The causes The current state of unemployment is germane to business cycle and economic structural change.
Excess technology investments in the US in the late 90s, coupled with bleak business outlook, dampen companies’ interest in capital investments. Capital investment, tech sector and US economy revival become self-feeding loop, a chicken and egg problem, haunting the revival of US economy.
US economy outlook There are currently two schools of thought about the prospects of the US economy. The optimist holds that US interest rate is now at historical low. Except in telecommunication industry, other industries excess inventories are largely cleared. Bush Government also announced stimulus packages in terms of tax cut. Consumer confidence and productivity gain remain strong. On top of that, there are signs of capital investment revival. In the latest earning reporting season many significant companies’ corporate profits met or exceeded market expectation, on the back of weak world economy and more stringent regulatory requirements in the US. The reporting results show the agility of US economy. And Wall Street also responded in the late surge of US stock market and the fall of bond price.
The pessimist holds that the unemployment rate still remains high. There are excess capacities in some industries that show demand remains weak. The improvement of capital investment outlay lately was replacement rather than real business expansion. The threat of terrorists’ attack remains real. Corporate and personal debts remain high and the ballooning budget deficit is worrying. Some economists attributed the latest spectacular GDP growth in the US to defence spending.
Now all eyes are on the momentum of US growth engine. The latest views are: the Fed is forecasting around 3.5 to 4 % for the next eighteen months. However, there are some pessimists view the outlook differently, according to Morgan Stanley’s economist, "we are suffering from a deficiency of income generation coming from the private economy." What he meant is weak savings and record level of household debts in the US, and predicted the economy will decline to around 2% annual rate early next year. As at the date of this writing the economy shows signs of gaining strength.
Business cycle afflicted unemployment For countries depend on export to the US such as China, Hong Kong, Japan and Singapore would hope that the sluggish US economy is to show some strength anytime from now. It is palpable, what the above depict is business cycle inflicted unemployment.
Restructuring afflicted unemployment
Another cause for these countries unemployment woe is restructuring. The reasons for restructuring can be many for which there are positive as well as negative causes; the former such as M & A and the latter like company in financial distress. Whichever is the reason, the common cause is the result of external market changes causing the change of business model, especially the impacts of technology advancement.
Technology replaces repetitive task also skilled or non-skilled workers whether they are blue or white collars and increases productivity. Integrated computerized manufacturing and business processes, share services are tools that reduce human interventions for companies to achieve better efficiency. That also pushes up unemployment rate. Time-based competition, speed to market resulted in product proliferation. To deliver products to the satisfaction of the customer efficiently and effectively, companies take drastic measures to restructure their product delivering process. By making use of technology to redesign the process, many jobs are then made redundant and workers being laid-off.
Other irreversible trends that worsen the unemployment condition are business processes outsourcing which I will elaborate below and the hollowing out tendency whereby companies move their entire manufacturing plants to low cost production countries. It draws much of my concern because it involves more employees being laid-off than just functional change in an organisation.
Fortunately, different industries restructure their product delivery processes at different pace; this gives the job market a breathing space and clues that tell you where the jobs are.
Slash & Burn
Companies when facing adverse situation usually start to cut discretionary expenses, such as R & D and entertainment expenses before cutting headcounts. If the actions still cannot arrest the situation, performance declines precipitately; payroll becomes the next prime target. There are several reasons for doing so. Payroll is the largest cost usually in operating expenses and also in cost of good manufactured (for old economy) in the P & L Statement. It is fixed cost in nature and therefore is certain. A cut of the expense is easy to see result, whereas revenue is uncertain and therefore hard to chase. It is apparent that which candidate is always to be the target.
Some companies are constantly under performance pressure, and resort to layoff to cut cost and boost share price performance. Market analysts are typically like to hear companies cut their headcounts, and specifically reward those companies for doing so with favourable share performance regardless it is cutting fat or the muscle and do it at the expense of the company’s long-term viability. Adopting this shortsighted view does not dovetail well to encourage companies to exemplify the right behaviour.
For public companies, employees are relatively long-term partners with the company from stakeholder perspective, whereas institutional or retail investors are speculators, and usually are short- term with the company in nature. The current market logic is to pursue short-term share performance to please shareholders and analysts at the expense of their company’s long-term partner. (employee being laid offs)
Adversity of layoffs There are studies about how layoff adversely impacts an organization:
First, we are now in the era of knowledge economy, intangible assets in some industries are weighted heavily in the total assets value in the Balance Sheet than tangible assets. Company’s future wealth creation by innovation is through people using organisation infrastructures (frameworks) to add value. "The knowledge based constitute a firm’s memory, a single individual has multiple relationships in such an organization, indiscriminate, non selective downsizing has the potential to inflict considerable damage on the learning and memory capacity of organisation" ~Responsible restructuring
In other words, layoff is doing damage on the learning and memory capacity and results in diminution in intangible assets value.
Second, The surviving staff take over the jobs from the staff being laid-off, the workload increases, employees have to work longer hours to clear their workload, workplace becomes more stressful than ever in the fear that the axe will fall on them sometime to come. Physical health is deteriorated and emotion stewed. Productivity takes a backlash.
Third, Employees’ loyalty and trust to management and the company diminish. Loyalty and trust are important cornerstones for employee commitment and company’s leadership. After laying-off employees, company has to spend greater efforts to win back the trust of the surviving employees.
Fourth, the coordination of the old network breakdown after the employees are being laid-off. It takes time to re-establish the new connection before the whole system is back to normal. This incurs system re-establishment costs.
Last but not least, layoff changes the job scope of surviving employees, company has to incur extra retraining costs to cope with new scope or incur recruitment expenses for new hire. The quality of the job may suffer somewhat, and this quality gap takes time to narrow, possibly by training. So, layoff incurs quality costs and training costs. Other related costs include severance and employee compensation related costs.
In short, there are hidden costs for layoff that will impact the P & L Statement. Management has to take into accounts seriously these hidden costs before grinding the axe.
Some research statistics This article is not to advocate that restructuring businesses and its inevitable layoff of employees are bad. Restructuring is part and parcel of a company survival skill for self-renewal in competition. What I concern is the nature of the layoff. Below I am quoting research results from the US; and statistics speak better than words. I hope its implications have common application to other countries.
"According to a survey to US 100 best public companies (most admired companies), employees in these companies are treated as an asset. These companies enjoy higher average stock return, higher operating performance, higher return on assets and higher return on capital employed compared to companies not in the list." ~Responsible restructuring
"This suggests that simply layoff employees to improve financial performance may not lead to the intended improvement in a firm’s financial performance if the layoffs are not accompanied by thoughtful restructuring of the firm’s assets." ~Responsible restructuring
In the latest survey showed that "A striking feature of our findings was that employment downsizing had a negligible impact on profitability when compared to the size of layoffs. Employment downsizers reduced their workforces by an average of 10.5%, but they failed to increase their profitability (ROA) until the end of year 2. Even then, they were able to attain an ROA that was only 0.3% above their industry average, which is insignificant, considering the high percentage of layoffs." ~Responsible restructuring
A research cover multiyear period shows "The good-to-great companies rarely used head-count lopping as a tactic and almost never used it as a primary strategy… Six of the eleven good-to-great companies recorded zero layoffs from ten years before the breakthrough date all the way through 1998, and four others reported only one or two layoffs. In contrast, we found layoffs used five times more frequently in the comparison companies than in the good-to-great companies. Some of the comparison companies had an almost chronic addiction to layoffs and restructurings. It would be a mistake, a tragic mistake indeed, to think that the way you ignite a transition from good to great is by wantonly swinging the axe on the vast numbers of hardworking people. Endless restructuring and mindless hacking were never part of the good-to-great model." Good to great
"Our research, done at the firm level rather than at the level of the strategic business unit, has not produced evidence that downsizing firms were generally and significantly to improve profit or cumulative returns on common stock. On the other hand, the evidence indicates that upsizing firms were able to please their stockholders, and Asset Upsizers generated stock returns that were superior to those of their industries in every year after the base year." ~Responsible restructuring
"According to a study by the US Bureau of labour statistics, organisational change at any level, can lead to a loss of 75% in productive work time. More significantly, job stress resulting from bad management and inhumane organisational practices adds directly to the cost of the doing business. "Job stress is estimated to cost US industry $300 billion annually, as assessed by absenteeism, diminished productivity, employee turnover, direct medical, legal, and workplace violence "writes Joel H.Neuman of State University of New York at New Paltz"` Toxic emotions at work
Human Capital The exchange for fittest companies is not without costs. The hidden costs to the company can be astounding. "Slash and burn" cost cutting measure is proven not an optimal use of human capital. It is crude and repugnant. It does not take into account the dynamics of cost structure, especially on handling of many facets of human capital.
Sad to say, we still lack the intricacy of a mature system to dealt with the value of human capital, although restructuring has been around for more than two decades. In times of taking decision for corporate renewal, the consideration is always narrow in scope and cost is the primary concern.
Particularly in the current climate of deficiency in demand, low growth, and fast speed of automation environment, excess human supplies are chasing forever-shrinking jobs available. Rather than matching competency and individual best with choices, in this milieu, there are few choices left, let alone matching individual best. It is the people fit in the wrong job even have to condescending for surviving purposes, a waste of human talents that do not put human resources into optimal use.
It is said that consumer will be benefited from cheaper goods as a result of the efficiency. However, the twisted cost efficiency ignores other parts of the hidden costs as mentioned above. Manufacturers choose to ignore these hidden costs; it is not a critical issue to them Their focus is how to squeeze available resources at hand to deliver monetary results to meet market expectation, and expecting someone to clear their shit for them and this is how capitalism operates. My admonition to these manufacturers is there is a limit of cost cutting to the cost curve, and consumer may pursue the value aspect rather than cost.
Social Costs
The winner survival guide for keeping the job is to ensure that you are still in the run by abjectly working harder and longer hours than before instead of pursuing work-life balance. Spending more time with the family becomes luxurious. Work becomes a burden rather than an enjoyment. Going for work is something in anguish. Work stress requires outlet to unwind, and employees bring home their problems. Their work problems now become social problems. Stress causes work-related illness, such as negative vibes, ulcer, anxiety and extra costs incurred to consult medical doctor and psychiatrist. Despite there are studies to highlight these dysfunctional aspects of restructuring, very little attention has so far to scotch these phenomena, leaving it to be an academic exercise.
Government role Who suppose to fill in this vacuum? Of course is the government and society at large. The government has to weight between hidden social costs and policy costs. What is the right balance of interests between employees and employers? What are the minimum legal protections employees should have in case they seek for recourse? Should attracting foreign investments displace self-respect and dignity regardless of value offer? How can we get rid of the trap of vicissitude of life to play the cost catch up game swirling us in the downward spiral cycle? These are millions dollar questions.
Socially responsible employer Since there is a price to pay for to get the business system loses weight. The most effective and cheapest way is to nip the problem in the bud? Yes, we should start with the business system. I find the idea in the book "Responsible restructuring" interesting. The government sector should encourage management and business owners to be socially responsible employers, by providing incentives to the companies to encourage them setting up framework to be socially responsible employer:
Setting up policies about firm’s layoff and employees’ retrenchment compensations: Developed countries have legal framework to provide compensations and aids for the laid-off, and soon they become social norm. However, when these companies invest in overseas, they take advantage of the scanty legal protection for employee in the host countries, and apply double standards. Host countries in order to attract foreign direct investments, keep silent about these double standard practices.
To stop double standards, the governments of developing countries should provide incentives, such as tax relief or exalting these foreign investors’ social symbol to encourage MNCs to take the lead to be socially responsible employers and exemplify this behaviour to the local employers. Large MNCs are usually concern about company image in the eyes of the local, and willing to cooperate. At least, the government should insist MNCs to do the minimum by participating in retrenchment group insurance to protect the retrenched worker against misfortune.
Nominating most admired companies, setting best practices, and publishing best practices handbook to guide positive behaviour and as evaluation criteria for most admired companies.
Encouraging early manpower planning: Many of the restructuring decision do not make overnight; whether it is caused by process change or otherwise. A set of manpower plan should be in place. A list of target employees to be laid-off should be ready at soonest possible date. A good Human Resource practice is to have employee competency database. The list is extracted from the database based on new job requirements.
Manpower planning should quickly identify the skill gaps and provide training. Early identification give time to employee fill the skill gap rather than eventually resort to recruit new staff with the necessary skills.
Supposing there are zero matches, responsible employer should at least do the following:
Communicate the manpower plan to the employee, asking her willingness for redeployment. Company is obliged to provide the necessary training.
Put the employee under job placement. Many developing countries still lack of job placement practices.
Put employee job data, subject to her agreement, to national job databank for matching. Provide job-seeking skills training, ready the employee for the next move.
Provide mental counselling service to the employee to heal emotional setback and job counselling to assist her to embark on suitable job.
Establish wide connection with outside companies with agreement to consider manpower transfer.
Encourage entrepreneurship, such as start-ups by grouping retrenched employee to be outsourcers, product distributors. How to make this happen?
Company conducting retrenchment looks into the possibilities of retrenched workers to be outsourcers or product distributor and proposes to the relevant authorities for feasibility studies. To create new jobs and fill the vacuum, government plays a role like venture capitalist; looking into the business model, feasibility studies, providing seed monies, financial and business advice to this group of retrenched workers turn entrepreneurs. They lack the necessary business and setting up experience to be the entrepreneurs and need guidance.
The more new businesses setting up, the more they will have the multitude effects on job growth depending on size and nature of the set up. The government role is to orchestrate the setting up process by providing guidance and bridging resources, standing in the board, providing strict financial control and obtaining a percentage of shares in the companies, once the company is in good shape, the government is to sell the shares back to existing shareholders by valuation or seeking for IPO as exit route. Take good care, make sure don’t lose trousers.
Why should government play the role of VC? The reasons are twofold:
One, it has the multitude effects to improve job growth. It opens up more employment opportunities. It is especially at this low growth, job market fast shrinking environment.
Two, the government aid is casting the net wider than the private VC. In other words, not all VCs are interested in the area. The government is just to fill the vacuum. It can consider tapping into private consulting firm resources by forming alliances to retain flexibility. If it arouses enough interest from private venture capitalists to fill the gap, the government should handover this role to them.
Follow up with assistance, such as giving retrenched worker short- term contract job. I quote some best practices as follows:
"Employees laid off by Cisco were offered non-paying work with non-profit organisations, the story of support had just begun. (Remember, they were still on the payroll at a reduced salary and full benefits.) Being laid off can be devastating to someone’s confidence and capacity to cope, even if an opportunity to recover is provided. Cisco insisted that these employees follow a set of procedures and be accountable for their time. They were required to meet measurable objectives, goals and milestones. They used offices at Cisco for meetings, and the whole project was treated as a Cisco sponsored assignment.
Such a process of recovery through structuring and facilitating active organisational routines works because it gives hurt people a taste of success. It keeps them moving. It turns their attention to the task at hand and to using their inner resources to cope with what needs to be done. They begin to make sense of themselves and their world in more constructive and positive ways, and this process allows them to share this with others."~Toxic emotions at work
"Siemens, the German electronics giant, introduced a similar scheme in 2001 when it lost $446 million in a three-month period in its information and Communication Mobile Group (IC Mobile). It offered employees the opportunities to their regular pay, depending on the length of the leave. Because of employees’ positive response to the time-out offer, the pilot project (Involving around a hundred employees), originally planned only for Munich, was extended to cover the whole of ICM throughout Germany.
Such interventions ease the burden of redundancy and signal the employees who remain that they "matter" that the company cares about the emotional well-being of its staff and, in times of difficulties, will try to resolve problems in ways that consider employee concerns. Through their actions, however, Cisco and Siemens were also paying attention to the long-term relationship they have with the staff they value but had to let go. By finding innovative ways to act with compassion, they will more likely keep an open connection to these employees that will benefit everyone involved when the economy eventually rebounds. ."~Toxic emotions at work
Manpower bureau:
The idea is not new for establishing a manpower bureau, the bureau should work like a fluid, and there are two functions of it.
First is its macro planning function: macro planning is to be able to read all industries manpower movement like a map, that requires accurate raw data, powerful forecasting software and common sense.
As we move into new economy, unemployment no longer is an indicator of economic recovery. Usually, Firms start to recruit new hires when economy recovers when more and more new orders flowing in. Since process is automated, coupled with certain jobs are no longer needed, being outsourced, change in characteristics or hollow out; Part of the Bureau job is to rationally communicate these sea change in the job market to the job seekers that certain jobs may never come back; either change in job characteristics or jobs are eliminated and to persuade them to seek new course. The earlier the change made benefits every party.
Manpower bureau’s job is to identify this new trend. Collecting raw data, about which jobs in the particular industry are automated, monitor the job growth trends, showing strong growth, slow growth and no growth and making early job transformation admonition, planning for training and job change. It is a meaningful job. What is required is to be proactive and pre-empt what will happen in the job market rather than the current reactive approach
Monitoring job loss and subsequent job found, to spot any new trends that job creation not going through job matching and is flourishing. This macro planning capability can be enhanced by IT investment, which will be elaborated below.
Another function is execution function: job matching, training, and acting as liaison people between employees and employers and career counselling. Career counselling can be done with the assistance of the private sector career counsellors or keep professional counsellor in-house. The job is to interview job seekers and help to change the mindset of the unemployed to embrace change and counselling for career change.
Make IT work for job matching:
Manpower bureau should use IT to strengthen its job matching capability. It is a strategic investment decision. The sine quo non for better use of IT power as a mean for macro planning and job matching are:
First, you need the scale to make the job match work. As you go into nitty-gritty of job matching, expanding the capacity enables you to do meticulous job match.
Second, it is a way of linking groups of job candidates to prospective employer for virtual job matching. Candidates can speak to several employers at video conferencing. The bureau can arrange for virtual plant tour, virtually meeting key persons of the prospective employers. That saves a lot of travelling time for initial screening, and making the search results more fruitful for both parties. As restructuring is an on-going exercise for corporate renewal, we should take a longer-term view on this investment. Its primary task is to match job demand with the job seekers’ competency. The whole process should work in fluidity.
Third, The ideal network is to link at least national wide, and subsequently link up with regional bureau to enhance search power and to tap into regional opportunities, as the job hollowing out regionally, branching out expand capacity gives job seekers wider choices.
Of course, the establishment of the network will crowd out employment agency in private sectors in certain extent. And the employment business will be even more competitive. Manpower Bureau is only provide information exchange, does not go into the depth of applying evaluation and assessment skills, such as behavioural tests to recruit candidate. So, search firms still have important role to play. Some companies still prefer search firms as retainers for their professionalism and capability.
Why should government play such a role? Why not let the free market turns its wheels? Of course, government has its political agendas and the purpose is to provide the unemployed the opportunities to continue with their life when external environment changes drastically. This goal is lofty. The government has the wherewithal to mobilize resources to accomplish this job and it is also for policymaking and macro-planning purposes. Private sector may not have the same objectives and interest.
Encourage job redesign:
Socially responsible employer does not discriminate employee by age, gender and race; Developed countries even promulgate law prohibit discrimination; especially age discrimination, the act give minimum protection to the older worker the rights to stay employed. It also force employer to exploit older workers’ strength: their broader experience and maturity, and redesign job scope and depth that fit the process. Job redesign is to make individual contribute their personal best to the bottom line.
It becomes a moral choice to the employer, if there is no enforcement to prohibit discrimination to make employer redesign job scope, employers take it as "the acts do not say no, it is up to me!" The outcome is like epidemic, endless mid-life older workers being discriminated and associated social problems abound.
New Trends-Temporary employment, outsourcing, hollowing out…
Business process outsourcing is an irreversible trend. Temporary employment and outsourcing, hollowing out will be the mainstay for the new economy.
Latest developments from news:
Large global organisations are setting up captive offices in countries like India, The Philippines and Malaysia.
Amex and Citicorp started moving more and more of their information extraction and reporting tasks overseas.
According to New York Times report, IBM told their corporate colleagues worldwide in a recorded conference call that the company needed to accelerate its efforts to move white-collar, Often high-pay job overseas.
What are the jobs that company outsourcing to overseas service providers?
According to an article in Business Times "Outsourcing’s various facets", there are four types:
Data transformation: It is simply data entry.
Customer Interface Services: Providing two ways information transfer, acting as middleman between clients and customers.
Problem Resolution: It is to comply client’s policy to resolve customer problems.
Expert intervention: Use a combination of knowledge, information, analytical skills and some sets of rules supplied by the client to resolve problems.
What are the implications for these phenomena?
Outsourcing and temporary employment are ways that companies make their resources mobilization more flexible. The question now is what is the right balance in between in- house and outsourced? To what extent a company can outsource its processes?
Brains and limbs Temporary position and business process outsourcing make companies nimble. However, I am certain that there is a limit for playing this game. To make an outsourcing effective, you need to critically evaluate the processes between core or strategic assets and non-core assets. It is miraculous that the trends are reaching the core. The analogy is you simply cannot outsource your brains for you to function properly. It is simply inconceivable to hire temporary CFO or outsource CEO functions. Put it another way, the cardinal principle is you can’t outsource value added activities (your core) that is going to weaken your competitive advantage.
Surviving guides 1: Critical assess your position in the value creating process. As you move up the value creation chain, the chances for your position to be eliminated are small even no one is indispensable in this world.
Skill sets:
General workers (including white collar clerical staff) they have low skill set. They are always the first targets to be retrenched. The strengths of them are: they are mobile, easily adaptable to new environment, easily find new job, as their expectations are not high.
Skilled workers (including white collars staff like bookkeeping clerical staff): There are two types, skill portable and skill not portable. Portable means skill can be transferred easily to other industry. Portable has vantage point in the new economy. Skill set can be transferred across industries is an asset. Skill set is locked in one industry and not portable carries more risks. The risk faced by skilled workers is the employer designs the process so routine that the skilled workers lose their proprietary applications, or they are over-qualified for the job, and become vulnerable or feel underpaid. They stay in between job is generally longer.
Highly skilled workers (Generally they are at management level): It is dreadful news that high wages jobs in IBM will move overseas. As I mentioned above, since IBM is in the survival competition game, and if its competitors and other large global players were doing so, outsourcing transnational becomes an irreversible trend, the question is to what extent? What jobs to move? What the global companies exploit is the cost advantage, which is at the expense of the incumbent. The different economic infrastructures result in different living standard in the US and India becomes a non-event. However, globalisation has become a fact of life, no one can turn the tide. We must also acknowledge to the fact that when knowledge becomes a commodity, then using it to produce in US or India is the same. There will be no concern about foreign exchange difference, living standards, races, developed or developing countries, it is the absolute cost figure that counts, a sad fact.
Surviving guides 2: Make sure your skills are portable, and you know full well your strength and about your skills across industry application, always update your skill sets and their variety. In other words, know your strength and built your strength. Cultivate a sense of urgency, always making sure that what you are doing now is still worth the salt, and chart your future course.
Knowledge: Knowledge is the power for innovation. However, knowledge used to be short-lived and easily becomes commodities, and you lose all the competitive advantage.
Surviving guides 3: Always keep yourselves at the forefront of your area of expertise. Delay the time knowledge becomes commodities.
Industries: Watch out whether you are in sunset or matured industries. Whether your industries are highly developed, highly concentrated. These ways the knowledge is easily disseminated and becomes commodity.
Surviving guides 4: If you are in these industries, you should have new plan of what you want to do next, don’t wait until the last day when the axe falls.
Emotional Intelligence: It is sometimes the human factor that makes or breaks. How is an employee’s 360-degree relationship with superiors, peers, and subordinates? How to make use of grapevine to solicit and share information.
Surviving guides 5: A high EQ employee generally knows how to manage interpersonal relationship better and smart use of formal and informal communication paths within the organization. That gives them influential role among employees. If you appear to be influential figure, chances are you are the last one being asked to leave in a layoff.
Adaptation: How resilient you are to face up with the reality? How flexible you are in reacting to change?
Surviving guide 6: Be flexible and resilient to face up with reality and embrace changes. I have to stress that to certain extent, the unemployment rate remains high is due to our mentality reluctant to change. That is why counselling from manpower bureau is important.
Looking ahead:
Because of the economic structural change, the demand for new hires may slow. So, even economy recovers, unemployment rate may not fall substantially.
It depends on several factors:
How close the country is moving into new economy
What industry are the employees in?
The intensity and depth of restructuring, such as business process outsourcing, and hollowing out to compete for cost leadership.
Country with labour intensive production requires more manpower to fill the capacity than the country’s production process is a highly automated one after the economy recovers. The worrying trends are the speed of process automation, outsourcing and hollowing out trends. If jobs elimination move faster than new jobs creation, leaving unemployment rate no chance to fall. Another worrying trend is the longer the time the unemployed stays between jobs, looking for new career, the more it holds up unemployment rate.
As of the date of this writing, the US September 2003 data showed the first time non- farm payroll increases of 57,000 jobs. "The jobless rate stayed at 6.1%, with nearly nine million Americans looking for work. But the report was better than expected. Economists were forecasting a loss of 15,000 payroll jobs and had expected the jobless rate to rise to 6.2%. How to explain this phenomenon?
First, most of the new jobs were in service sectors, service sectors demand more manpower to add value. Even in a manufacturing concern, companies now realise that they can create more value for their customer with services. It is without surprise that when the economy recovered, employers do not hesitate to add headcount for service. Service industry is also less intense in automation compare to manufacturing sector. So, the above three factors play important role in jobless rate improvements.
According to Business Times report, Merrill Lynch’s chief economist has gloomy outlook of US job prospect:
The "jobs hard to get" Component of the Conference Board’s September consumer survey rose to its highest level since December 1993
The four-week moving average in jobless claims has been above 400,000(currently 403,500) for five straight weeks.
The employment component of the September national ISM manufacturing survey, reported on Wednesday, fell to a four-month low
An index of helped-wanted ads fell to 37 in August, just above the 40-year low reached in May.
Manpower’s Hiring Intention survey has improved but remains at its fourth worst reading in 12 years.
Contrary to my view, some orthodox economists offer a piece of good news for the unemployed and me is, "The permanent job growth will happen. Currently, employers are uncertain about economic prospect, and prefer to hire more temp workers. As output increases and demand picks up, especially in the year of 2004, there will be increase of permanent hires," Some economists even thought the September data job-loss trend has turned the corner. We need to look into longer period of time to confirm the trends. It remains interesting to see how things develop.
As what I mentioned above that there is no panaceas. It takes the members in the system to take coordinated efforts to resolve the unemployment issues. There is no fixed way to solve new issues. My suggestions in this article are not conclusive. Think creatively, even aberrant, you always get new answers.
References:
1. Responsible Restructuring-creative profitable alternatives to layoffs by Wayne F.Cascio
2. Toxic emotion at work by Peter J. Frost
3. Business Times
*I write this article is in memory of my past four years job search efforts.
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