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A Right Recruiting Newsletter, 4/2008
It’s been over 3 months since our last newsletter so we are long overdue. We’ve gotten quite a few calls and emails, both from employers and candidates, asking about the state of the market. After years of a tight labor market, will employers get some relief? After a few years of a candidate–tilted market, will candidates get their come-uppance? Here are our thoughts, based up in 30 years of locally based recruiting at the ground-floor level.
First, a few things you need to know. One, we are not in a recession. GDP needs to fall for at least two quarters to fulfill the technical definition of a recession and I don’t think we’ve even had one quarter of GDP loss. Two, unemployment is not high. Right now we are at 5% unemployment, which is BELOW the average unemployment rate historically. Three, job losses have not been severe. Over the last 2 months, the weekly rate of first-time unemployment claims has dropped, not risen.
Despite what our friends in the media tell us, things are not bad. Sure, in some parts of the country housing is lousy but, since we’ve always been boom/bust resistant here, that does not affect us much. While some parts of manufacturing are down, exports are booming. Auto, a sector considered weak by many, actually produced more cars last year than any other year. Detroit-based auto is weak. But, BMW, Toyota, etc. plants here in the US are busy. Things are always more complex than presented in sound-bites, especially during an election year. This is certainly no exception.
Here is where we are. Later, I will explain where we are headed, and what it means for you.
We are in a perfectly balanced employment market. Candidates and jobs are in an equilibrium. While there are fewer employers hiring, there are also fewer people looking. Often, when the market is perceived to be troubled, people who are employed hunker down and do not look to better their situations. In a truly bad market, a paucity of candidates is more than made up by layoffs. Those layoffs have not happened, yet. To date, unlike 2001-2003, we’ve had no large local layoffs like we had a few years ago when IT companies, telecomm, companies, etc. were slashing their workforces Back then, we had a hiring slowdown in conjunction with thousands of professionals being thrown into the market. That created an over-supply of candidates, as many of you remember. Up to now, any layoffs we’ve seen have been at the margins and have not been widespread. While less companies are hiring, less people are looking, creating a balance. If you are hiring, you are still not seeing many candidates. If you are looking, there are fewer opportunities, but not so few as to make your job search depressing.
As to the future, I have been told to expect at least two companies, both in the western suburbs, to either leave the region or face large layoffs by the end of the year. That can change the dynamics, especially if they do so in a slower hiring market. There is nothing more disturbing that 100’s or 1000’s of people, all with similar resumes and industry experience, hitting the market at once in the same geographical area. That drives salaries down, as employers play candidates off against each other. For some firms, it becomes a payback for candidates who played companies off against each other a few years earlier. Those are the kind of scenarios that cause people to lose their homes and careers.
As I’ve mentioned in earlier Newsletters, we usually hold up well here locally because of two factors. One, we have a mixed economy in which lots of industries are represented. Two, we have lots of small companies, the true drivers of economic growth. The first factor may be challenged in a few years, however. One of the pillars of the local economy has always been the pharmaceutical industry. Without taking sides on the issue, anyone who thinks that the industry will survive a nationalized health care plan as it stands now is not thinking clearly. Within a decade, pharma may look like the defense industry, an industry with one major client. That could have a profound affect on our corner of the world. More on that in another Newsletter, though.
From a societal standpoint, on a more troubling note, I think we are seeing a complete decoupling of the professional employment market from the rest of America. An analysis of the resumes we’ve received over the last 6 months shows an unmistakable trend. Companies are going through a generational shift and are professionalizing many functions that used to be home grown. For example, one of the most common searches we’ve had over the last year has been an upgrade of production supervision and management. In the executive suite, there is a recognition that new methodologies, at the plant level, are required to compete globally. The Production Supervisor, with 30 years experience in doing one thing one way, is being replaced by the BS/BA candidate with 5 years experience and lean or six-sigma training. A supervisor who is resistant to change is not being allowed to stop the process anymore. The same dynamic is happening in fields other than operations. Sales, marketing, finance and the rest of a business infrastructure are all trying to internalize new tools and new thinking to remain competitive. Candidly, existing employees who have not kept pace are beginning to be shed and replaced. What does it say about the state of the market when one person is being laid-off and replaced by another? This can be cold but has always been inevitable. This is not our father’s world and it’s not our grandfather’s world. The days when you go to work for Acme Manufacturing and work your way up the ladder for 30 years without upgrading your skills are over. I think that statement has often been said but never really believed. Believe it. Last week I got a resume of a Director at a local tech company. He started as a clerk and worked his way up to the executive suite and a $200,000 salary, without getting a BS/BA degree, much less an MBA. His role will inevitably be filled by an internal promotion or outside hire. He will be replaced by someone whose educational background or work experience shows that they can create new ideas, not just maintain existing systems that have become outmoded. While it may sound cold and heartless to throw the fellow away, please remember that his employer has a very good tuition re-imbursement plan and that he required a BS/BA degree for professional hires two level below him. He needed to aggressively keep his education current and, because he did not, he is in real trouble now. The reality of the phrase – the pace of business has speeded up – is becoming painful to some.
While you don’t need a degree to get a professional job, you need a degree to keep one. Without a doubt, you need a degree, and sometimes 2, to advance yourself. While on-line bachelors programs help, they still put you at a competitive disadvantage when you are faced against someone with a more traditional degree. While that may change over time with more acceptance, that bias for a brick and mortar education still exists.
The best statistic I can give showing the decoupling of the professional and general labor markets is startling. At a time when the general rate of unemployment is 5%, the rate for college-educated heads of households is 2.1%. Professionals are in short supply and will remain so.
Since most of you are professionals and most are degreed, many of you are thinking everything is hunky-dory now. No matter what the headlines say, you are still a hot-property and things are great, right? While I expect this decoupling to continue because of societal factors there is a fly in the ointment that is going to make this market goofy for awhile. That fly is – perceptions. Let me explain.
For some odd reason journalists appear to love bad business news. The size of the headline is always bigger when the news is bad than when the news is good. Coupled with the fact that very very few journalists have any experience in business or training in economics, most people are fed a diet of bad news, even when analysis of the data might lead to a more positive interpretation. This is where perceptions come into play.
Negotiating salaries, either for a raise or new job, can be a painful experience. It can be much worse when the person you are negotiating with thinks the market is in their favor, even if it’s not. It’s like real estate. You want to buy a house that you evaluate, correctly, as worth $200,000. The seller values it incorrectly at $300,000. They turn down your offer for $200,000. A year later, having been proved wrong by the market, they sell it to someone else for $200,000. Even though you were right in your valuation, it did you no good.
If you think, correctly, that you are worth an $80,000 salary but your employer, incorrectly, sees your market value as $70,000, you will not get $80,000 until the market shows them the falseness of their views. That means you either have to find a more enlightened employer. You also have to gamble that you are right in your personal valuation. Since most employers get their view of the market from the media, just like anyone else, it will be easy for you to be undervalued. It will be annoying for you to go out and prove it.
In other words, we are poised for a goofy employment market. It will be a market that frustrates both employer and candidate alike, with disconnects on both sides. Of course, knowing us can help as I believe we are an honest broker for both sides. And, remember, there are indeed companies out there that know how to value people and that will do their homework on salaries and will recognize value. Those are the opportunities that you should jump at for they will continue to value you throughout your employment. There are good companies looking to fill good jobs NOW! Don’t hunker down and forget that the world is still spinning. Also, don’t forget keep your skills up-to-date and current!
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