The pace quickens, but for whom?

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Expert Perspective by Grahall’s OmniMedia Editorial Board

expert perspective telescopeThe August 10, 2009 Wall Street Journal article by Justin Lahart titled “Pace of Job Losses Sets Stage for Quick Labor-Market Rebound”  suggests that: “The rapid pace at which businesses shed jobs during the recession comes with a flip side: Workers will need to be hired back quickly as the economy improves.”

Certainly we are optimistic about economic recovery and delighted for those people who will see job opportunities arise.  But what will Post-Great Recession American companies look like?  Let’s take a step back, all the way back to those fat and happy years in the early 21st century. During those rich economic times, companies put on fat all over, layering on programs, bureaucracy and “cost center employees.”  Demand for product was so high that even marginally profitable businesses could thrive, and support-services jobs were plentiful. 

But when the worm turns – like it did in late 2008 – and times are tough, often the first people to lose jobs are those not directly supporting the overall profitability of the firm – the cost center employees such as human resources personnel.  Next businesses will downsize unprofitable divisions and will slow overall production to help control costs. 

Then when the recovery arrives, companies may have limited inventory to meet growing customer demand. If that is the case, the first people to hear the sirens’ song of job offers are those who create, sell and service the product.  But jobs in the manufacturing industry may still be elusive.  In past recessions, manufacturing jobs have headed overseas where the cost of labor is low, regulations are limited and unions unheard of, that may happen in this recession as well.  Post Great Recession jobs in the manufacturing industry may be available only in Central America and Asia.

For companies in the service industry it is likely that  jobs will again become plentiful. The companies that are the smartest will focus on creating product, selling product and supporting the customer.  This is where the jobs will quickly rebound and where profits can be quickly realized.  Jobs in “cost center” functions, however, will be slower to recover.  The focus for companies returning to profitability needs to be revenue.  Hiring temporary personnel in “cost center” functions such as HR and other such support services is an excellent alternative to bringing on full-time employees.   Once business and the economy stabilizes, then considerations can turn to infrastructure.  (Link to Grahall’s Rewards Temps services).

Will we see a return to the heady days before the fall of 2008 (and the economic implosion)?  Perhaps, but it is important to remember that for many years the “full employment strike zone”, was 6% unemployment, not the 4% that was touted in 2007.  The “natural” or “effective” unemployment rate may no longer be 4%, which means that some folks will not find work. The real irony, probably a reflection of the same irony as in past recessions, is if you ask those folks with jobs they will say there is no shortage of work, there is just a shortage of money in the hands of buyers, including themselves.

Contact Grahall’s editorial director at edie.kingston@grahall.com

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