October 2009              4.7%

October 2008              3.1%

October 2007              2.1%

October 2006              1.9%

October 2005              2.3%

October 2004              2.5%

October 2003              3.1%

October 2002              3.0%

So, while October’s 2011’s rates for these two categories, of 4.4% and 4.4% 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%

 

 

 

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%

 

 

 

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%

 

 

 

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%

 

 

 

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%

 

 

 

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

 

 

 

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

 

 

 

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

 

 

 

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%

 

 

 

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%

 

 

 

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%