Job Seeker Relocation Drops to Record Low
HOME VALUES KEEP JOB SEEKERS NEAR HOME;
WORKER IMMOBILITY COULD SLOW RECOVERY
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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