The economy and job market have a long way to go before reaching pre-recession health, but an analysis of employment data and the recent surge in large-scale hiring announcements indicate that the so-called jobless recovery may have finally evolved into a job- growth recovery.
According to the analysis by global outplacement consultancy Challenger, Gray & Christmas, Inc., the job market is stronger than most Americans realize and improved faster than one might reasonably expect, considering the severity of the recession.
“It has been nearly two years since the recession ended in June 2009, according to the National Bureau of Economic Research. Obviously, the economy does not go from recession one month to full-blown recovery the next. And, unfortunately, the job market is often the last area of the economy to enjoy the fruits of recovery. So, for the millions of unemployed Americans, it is only natural to feel that the recovery is moving at a frustratingly slow pace,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.
“The pessimism about the job market is evidenced in latest readings on consumer confidence by the Conference Board and the University of Michigan, both of which declined in March. However, while some might perceive that the job market is standing still, it has actually made significant strides since the end of the recession in several areas, including planned layoffs, private-sector payrolls, unemployment and hiring,” noted Challenger.
Employment is also growing in the Bureau of Labor Statistics’ household survey, which is used to establish the unemployment rate. Similar to private payrolls, overall employment continued to decline during the six-month period following the end of the recession. However, over the past 15 months, there have been 10 months of gains for a net increase of 1.9 million newly employed Americans.
Meanwhile, the unemployment rate, which initially continued to rise for four months following the June 2009 end of the recession to a high of 10.1 percent in October 2009, fell to a 24-month low of 8.8 percent in March. By contrast, unemployment peaked 19 months after the end of the 2001 recession and, following the recession that ended in March 1991, unemployment continued to rise for 15 months.
“There is no reason to think that these positive trends will not continue, even with the threat of higher fuel costs. Based on our tracking of planned job-cut announcements, which tend to be a forward-looking indicator of how employers see future business conditions, there are no signs of sudden reversal of fortune,” said Challenger.
Monthly job-cut announcements are at their lowest levels since the late 1990s. In fact, the 130,749 job cuts announced between January and March represents the lowest first-quarter total since 1995.
At the same time, planned hiring announced in the first quarter totaled 112,942, which is more than double the 53,675 planned hires announced during the same period a year ago.
“Since many companies do not formally announce hiring plans, these job-creation plans probably represent just a small fraction of the hiring that is actually taking place,” said Challenger.
This is indeed the case, according to the latest Job Openings and Labor Turnover survey released by the Bureau of Labor Statistics, which found that employers hired 3.9 million workers in February alone. Additionally, the survey found that these employers still had more than 3.0 million job openings at the end of the month.
Among the biggest hiring announcements so far this year include plans by Home Depot to add 60,000 seasonal workers. Lowe’s, another large home supplies retailer, announced plans to add 10,000 workers. McDonald’s plans to add 50,000 to payrolls, a figure which is made more significant by the fact that the food service chain plans to hire all of these workers on its National Hiring Day coming up on April 19.
“While many would like to discount the significant hiring plans by McDonald’s, Home Depot and Lowes as being low-paying, hourly wage positions, the fact is the highest unemployment rate is among young, low-skilled workers. So, the types of jobs being created by these employers are precisely the types of jobs the economy needs to generate,” Challenger observed.
Unemployment is also significantly higher among teenagers. As of March, the unemployment rate among 16- to 19-year-olds was 24.5 percent, compared to a jobless rate of 7.4 percent for the portion of the labor force 25 years and older.
“We should not downplay the large number of jobs being created by employers like McDonald’s and Home Depot. Instead, we should embrace them, because these are the types of jobs that will address the largest segments of the unemployed,” said Challenger.
“Furthermore, it would be a mistake to conclude that these are the only types of jobs being created. We have also seen large hiring announcements from the likes of Google and Ford Motor Company. In addition, government data reveals that substantial employment gains are being enjoyed by those in managerial and professional occupations,” he noted.
According to the latest BLS data, employment in management, professional and related occupations increased by a net 2.4 million jobs since September 2010. In January and February, employers in the trade, transportation and utilities sectors hired nearly 1.6 million new workers. Education and health services employers hired about 900,000 new workers to start 2011.
“Make no mistake; the economy is a long way from its pre-recession health. Unemployment is still the highest it has been since the 1980s, with millions suffering long-term joblessness lasting 27 weeks or more. It could take another two to three years for unemployment to drop to the more acceptable rate of 5.0 percent. However, this length of recovery and return to pre-recession unemployment levels is not out of line with previous recessions.
“We no longer live in a manufacturing-driven economy where plants would simply call back thousands of laid off workers as soon as conditions improved. We now exist in an information/service-based economy where hiring the right people for the right positions is a process; often a slow one. Unfortunately, when some people don’t see obvious signs of hiring or if the employment data does not live up to expectations, they give up, and that is about the worst thing you can do at this point of the recovery. Now is the time to get more aggressive,” Challenger concluded.