| In our Technology newsletter, annually we review the state of the employment market and try and predict it’s future. Since this is our inaugural HR newsletter, it seems appropriate to start with a discussion of the state of the HR market.
First, the good news. In general, we are in an improving job market. As I pointed out in my technology newsletter, there are more companies hiring or planning to hire. This is true in all disciplines. Our economy here in the PA/NJ/DE areas is quite reflective of the nation’s economy as a whole. All industries are represented here and the nation’s general economic improvement should be mirrored by our regional economy. Much like 1992-1993, our last recovery period, you will be hearing about a "jobless" recovery well after the jobless rate drops and we are back to normal. By the time you read about a tighter labor market in Time Magazine, for example, the market will have tightened a year earlier. Unemployment makes good headlines.
However, I think this recovery in the job market will be more intense than people expect. There have been some significant differences in the recent downturn. These differences should lead to a different type of job market recovery. First, the last 3 recessions have each been shallower than the last (1982 -10% unemployment, 1991 - 8% unemployment, 2001 - 6% unemployment). Each recovery has led to a tighter labor market (1989 - 5.5%, 1999 - 4%). Most of that improvement in each period can be based on demographics. As the boomers move through the labor market, there are fewer people coming out of college to replace them. Hence a tighter market with each recovery. That trend should continue.
Also, this recovery is starting from a better base. Right now the unemployment rate is 5.6%. That used to be considered full employment. It was not till 1996-1997 that unemployment dropped to that figure from the 8% figure in 1991-1992. In other words, our recovery is beginning with a tighter labor pool.
How can that be? Lot’s of people are out of work. Well, I don’t think that’s true. My evidence is empirical but it all points in the same direction. As we said earlier, this has been a shallower downturn that 1991 or 1982 BUT it’s been longer. While the others lasted a couple of quarters, this has lasted a couple of years. There are not a lot of people out of work. There are some people who have been out of work for a long time. Those are 2 different situations. We have a pool of labor that looks big but is deceptive because it’s very shallow. What we have lacked the last few years was any appreciable hiring. Any up tick in hiring should drain that pool quickly. Once the pool is empty you have a tight labor market again.
Over the last few months, our business has shown some evidence of that draining. In February, we filled two senior jobs with people who were out of work over a year. One fellow had 2 other offers when he accepted ours. Conversations across the board have brought anecdotal evidence that that is not an unusual evident. We are at a spot where there are companies hiring-finally. Ironically, every one of those firms is convinced that it’s the ONLY company hiring, so the interviewing pace is still slow. Candidate availability is being taken for granted. Remember the fellow we placed with two other offers. I bet both those firms were stunned when he turned down their jobs. As that gets repeated, the pace of hiring will pick up.
Ad response has also confirmed this. Starting in August 2003, the quantity of Right Recruiting’s ad response dropped noticeably and this has continued into 2004. I’ve checked with people in other companies, both corporate and agencies. They have seen the same thing. Less layoffs creates fewer candidates. Weekly unemployment claims have been dropping for 6 months. A little hiring will make a big difference and that hiring has begun.
Now, how about the HR market specifically? Will that mirror the general professional market? Yes, but it will lag. In general, HR is the last market to come back. Please don’t take this personally because most of the people getting this are in HR. Facts are facts-it’s sometimes perceived as overhead. Also, maybe about 25% of companies take their HR departments seriously. Having said that please don’t assume I share that view. HR, like Quality or Marketing, is a discipline whose benefits can be hard to quantify. Everyone knows they should have HR, like they know they should have a Quality department, but very few people know what a good HR person can do.
Now, what makes a good HR department can be up to discussion. Personally, I think it’s not the number of people in HR; it’s the attitude of the people in HR. But, that’s another newsletter!
Another unique thing about the HR market is a trait with both a good and bad side. HR people take care of their own. That’s good. HR people network well, better than any other discipline I have seen. They also work hard to provide out-of-work peers with consulting projects within their companies. These contracting jobs provide that "paycheck maintenance" function so important to most of us. That’s good but it’s bad too.
It’s bad because, if you are a Director of HR and you have a legitimate need for someone to handle a benefits project, you may really want an employee to add to your staff long-term. However, as long as your CFO knows there are readily available contractors, he may be reluctant to approve the head count addition, even though your gut tells you it will be a long-term need. It’s like an Oracle DBA posting their resume on Monster. When one does it, it’s great for that person. When 200 DBA’s do it, it creates the impression of a slack market and turns all 200 DBA’s into commodities to be bought at the cheapest price.
That doesn’t mean it’s wrong to take a contract or hire a consultant. It’s just one of a few contributing factors to the HR employment market and it delays the creation of permanent jobs.
I think the HR market begins to improve now. That would mean it lags the technology market by a quarter or two, which feels right to me. If you are one of those people who is currently out of work, don’t give up. Your own personal job recovery may be just around the corner. If you are now working in a HR department, why don’t you hire one of those people out of work? The sooner you create and fill jobs, the better the market for the employer. If you wait too long, the tight market will bite you like it did in the late 1990’s.
And please remember Right Recruiting!
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