Start-Up Activity Lowest On Record


Start-up activity among unemployed managers and executives in the first half of 2011 fell to its lowest level in the history of tracking, according to new survey results from outplacement consultancy Challenger, Gray & Christmas, Inc.  The survey results reflect the harsh conditions that currently exist for would-be entrepreneurs, whose biggest obstacle may be securing the funds to undertake such an endeavor.

Through the first six months of 2011, an average of just 3.3 percent of job seekers decided to start their own business.  That was down from the previous record-low of 3.7 percent averaged over the first two quarters of 2010.  In the second quarter of 2011 the start-up rate was even lower, with only 2.5 percent of job seekers launching their own firms.

The Challenger survey is conducted quarterly among approximately 3,000 job seekers reentering the workforce in a variety of industries and occupations across the country.  While all career levels are represented, the survey pool tends to skew toward the more experienced, managerial and executive level job seeker.

The 2.5 percent of job seekers starting businesses in the second quarter is the lowest level of start-up activity ever recorded by Challenger in survey records going back to 1986.  Even in 2001, amid the collapse that was particular devastating to recent start-ups, entrepreneurship was still pursued, on average, by nearly 8.0 percent of job seekers every quarter.  Over the past six quarters, the average start-up rate is half the 2001 average at 4.2 percent.

“We are slowly coming out of the deepest recession this country has seen in decades.  While some large and medium-sized companies are finally beginning to see the effects of an upturn, conditions are still very tough for small businesses and would-be entrepreneurs,” saidJohn A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“Lending is still extremely tight and for many of those wanting to start a business, funding the venture with credit cards or through a home equity loan are no longer viable options.  Then there is the difficulty of finding customers.  Even medium and large companies are having a hard time doing this, as consumers and businesses continue to keep a lid on spending,” he added.

It is not just job seekers who are reluctant to start businesses; self-employment, in general, has declined significantly since the beginning of the recession, according to the latest non-seasonally adjusted data from the United States Bureau of Labor Statistics.  As of July, there were 8.6 million self-employed Americans, down from a pre-recession peak of nearly 10 million in June 2007.

The number of self-employed has continued to drop throughout the recovery, which began in July 2009, according to the National Bureau of Economic Research.  The current self-employment level of 8.6 million is down 4.4 percent from 9.0 million in July 2009.

“Another reason start-up activity may be falling is that hiring is improving just enough to keep people on a more traditional employment path,” said Challenger.

While net employment gains have been relatively small over the last 18 months due to continued layoffs, retirements and other separations, hiring levels are actually quite strong.  The Bureau of Labor Statistics’ latest job openings and labor turnover survey reveals that employers hired nearly 12.2 million new workers during the second quarter.

“When the recovery reaches the point when employers begin hiring, but the economy remains relatively fragile, we tend to see a drop in entrepreneurism as job seekers start to see success in their searches.  As the economy continues to gain strength, start-up activity may begin to grow again, as conditions for such ventures become more inviting,” noted Challenger.


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By Quarter, 2000 – 2011






Annual Average







































































Source: Challenger, Gray & Christmas, In


Companies Keep Celebration Light

As a growing number of companies benefit from a slowly improving economy, there are indications that workplace holiday parties are starting to make a comeback. However, with the bitter taste of cost-cutting measures still fresh in employees’ minds, some companies appear to be keeping festivities relatively subdued, according to a new survey and interviews with employers.

In its annual survey on holiday parties, global outplacement and business coaching firm Challenger, Gray & Christmas, Inc. found that 64 percent of companies are planning holiday parties this year, up slightly from 62 percent a year ago. About four percent of those holding parties this year are doing so after one or more years with no party due to the recession.

The non-scientific survey of approximately 100 human resources professionals found that only six percent of those companies holding parties are planning to spend more this year. The majority of respondents (76 percent) said party budgets would be about the same as last year. Eighteen percent of companies are spending less, down from 29 percent a year ago.

Full Report Here:

Job-Seeker Relocation At Record Low

Job Seeker Relocation Drops to Record Low

The percentage of unemployed managers and executives relocating for a new position fell to a record low in the third quarter of 2010, as a slightly improved job market and greatly depreciated home values combined to eliminate this option for most job seekers.

Just 6.9 percent of job seekers who found employment in the third quarter relocated for the new position. That was down from a relocation rate of 13.4 percent in the same quarter a year ago, according to the latest Challenger Job Market Index, a quarterly survey conducted by global outplacement consultancy Challenger, Gray & Christmas, Inc. among approximately 3,000 successful job seekers from a wide range of industries nationwide.

The relocation rate has been low for four consecutive quarters, averaging just 7.3 percent since the fourth quarter of 2009. The 6.9 percent figure in the quarter ending September 30 was the lowest ever recorded by the firm, which began its tracking in 1986.

“Continued weakness in the housing market is undoubtedly the biggest factor suppressing relocation. Job seekers who own a home – even if they are open to relocating for a new job – are basically stuck where they are if they are unable or unwilling to sell their homes without incurring a significant loss,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“In a strong job market, where talent is difficult to find, employers might be more willing to help offset some of the financial loss associated with relocation. However, at this early stage of the recovery, companies are still in cost-containment mode,” he added.

Job seekers may also be opting to eschew relocation due to increased confidence in their ability to find employment locally.

“Many areas have seen a slight improvement in the job market over the past year. While the gains have been small, for the most part, they may have been enough to lift job seekers from the sense of desperation that often compels people to relocate,” said Challenger.

According to state and local employment data from the Bureau of Labor Statistics, 167 metropolitan areas have seen their unemployment rates decline over the past 12 months, with 45 of those dropping by a percentage point or more. As of August, there were 232 metropolitan areas with unemployment rates below the national average of 9.6 percent. There were 91 cities with unemployment rates of 7.5 percent or below.

Furthermore, 27 states have experienced net gains in payroll levels over the 12-month period ending in August. Overall, a total of 500,600 new jobs have been added to payrolls in these states, or an average of 18,500 jobs added per state.

“The job market is expected to continue to improve in 2011. If it improves faster than the housing market, the inability of job seekers to relocate will become a major obstacle to sustained job creation,” warned Challenger.

“Right now, demand for new workers is not at a level that would force companies to bring in talent from outside their region. However, as the local talent pool starts to become depleted as the economy improves, companies will be compelled to cast a wider recruiting net. Unfortunately, the immobility of the workforce may mean that some employers will have to delay expansion plans, thus slowing the recovery,” he said.

“At that point, some large companies might have the financial ability to increase their relocation budgets and help offset the difference between the home value and selling price. However, small- and medium-size companies, where most of the new job growth is expected to occur, probably will be unable to cover the costs of relocation and make up for a candidate’s lost home value,” said Challenger.

Surprisingly, small companies currently appear more willing to cover relocation expenses. A 2010 Atlas Van Lines survey of companies found that 51 percent of companies with fewer than 500 employees offer full reimbursement of relocation expenses to new hires. Among companies with 500 to 4,999 employees, the percentage offering full reimbursement drops to 45 percent, while 47 percent of companies with 5,000 employees or more cover all moving expenses for new hires.

However, most companies draw the line when it comes to covering any losses on the sale of a home. Only 28 percent of all employers are willing to reimburse new hires for any loss on the sale of their home. The percentage of employers that reimburse for financial loss drops to 14 percent for companies with less than 500 employees.

“Even if business conditions improve to the point where more employers are willing and able reimburse new hires for relocation costs and for the financial losses experience by home sellers, there is no guarantee that candidates will be willing to move,” said Challenger.

Relocation has been on the decline since the early-1990s. In 1986, the quarterly relocation rate averaged 42 percent. In 1993, relocation averaged 35 percent over the year, but reached a record high of 49.2 percent in the second quarter. From 1994 through 2000, the quarterly average sank to 22 percent from 1994 through 2000. Since January 2001, the relocation rate has remained below 20 percent for 39 consecutive quarters.

“Several factors probably contributed to the decline in relocation. The country experienced a period of phenomenal growth, with many cities and states diversifying their economies. As a result, it was no longer necessary to relocate to Silicon Valley for a technology job, for example.” said Challenger.

“Furthermore, the same Internet technology that makes it easier to conduct an out-of-town job search also makes it easier for people to work from anywhere. Faster and cheaper Internet connections, coupled with relatively low air-travels costs, made it possible for job seekers to gain out-of-town employment without actually moving out of town,” he added.

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August BLS Commentary: Job Market Stuck In Neutral


“Overall, today’s report on the employment situation was fairly lackluster. The job market appears to be stuck in neutral as employers hang on to the workers they have, but are unable or unwilling to add new workers. As a result, private sector payrolls grew by just 67,000 in August, well short of the level needed to make a dent in unemployment,” said John A. Challenger, chief executive officer of global outplacement consultancy Challenger, Gray & Christmas, Inc.

In the household survey, which is used to determine the unemployment rate and more likely to capture the number of Americans who are self-employed or working for very small firms, employment gains of 290,000 were offset by 261,000 added to the ranks of the unemployed. Some of the newly unemployed may not have lost their jobs. Instead, they may have re-entered the labor force after sitting on the sidelines. The number of people categorized as not in the labor force fell by 341,000.

Other statistics were also mixed. The number of people unemployed 27 weeks or longer fell by 323,000. However, the number of people working part-time because of slack business conditions or lack of full-time positions increased by 331,000. This suggests that more people are simply trying to get their foot in the door by taking part-time assignments.

“The job market has a long way to go before it starts to look and feel like a recovery, which makes stagnant reports like today’s all the more frustrating. Progress is indeed being made, but it is occurring in such small increments and it is so tenuous that it doesn’t seem like progress at all. It is also important to remember that today’s numbers are the national averages; the view from 30,000 feet. Down on the ground, in the cities and towns, the reality is probably much different. In some areas, the situation may actually be better than today’s report suggests. Unfortunately, in many areas, the situation is far worse,” said Challenger.

88 CEO Departures In July, Lowest Since 78 In April 2009

While notable chief executive officer departures by Hewlett-Packard’s Mark Hurd and Sara Lee’s Brenda Barnes have grabbed headlines in early August, CEO turnover in July was relatively subdued; falling to its lowest level in 16 months.

A total of 88 CEO changes were recorded in July, 18 percent fewer than June’s 107 and 30 percent fewer than the 126 CEO changes announced in July 2009. The July total is the lowest since April 2009 when 78 CEOs left their posts, according to the latest report on CEO turnover released Wednesday by global outplacement firm Challenger, Gray & Christmas, Inc.

So far this year, 761 CEO exits have been announced. That is just four percent more than the 733 departures at the same point a year ago. Despite the slight uptick in CEO changes this year, turnover remains well below the record pace set in 2008, which saw 848 departures announced from January through July, and ended the year with 1,484 CEO exits.

“It is not unusual to see a drop in CEO departures during the summer months. In four of the past five years, CEO turnover was lower in July than in June and, in three of the past five years, the July total was lower than the annual average,” noted John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“It is too soon to tell if this July’s decline is part of a bigger downward trend in CEO turnover or simply a byproduct of the typical seasonal cycle that seems to slow corporate activities and decision-making during the summer,” he added.

The most common reason for CEO departures in July was resignation, which accounted for 34 (39 percent) of the 88 exits. The relatively vague “resignation” has been used as the reason for departure 235 times this year, which represents nearly one-third (31 percent) of all the announced departures. Retirement accounts for 205 departures this year, including 14 in July.

The service sector saw the heaviest CEO turnover in July, with 12 departures. It was closely followed by the health care and government/non-profit sectors, which each had 11 CEO changes during the month. While tying for second in July, these two sectors lead all others in CEO turnover for the year. The health care sector has seen 123 CEOs leave their posts, while government and non-profit agencies have lost 108 CEOs.

“These sectors are still trying to find their footing in this recovery. Both continue to struggle amid massive budget shortfalls and may be seeing higher turnover as they lose leaders who are unwilling or unable to guide the organizations through the rough patch,” said Challenger.

Challenger Start-Up Report: Lowest Rate On Record

A new survey shows that start- up activity plummeted in the first half of 2010 as would-be entrepreneurs were either scooped up by employers or scared off by fragile economic conditions, a tight lending market and uncertainty over the sustainability of the recovery.

Results of a survey of job seekers released by global outplacement and executive coaching firm Challenger, Gray & Christmas, Inc., show that an average of 3.7 percent opted to start their own business in the first half of 2010. That was down from 7.6 percent in the first half of 2009 and the 9.6 percent start-up rate averaged over the last two quarters of 2009.

The 3.4 percent start-up rate in the first quarter and the 3.9 percent rate in the second quarter represent the lowest two-quarter average on record, according to Challenger, which began tracking in 1986. The highest two-quarter average on record occurred in the first half of 1989, when 21.5 percent of job seekers ended up starting a business.

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MARCH MADNESS REPORT: Tourney Could Cost Employers $1.8 Billion

It is March once again, and like the swallows returning to Capistrano, basketball fans across the country will return to their favorite sports websites to research every one of the 64 teams playing in the NCAA men’s basketball championship tournament, fill out tournament brackets and enter one or more betting pools in what has become an annual rite of spring as sacred as green beer on St. Patrick’s Day.

For the nation’s employers, the men’s college basketball tournament, better known as March Madness, marks the arrival of several other annual rituals: employee-organized office pools, a potential dip in productivity and a marked decline in Internet speed, as workers soak up bandwidth watching live streaming broadcasts of the tournament games during office hours.

“March Madness and the subsequent office pools have been going on long enough, that employers can no longer claim to be caught off guard by the annual event. Some have tried to squash these pools, most simply ignore them and others have found ways to embrace the tournament as a team-building and morale-boosting opportunity,” said John Challenger, chief executive officer of Challenger, Gray & Christmas, Inc., the global outplacement consultancy that each year attempts to predict the tournament’s impact on workplace productivity.

This year, armed with an assortment of statistics from various sources, the firm estimates that workers distracted by March Madness could cost employers as much as $1.8 billion in unproductive wages during the first week of the tournament, alone, based on 20 minutes of daily time wasting.

“Keep in mind that it is nearly impossible to gauge the impact of March Madness on productivity in an information-based economy where workers possess portable technology that allows them to work from anywhere and any time. This estimate is probably about as accurate as the point spreads computed by Las Vegas bookmakers,” Challenger acknowledged.

The Challenger estimate is based on the number of people expected to participate in office pools, the amount of money they earn and the amount of work-time wasted on March Madness related activities, whether it is trash talking at the water cooler or watching live videos of the games during business hours.

A 2009 Microsoft/MSN survey found that 45 percent of Americans planned to enter at least one college basketball pool last year. Assuming that at least that many plan to participate in pools this year, Challenger applied that percentage to total payroll employment in February (129,526,000) to approximate that as many as 58.3 million workers could participate in office pools this year (45% of the total non-farm workforce).

According to the latest available data on average weekly earnings from the Bureau of Labor Statistics, these workers earn $748 per week or about $18.70 per hour (based on 40-hour work week). That breaks down further to earnings of about $6.23 every 20 minutes.

So, among the 58.3 million office pool participants, every 20 minutes of unproductive work time costs employers roughly $363.2 million (58.2 million X $6.23). It is conceivable that workers participating in pools could waste an average of at least 20 minutes per day the week between Selection Sunday (March 14) and the end of the first round (March 19), when March Madness-related activity is at its height as people research teams, put together their brackets and watch games online during work hours.

“By the end of that first week, employers across the country may pay unproductive workers a total of $1.8 billion,” said Challenger, multiplying the $363.2 million by five.

“As the tournament moves beyond the first and second round, the impact on the employer decreases, since few games are played during office hours and workers can no longer make adjustments to their brackets, thus eliminating the need to research teams,” Challenger added.

“Those who insist there will be no impact are kidding themselves. It might be a slight drop in output or it could be slow internet connections as bandwidth is sapped by employees watching streaming feeds of the games.”

During the first two days of the Tournament (Thursday, March 18 and Friday, March 19), approximately half of the 32 games are played during business hours. Fans on the west coast may be able to begin watching games as early as 9:00 AM.

CBS Sports and the NCAA teamed up a few years ago to begin offering March Madness on Demand web streaming service, which provides streaming webcasts of every game in every round of the tournament. Last year, it attracted 7.52 million unique visitors, up 75 percent from 4.92 million in 2008. According to Nielson web ratings data, 92 percent of fans who watched games online during the 2008 March Madness tournament did so from work computers.

Despite the potential impact, most companies see no reason to establish special March Madness policies. Two-thirds of employers do not have policies regarding office pools, fantasy sports leagues, or gambling in the workplace, according to a 2010 survey by the Society for Human Resource Management (SHRM). And, the majority of employers still do not block access to all video streaming sites.

“In the end, employers may or may not see a significant impact. Even if they do, few are compelled to go out of their way to ban March Madness related activities. Especially in this economy, when many employees are already anxious about their jobs, there is no reason for employers to make a big deal about what amounts to a blip on the productivity radar,” said Challenger.

“In fact, with worker stress and anxiety heightened, a little distraction could be just what the doctor ordered. The key for companies is finding a way to maximize the positive aspects of March Madness so that they outweigh any potential negatives,” Challenger noted.

“Companies can use this event as a way to build morale and camaraderie. This could mean putting televisions in the break room, so employees have somewhere to watch the games other than the Internet. Employers might consider organizing a company-wide pool, which should have no entry fee in order to avoid ethical and/or legal questions,” Challenger suggested.