Whew, that a year we just had! Good riddance to 2008!!
To call 2008 an "off" year would be a gross understatement. To hope for a strong recovery in 2009 though, might be called a gross "delusion."
Not that we at Applied HR Strategies (AHRS) don't expect things to improve somewhat; we do, but we're realists too - we expect things to get worse before they level out, and then eventually to slowly get better.
Now that we've blown off a little steam, let's get down to our general predictions for 2009:
2009 Compensation & Economic Predictions:
Merit Pay Budgets: Upper 3% range to 4% in 2008. Down to 3% +/-, depending on industry and circumstances. Some industries will be well below 3%. Comment: if budgets are updated from here, the vast majority will be downward.
Salary Structure Adjustments: Upper 2% to 3%+ range in 2008; 2.5% or so, but with a downward bias in 2009. Same comments as for merit budgets.
Unemployment rates for 2008 (current) and 2009 (projected):
2008: U.S.: 6.7%, WA: 6.4%, Seattle area: 5.4% (November ’08 data)
2009: U.S.: 7% - 9%, WA: 7% - 8.5%, Seattle area: 6% - 7.5%. Comment: nowhere to go but down, at least for the first several months of 2009.
Consumer Spending: Slow growth in early ’08; down mostly in second half. 2009: down early ’09; mixed to down in mid-2009; mixed in late 2009 (but still weak). Comment: flat with 2008 would be a “great” year, based on current trends.
Business Profits: Not bad in early 2008; horrible later in the year. 2009: a bad year all-around. A rebound in late 2009 would be a welcome blessing. Profits and bonuses will be down overall, barring an unexpectedly positive turnaround.
Happy New Year!! Let's hope 2009 will be better than expected!
Dec 29, 2008
Dec 18, 2008
Revised Pay Budgets Slashed
In the past two weeks a couple of major studies of what companies are doing with regard to their 2009 pay budgets are revealing concerning how quickly and deeply business conditions and the labor market have deteriorated.
In a study just completed by Hewitt Associates, merit budgets for 2009 have dropped to only 3%, compared to 3.6% to 3.8% from the same study done in the summer of 2008. And when companies with frozen and/or cut pay rates are taken into account, Hewitt expects overall pay levels to only increase only 2.5% next year (if you're lucky enough not to be laid off before then).
According to the the Hewitt study, 50% of employers have already reduced their pay spending plans for 2009 and 25% say they are considering cuts and/or further reductions. (Just today, FedEx announced a 5% pay cuts for all salaried staff and 7.5% to 10% cuts for executives).
In the just published Culpepper December 2008 Pay Practices & Policies Survey (www.culpepper.com), 35% of participating companies have already reduced their salary increase budgets, another 12% have or plan to freeze salaries, and another 31% are undecided which course they will take in regard to recent economic and business developments. Only 23% of participating companies anticipate making no changes to their salary increase plans.
The Culpepper study is geared more towards technology and life science companies, while the Hewitt Associates study is more cross-industry and skewed towards larger firms.
In the Culpepper study, the average base salary increase for 2009 is budgeted at 3.08% and the average budgeted pay structure increase for next year is only 2.08%. Both of these data points are down significantly from earlier projections for 2009.
In the current environment it is likely that further reductions will take place, even though the 2009 projections are already the lowest pay increase budgets in at least 15 years.
In a study just completed by Hewitt Associates, merit budgets for 2009 have dropped to only 3%, compared to 3.6% to 3.8% from the same study done in the summer of 2008. And when companies with frozen and/or cut pay rates are taken into account, Hewitt expects overall pay levels to only increase only 2.5% next year (if you're lucky enough not to be laid off before then).
According to the the Hewitt study, 50% of employers have already reduced their pay spending plans for 2009 and 25% say they are considering cuts and/or further reductions. (Just today, FedEx announced a 5% pay cuts for all salaried staff and 7.5% to 10% cuts for executives).
In the just published Culpepper December 2008 Pay Practices & Policies Survey (www.culpepper.com), 35% of participating companies have already reduced their salary increase budgets, another 12% have or plan to freeze salaries, and another 31% are undecided which course they will take in regard to recent economic and business developments. Only 23% of participating companies anticipate making no changes to their salary increase plans.
The Culpepper study is geared more towards technology and life science companies, while the Hewitt Associates study is more cross-industry and skewed towards larger firms.
In the Culpepper study, the average base salary increase for 2009 is budgeted at 3.08% and the average budgeted pay structure increase for next year is only 2.08%. Both of these data points are down significantly from earlier projections for 2009.
In the current environment it is likely that further reductions will take place, even though the 2009 projections are already the lowest pay increase budgets in at least 15 years.
Dec 5, 2008
Happy Holidays?
Today, the US Dept. of Labor reported a loss of over a half million (533,000) jobs in November alone, bringing 2008 job losses to over 1.7 million. The report was even worse than feared by many economists, putting further pressure on the the economy, retailers, and most of all, American families.
The images above pretty much show it all. In 2007, job growth was fairly healthy, but job growth was declining as the year went on. By January 2008, we were in slightly negative territory, and you can see what's happened since then. The downward trajectory of job loss continues to surge, virtually assuring the unemployment rate will continue to grow from here as we turn towards 2009.
The reported November job loss was the 11th straight monthly decline, and worst single monthly job loss since 1974. The U.S. unemployment rate shot up to 6.7% (from 6.5%), and many economists are predicting the unemployment rate reaching 7.5% to 9.0% before we "top" out sometime later in 2009.
Layoffs are soaring nationwide, and even in our hometown of Seattle, which until recently was fairing better than than the nation as a whole, the bad news is starting to really pile up here too. To track lay-offs in the Puget Sound region, click here.
There is really no way to put a positive "spin" on the most recent data. It's bad, and it's only going to get worse, for a while at least...
Until then, "hunker down," spend some quality time with your family and friends, and keep a tight grip on your wallets. Your "peeps" (me and my spouse's slang for our family and best friends) are far more important than money anyways, so enjoy the holiday season with your peeps. Maybe with less "stuff," but most of us already have plenty of that already.
Nov 7, 2008
Labor Market Woes Continue to Compound
The most recent news from the US Department of Labor confirm that the labor market downturn is continuing, if not worsening.
The chart above shows how job loss has accelerated though this year. As of the latest report, over one million jobs have been lost since the start of the year (including downward revised figures for August and September). The national unemployment rate soared to 6.5%, the highest since 1994, with no let-up in lay-offs in sight. If current trends continue, we are headed for the worst labor market since the major recession of the early 80s.
The regional Pacific NW labor markets continue to be in better shape than the national one, but it is uncertain at this point if that will continue, based on recent events (WAMU's collapse, etc.).
To see what employers are currently doing to compensation their remaining employees, ask for a copy of our "special report" (see post below).
Nov 4, 2008
Special Report on Merit and Comp Trends
With all of the craziness and bad news lately in the economy, credit and financial markets, many companies are wondering what other organizations are doing (or planning to do) with merit budgets and related compensation matters for 2009.
Up until now, we at AHRS have been sharing our best predictions as to where things are heading for our clients and blog followers (see the below posts, for instance). Until just recently though, there hasn't been a lot of solid data as to what companies are actually doing.
Last week AHRS compiled brand new data from a few major studies that were just conducted in October, along with some general recommendations on key compensation-related decision points for these difficult times.
The data and recommendations are too lengthy for a blog posting, but if you would like to receive a free copy, please feel free to contact me directly at via at doug@appliedHRstrategies.com and request a copy of our "Special Report."
Up until now, we at AHRS have been sharing our best predictions as to where things are heading for our clients and blog followers (see the below posts, for instance). Until just recently though, there hasn't been a lot of solid data as to what companies are actually doing.
Last week AHRS compiled brand new data from a few major studies that were just conducted in October, along with some general recommendations on key compensation-related decision points for these difficult times.
The data and recommendations are too lengthy for a blog posting, but if you would like to receive a free copy, please feel free to contact me directly at via at doug@appliedHRstrategies.com and request a copy of our "Special Report."
Oct 3, 2008
Prepare for the Worst Labor Market in Many Years
The news on the labor market just continues to get worse, with the 9th straight monthly report of job losses nationwide the U.S. Labor Department reported today.
The Labor Department reported that employers cut 159,000 jobs in September, more than twice as many as in August or July. The September report was the biggest single monthly decline since 2003, when the economy was still in retreat from the 2001 recession (which became a three-year labor market recession).
“The U.S. consumer is in major trouble, with wage and salary income growth evaporating, credit extremely tight or unavailable, home prices continuing to decline, and food and energy costs consuming a large share of household budgets,” said Joshua Shapiro, an economist at MFR, a research firm in New York. “Whatever the government might or might not do to try to bail out the financial system, a consumer-led recession is upon us, and it promises to be a serious one” (as quoted in today's NY Times).
The regional labor market is sinking as well, but not quite as fast, although even that could change quickly, as the Boeing strike continues, the effects of Washington Mutual bust and other major layoffs reported recently work there way through the area. It looks right now like we are headed for the worst labor market in the area since the dismal 2001 - 2003 period.
The few remaining areas of strength (high tech, healthcare, and formerly aerospace), could begin to head south as businesses start to catch the same cold that consumers are already experiencing.
The credit markets are frozen, the housing market the worst in decades, and many area companies struggling, so put on your helmet and "hunker down" for what could be the worst labor market in several years, or worse.
The Labor Department reported that employers cut 159,000 jobs in September, more than twice as many as in August or July. The September report was the biggest single monthly decline since 2003, when the economy was still in retreat from the 2001 recession (which became a three-year labor market recession).
“The U.S. consumer is in major trouble, with wage and salary income growth evaporating, credit extremely tight or unavailable, home prices continuing to decline, and food and energy costs consuming a large share of household budgets,” said Joshua Shapiro, an economist at MFR, a research firm in New York. “Whatever the government might or might not do to try to bail out the financial system, a consumer-led recession is upon us, and it promises to be a serious one” (as quoted in today's NY Times).
The regional labor market is sinking as well, but not quite as fast, although even that could change quickly, as the Boeing strike continues, the effects of Washington Mutual bust and other major layoffs reported recently work there way through the area. It looks right now like we are headed for the worst labor market in the area since the dismal 2001 - 2003 period.
The few remaining areas of strength (high tech, healthcare, and formerly aerospace), could begin to head south as businesses start to catch the same cold that consumers are already experiencing.
The credit markets are frozen, the housing market the worst in decades, and many area companies struggling, so put on your helmet and "hunker down" for what could be the worst labor market in several years, or worse.
Sep 25, 2008
Healthcare Cost Inflation Receding?
The Kaiser Family Foundation, who conducts one of the largest annual surveys of healthcare costs, released its latest study this week. It said that health insurance premiums increased "just" 5 percent in 2008 (very low by healthcare inflation standards). The 5 percent increase was comparable but somewhat lower than 2007's increase.
Despite the lower levels of healthcare inflation (after several successive years double-digit percentage increases), premiums have still more than doubled over the past decade. Overall, premiums for family coverage are now up to $12,680 and premiums for single coverage increased to $4,704. Employers pay, on average, about three-quarters of that cost according to the Kaiser study.
The annual cost of family health coverage has more than doubled since 1999, and employees are paying an average of $3,354 toward it in 2008. While employee co-insurance and co-pays continue to increase, employees are also are concurrently dealing with rising deductibles. About 18% are facing deductibles of at least $1,000, up from 12% in 2007.
The Kaiser study noted that rising health costs are most troubling for those employees working at companies with fewer than 200 employees, who have been less able to absorb the cost increases and have had to pass on a greater share of the cost burden to their employees.
The shift toward high-deductible insurance was most dramatic for workers in small businesses, where more than one in three covered workers must pay at least $1,000 out-of-pocket before their plan will start to pay a share of their health care bills. Generally, the more liability consumers assume for their health expenses, the less insurers charge for premiums, which probably is the biggest reason premiums are rising less quickly. Often, high-deductible plans are coupled with health savings accounts (HSAs). Consumers that enroll in such plans can set aside money on a pretax basis and then use the savings to help pay for some of their medical expenses.
"We may be seeing the tip of the iceberg of a trend towards less comprehensive, skimpier health insurance coverage for many working people," said Drew Altman, president and CEO of the Kaiser Family Foundation. Altman said the Kaiser survey shows more companies opting for health saving accounts. But a bigger trend was the movement toward high-deductible plans with no savings component.
So, while the rate of premium increases are going down, much of the slowdown in rate increases may be attributed to increased deductibles and/or reduced coverage levels, not necessarily to a slowdown in the core rate of healthcare inflation.
That said, there have been recent reports of a slowdown in demand for some health services including a small drop in prescriptions filled last quarter, preventative and elective procedures being delayed, etc. It will be interesting to see if healthcare costs follow the same laws of supply and demand that most other goods and services do. If they do, we could expect to see a slowdown in cost increase at the consumer level, not just a slowdown in premium increases via reduced coverage.
Despite the lower levels of healthcare inflation (after several successive years double-digit percentage increases), premiums have still more than doubled over the past decade. Overall, premiums for family coverage are now up to $12,680 and premiums for single coverage increased to $4,704. Employers pay, on average, about three-quarters of that cost according to the Kaiser study.
The annual cost of family health coverage has more than doubled since 1999, and employees are paying an average of $3,354 toward it in 2008. While employee co-insurance and co-pays continue to increase, employees are also are concurrently dealing with rising deductibles. About 18% are facing deductibles of at least $1,000, up from 12% in 2007.
The Kaiser study noted that rising health costs are most troubling for those employees working at companies with fewer than 200 employees, who have been less able to absorb the cost increases and have had to pass on a greater share of the cost burden to their employees.
The shift toward high-deductible insurance was most dramatic for workers in small businesses, where more than one in three covered workers must pay at least $1,000 out-of-pocket before their plan will start to pay a share of their health care bills. Generally, the more liability consumers assume for their health expenses, the less insurers charge for premiums, which probably is the biggest reason premiums are rising less quickly. Often, high-deductible plans are coupled with health savings accounts (HSAs). Consumers that enroll in such plans can set aside money on a pretax basis and then use the savings to help pay for some of their medical expenses.
"We may be seeing the tip of the iceberg of a trend towards less comprehensive, skimpier health insurance coverage for many working people," said Drew Altman, president and CEO of the Kaiser Family Foundation. Altman said the Kaiser survey shows more companies opting for health saving accounts. But a bigger trend was the movement toward high-deductible plans with no savings component.
So, while the rate of premium increases are going down, much of the slowdown in rate increases may be attributed to increased deductibles and/or reduced coverage levels, not necessarily to a slowdown in the core rate of healthcare inflation.
That said, there have been recent reports of a slowdown in demand for some health services including a small drop in prescriptions filled last quarter, preventative and elective procedures being delayed, etc. It will be interesting to see if healthcare costs follow the same laws of supply and demand that most other goods and services do. If they do, we could expect to see a slowdown in cost increase at the consumer level, not just a slowdown in premium increases via reduced coverage.
Sep 11, 2008
What's "HOT?"
Just the other day, a client asked us what are the "hot jobs" in today's labor market (which overall is turning out to be a very weak right now, and for the next few quarters at least). I figured I would share our list with you, and seek your feedback.
If the reader happens to have others that they are having troubles finding out there, please email be (doug@appliedHRstrategies.com) with your thoughts. We are always trying to stay on the cutting edge of what's happening out there in the world of pay and labor market conditions.
Here’s our list:
• Software and web developers, especially with .NET, ASP.net, JavaScript skill sets. Developers and experts in enterprise software and databases remain hot and very hard to find.
• High level technical professionals of most types – the tech market remains strong despite the overall labor market downturn.
• Engineers and related technical professionals – nearly all types.
• Accounting & finance professionals – especially higher level ones with compliance, tax and specialized technical skills.
• Health Care Professionals – continue to be in high demand and will likely remain so for the foreseeable future.
• Sales & Bus Development – for highly experienced professionals, demands remain high (target earnings are more important than base pay here, however).
So, in today's overall weak labor market, would you bump all jobs at the same rate. The quick answer is "no." Stay on top of your critical and hot skill jobs always, and adjust accordingly, regardless of what's happening around them.
If you haven't looked into pay rates for your critical/hot skills jobs for a year or more, it's time to start doing your homework. Don't just assume that because we're in a weak economic and labor market cycle that your just fine in these areas.
If the reader happens to have others that they are having troubles finding out there, please email be (doug@appliedHRstrategies.com) with your thoughts. We are always trying to stay on the cutting edge of what's happening out there in the world of pay and labor market conditions.
Here’s our list:
• Software and web developers, especially with .NET, ASP.net, JavaScript skill sets. Developers and experts in enterprise software and databases remain hot and very hard to find.
• High level technical professionals of most types – the tech market remains strong despite the overall labor market downturn.
• Engineers and related technical professionals – nearly all types.
• Accounting & finance professionals – especially higher level ones with compliance, tax and specialized technical skills.
• Health Care Professionals – continue to be in high demand and will likely remain so for the foreseeable future.
• Sales & Bus Development – for highly experienced professionals, demands remain high (target earnings are more important than base pay here, however).
So, in today's overall weak labor market, would you bump all jobs at the same rate. The quick answer is "no." Stay on top of your critical and hot skill jobs always, and adjust accordingly, regardless of what's happening around them.
If you haven't looked into pay rates for your critical/hot skills jobs for a year or more, it's time to start doing your homework. Don't just assume that because we're in a weak economic and labor market cycle that your just fine in these areas.
Sep 4, 2008
2008 Layoffs Worst in Several Years
The above headline probably isn't a big surprise given the spate of economic news out this year, but the pace of the deterioration might be. According to recruiting firm and long-time layoff tracker Challenger, Gray & Christmas, at the current pace of layoffs in 2008, we will exceed last year's total by mid-October of this year.
Through August, layoffs are up 29% year over year. The financial and auto industries are leading the pack in terms of layoffs announce so far this year. For more details, see www.msnbc.msn.com/id/26526521.
So, while the economists argue over whether or not we're in a "officially" in a recession, just look at what's happening and make a reasoned decision yourself:
- The worst housing market in decades
- Layoffs up 29% this year vs. last year
- Regional and U.S. unemployment at a several-year high
- Credit markets in worst shape since the 1980s S&L crisis
- Retail sales the worst in years
- Restaurants and restaurant stocks in the doldrums
Other that that, things are pretty darn good (assuming everyone in your family still has a job, you don't need to sell your house, get a loan, etc.)!
In my earlier posts we've predicted a drop in merit budgets, despite the surveys conducted earlier this year projecting flat to slightly up budgets. We're sticking to our guns on this one - there is no reason that trend is going to be up.
Through August, layoffs are up 29% year over year. The financial and auto industries are leading the pack in terms of layoffs announce so far this year. For more details, see www.msnbc.msn.com/id/26526521.
So, while the economists argue over whether or not we're in a "officially" in a recession, just look at what's happening and make a reasoned decision yourself:
- The worst housing market in decades
- Layoffs up 29% this year vs. last year
- Regional and U.S. unemployment at a several-year high
- Credit markets in worst shape since the 1980s S&L crisis
- Retail sales the worst in years
- Restaurants and restaurant stocks in the doldrums
Other that that, things are pretty darn good (assuming everyone in your family still has a job, you don't need to sell your house, get a loan, etc.)!
In my earlier posts we've predicted a drop in merit budgets, despite the surveys conducted earlier this year projecting flat to slightly up budgets. We're sticking to our guns on this one - there is no reason that trend is going to be up.
Aug 28, 2008
Worker Confidence Down to 2001 Recession Levels
I saw this feed from a news service I subscribe to and figured I'd pass it along.
American workers' confidence in the job market is now as low as it was during the 2001 recession, according to a new national survey conducted by Rutgers University's Center for Workforce Development.
When the survey asked whether this is a bad time to find a quality job, 65% said it was, equaling the level of the 2001 recession, according to the survey.
With unemployment at 5.7%, the highest level since 2004, and with weekly unemployment claims hitting a six-year high earlier this month, workers are worried about everything from their hours, to their total pay and job security. (Washington State's unemployment level also hit 5.7% last month, after a few years of being less than the national average).
The survey found one-third of workers said they often don't have enough money to make ends meet. About one-third of respondents say the amount they owe on credit cards exceeds their retirement savings, a somewhat shocking commentary on the state of some American workers' spending and savings and habits.
Aug 27, 2008
Inflation and Wages
In an earlier post I had mentioned "stagflation" and wage "dis-inflation" as the current state of the wage growth in the northwest and in general. A few days ago, the Wall Street Journal published a closely related article on the same general topic, including the following graphic, which displays what's happening better than I could ("A picture is worth a thousand words...").2008, and likely a year or two ahead will not be a good period for workers making real (after inflation) wage gains.
Aug 14, 2008
Studies: Bulk Of Pay Raises To Go to Best Performers
Salary planning for 2009 is in full gear for many employers. Last month, Watson Wyatt Worldwide released salary projections suggesting employers would boost pay an average 3.5% in 2009. Later this month, Hewitt Associates will release its salary increase survey projecting an increase closer to 3.8%. And yesterday, Mercer released its report suggesting a 3.7% increase in 2009. In addition, the recently-released 2008-2009 WorldatWork Salary Budget Survey suggest very similar increases in the 3.7% to 4.0% range, depending on the employee group,
Another way that employers are rewarding top performers is through greater use of variable incentive pay (simply called "bonuses" at many companies). Both the WorldatWork and Mercer studies show at least 80% or more of companies offer such incentive pay, and their prevalence continues to slowly increase, as does the dollars that are budgeted for such programs.
The Watson Wyatt study says that employers will reserve the bulk of their pay raises for higher performers. Low-performing employees won't see their paychecks rise much.
Another way that employers are rewarding top performers is through greater use of variable incentive pay (simply called "bonuses" at many companies). Both the WorldatWork and Mercer studies show at least 80% or more of companies offer such incentive pay, and their prevalence continues to slowly increase, as does the dollars that are budgeted for such programs.
Inflation and Unemployment Rise
According to a U.S. Labor Department report today, U.S. inflation soared to a 17 year high annual rate in July, up 5.6% from a year earlier, led by gains in food, energy, travel costs and other items. On the positive side though, with energy and commodity prices recently on the retreat and the U.S. dollar strengthening, the report is unlikely to move the Federal Reserve into raising rates anytime soon.
This stagflationary mix of rising unemployment, a strained economy and rising inflation, creates a dilemma for employers. Generally speaking, higher inflation tends to lead to rising merit increase budgets, but with the economy at it weakest in years, and business conditions continuing to worsen, it seems unlikely that employers will be more likely to open their wallets further anytime soon.
Stay tuned...
Aug 3, 2008
Inflation in Seatte Among Nation's Highest
Despite withering economic performance and declining housing prices, the Seattle area has one of the highest, if not the highest rates of inflation among major metropolitan areas. The Bureau of Labor Statistics (BLS) reports that as of June, Seattle's 5.8% annualized inflation rate was tops among 10 major metro areas it looked at. A different study by Economy.com, utilized BLS and other economic data and reported that Seattle's inflation rate was the highest among the nation's 40 largest metro areas.
Some "blame" goes to our better than average job market performance (3.9% locally, vs. 5.5% for the whole state and 5.7% nationally). Probably the biggest factor though are rental rates that continue to rise, despite the weak housing market (which is still stronger that in most of the rest of the country) and gasoline costs that are also up more here than in most parts of the country.
So, because of our higher cost of living, does that mean that pay increases and wage rates will follow suit and increase more quickly? Probably not. Despite the higher inflation rates, poor and weakening business conditions, along with a weak overall labor market (except for tech, healthcare and a few other pockets) is not a recipe for higher merit budgets.
Let's call it "Seattle Stagflation." High inflation and poor economic growth is a bad combination for everyone; businesses, wage earners, renters, drivers, etc.
Some "blame" goes to our better than average job market performance (3.9% locally, vs. 5.5% for the whole state and 5.7% nationally). Probably the biggest factor though are rental rates that continue to rise, despite the weak housing market (which is still stronger that in most of the rest of the country) and gasoline costs that are also up more here than in most parts of the country.
So, because of our higher cost of living, does that mean that pay increases and wage rates will follow suit and increase more quickly? Probably not. Despite the higher inflation rates, poor and weakening business conditions, along with a weak overall labor market (except for tech, healthcare and a few other pockets) is not a recipe for higher merit budgets.
Let's call it "Seattle Stagflation." High inflation and poor economic growth is a bad combination for everyone; businesses, wage earners, renters, drivers, etc.
Jul 24, 2008
IT Employment Up 10% Over Past Year
Despite the labor-market sagging effects of of our current economic malaise, somewhat surprisingly, overall employment in the IT sector is up a strong 10% year-over-year (2nd quarter '08 compared to '07).
Considering the steep slide in the labor market over the past few quarters, the growth in IT employment represents amazing strength and resiliency, in what is mostly an otherwise dismal period for labor market participants of nearly all stripes. Only a handful of other employment groups (notably health care) have held their own over the past year.
According to the report by the BLS (Bureau of Labor Statistics), unemployment in the IT worker category (which includes virtually all major technology job groups) sits at 2.2% nationwide, far better than the 5.5% overall unemployment rate nationally.
The BLS report doesn't address employment in the Puget Sound region (and the state's data doesn't adequately tease out this group either), but there is no doubt that IT/technology professionals remains an area of strength here too, despite the overall downward trajectory of the regional labor market over the past few months.
With all the major difficulties in the financial sector, it remains to be seen if the strength in the IT/tech group can be maintained, as banks are major employers of IT professionals.
Regardless though, this data should convince all employers of technology professionals, that just because the economy is down, it doesn't mean that employers can be complacent about staying competitive and in building/maintaining programs that attract, motivate and retain this key group of professionals.
Considering the steep slide in the labor market over the past few quarters, the growth in IT employment represents amazing strength and resiliency, in what is mostly an otherwise dismal period for labor market participants of nearly all stripes. Only a handful of other employment groups (notably health care) have held their own over the past year.
According to the report by the BLS (Bureau of Labor Statistics), unemployment in the IT worker category (which includes virtually all major technology job groups) sits at 2.2% nationwide, far better than the 5.5% overall unemployment rate nationally.
The BLS report doesn't address employment in the Puget Sound region (and the state's data doesn't adequately tease out this group either), but there is no doubt that IT/technology professionals remains an area of strength here too, despite the overall downward trajectory of the regional labor market over the past few months.
With all the major difficulties in the financial sector, it remains to be seen if the strength in the IT/tech group can be maintained, as banks are major employers of IT professionals.
Regardless though, this data should convince all employers of technology professionals, that just because the economy is down, it doesn't mean that employers can be complacent about staying competitive and in building/maintaining programs that attract, motivate and retain this key group of professionals.
Expect a Lengthy Period of Wage "Dis-inflation"
Until this past year, most workers have enjoyed a several-year period of modest "real" (adjusted for inflation) wage growth, as the increase in wage levels have generally outpaced inflation (albeit, by a fairly small margin). That period is now over, and is unlikely to return anytime soon.
With consumer confidence plummeting, business conditions weakening and economic projections declining, we at AHRS expect merit budgets to decrease for 2009, even while inflation continues to increase, creating a "double-whammy" impact on economic value of wage rates.
A few labor force participants in the "hot" skills areas may be able to keep their heads above the inflation water-level, but that's a fairly tiny part of the overall labor force. Experienced technology professionals are the only group that seem capable of staying ahead of inflation right now, with 10% year-over-year job growth and a 2.2% unemployment rate according to recent data (see other post on this topic).
Typically, inflation occurs because of strong strong economic growth, with more money chasing goods and services than are available at the time, forcing prices to rise. Not this time though, as inflation is being driven by soaring oil and commodity prices, which ultimately extend their reach through nearly all sectors of the economy (except real estate!). Today's inflation, instead of being demand-driven, is more like the "Stagflation" of the early 1980s, when we had high inflation, and slow economic growth.
Expect wage rates to trail inflation for some time.
With consumer confidence plummeting, business conditions weakening and economic projections declining, we at AHRS expect merit budgets to decrease for 2009, even while inflation continues to increase, creating a "double-whammy" impact on economic value of wage rates.
A few labor force participants in the "hot" skills areas may be able to keep their heads above the inflation water-level, but that's a fairly tiny part of the overall labor force. Experienced technology professionals are the only group that seem capable of staying ahead of inflation right now, with 10% year-over-year job growth and a 2.2% unemployment rate according to recent data (see other post on this topic).
According to its mid-July report, the U.S. Labor Department said the national consumer price index (CPI) surged 1.1% in June, its largest monthly rise since June 1982. On a year-over-year basis, consumer prices grew 5%, the highest rate since May 1991. Many would argue that the 5% official inflation figure greatly understates the impact of inflation on most families, with food, fuel and utility costs rising at a much faster pace than that. Families can forgo the purchase of discretionary items, but no one can escape the soaring costs of basic necessities such as food and gasoline (even if you don't drive, the rising cost of oil is filtering its way into the cost of virtually everything else).
Generally speaking, there is a correlation between inflation rates and pay increase rates, but it's far from a perfect correlation. With many businesses in declining sales and/or profits mode and the labor market weak in nearly all but a few sectors (i.e. tech, health care), there seems no impetus to increase "merit pay" or other pay increase budgets, despite the clearly rising inflation waters.Typically, inflation occurs because of strong strong economic growth, with more money chasing goods and services than are available at the time, forcing prices to rise. Not this time though, as inflation is being driven by soaring oil and commodity prices, which ultimately extend their reach through nearly all sectors of the economy (except real estate!). Today's inflation, instead of being demand-driven, is more like the "Stagflation" of the early 1980s, when we had high inflation, and slow economic growth.
Expect wage rates to trail inflation for some time.
Jul 2, 2008
A "Slow-Motion Recession"?
The above quote is from chief United States economist for Lehman Brothers, Ethan Harris. He was referring to what he sees as the "Chinese water torture" type of recession. In todays NY Times, he goes onto say: “In a normal recession, things kind of collapse and get so weak that you have nowhere to go but up. But we’re not getting the classic two or three negative quarters. Instead, we’re expecting two years of sub-par growth. Growth that’s not enough to generate jobs. It’s kind of a chronic rather than an acute pain.”
Let's hope he's not right, but I unfortunately we at AHRS believe he is. So far in the Puget Sound region we haven't gone into recession, but there is no doubt the economy and job markets have slowed. That said, here are some factors in the region that could have a long-term (>1 year) impact to our area:
At least the weather has improved lately!
Let's hope he's not right, but I unfortunately we at AHRS believe he is. So far in the Puget Sound region we haven't gone into recession, but there is no doubt the economy and job markets have slowed. That said, here are some factors in the region that could have a long-term (>1 year) impact to our area:
- A weak real-estate market (but still way stronger than more major cities) that creeps its way into many areas of the economy: job losses, illiquid real estate assets, sliding home equity, increased foreclosures, etc.
- A weakened labor market. In the past few months technology and aerospace employers have continued to add jobs to the area economy, but alone these industries can't overcome the weakness of rest of the regional labor market. Aerospace may well drop off the list of net hiring in the near future.
- Troubles at WAMU (and now Starbucks) lead to even more layoffs and office vacancies, not to mention the investment losses.
- Record fuel prices and airline capacity reductions may well lead to slower and/or delayed orders at Boeing, which would have a rippling effect through the area.
- Local investors investing in the region (or anywhere) are hurting (check out recent stock prices for Boeing, WAMU, Blue Nile, Starbucks, etc.). People have shrinking investment accounts and feel less affluent, regardless if they hold onto their stock (only "paper" losses so far). As a result, of course, they spend less.
At least the weather has improved lately!
Jun 24, 2008
Cybercities 2008 Report from the AeA - is this News?
The American Electronics Association (AeA) has released its big report on the state of the technology industry nationally, including its assessment of Washington State, which seems more designed to gain publicity than to enlighten its readers with meaningful insights about the regional labor market.
The recently released "Cybercities 2008" report tells us what happened in the technology labor force in the area in 2006, and that back in 2006 technology employment expanded by 6.5%. Whoopee! What happened in 2007 and in early to mid 2008? For that information, see our posts, below.
Reminds me of the AeA report that came out in the very early 2000s stating that the average tech worker in the Seattle area made well over $100k (I got a lot of interesting calls from AHRS technology clients after their people in their employ actively questioned why their pay was so far below the "average"). When AHRS and other compensation professionals challenged the AeA on their report, it was learned that Microsoft's pay and stock option gain data had a heavy influence on the data sample (and therefore the information reported was not terribly representative of the state of the "average" or typical tech worker at all). It did, however, gain a lot of publicity for the AeA.
On the positive side, there were a few interesting tidbits of information that came out from the 2008 report. As of 2006, the area had almost (not quite) caught up the all-time peak in tech employment reached early 2001. AHRS confidently predicts that we have now surpassed that mark, based on Microsoft's hiring in 2007, and the heavy demand for experienced high tech workers in general in 2007 and early 2008. (Even the most recent report from the WA State Employment Security Department showed technology employment increasing in the area in May 2008, despite most other employment groups being down, some significantly).
So, while the AeA report was interesting, it's hardly insightful or news to anyone who follows pay and labor market trends. See this link or several other sources for a summary of the AeA release.
The recently released "Cybercities 2008" report tells us what happened in the technology labor force in the area in 2006, and that back in 2006 technology employment expanded by 6.5%. Whoopee! What happened in 2007 and in early to mid 2008? For that information, see our posts, below.
Reminds me of the AeA report that came out in the very early 2000s stating that the average tech worker in the Seattle area made well over $100k (I got a lot of interesting calls from AHRS technology clients after their people in their employ actively questioned why their pay was so far below the "average"). When AHRS and other compensation professionals challenged the AeA on their report, it was learned that Microsoft's pay and stock option gain data had a heavy influence on the data sample (and therefore the information reported was not terribly representative of the state of the "average" or typical tech worker at all). It did, however, gain a lot of publicity for the AeA.
On the positive side, there were a few interesting tidbits of information that came out from the 2008 report. As of 2006, the area had almost (not quite) caught up the all-time peak in tech employment reached early 2001. AHRS confidently predicts that we have now surpassed that mark, based on Microsoft's hiring in 2007, and the heavy demand for experienced high tech workers in general in 2007 and early 2008. (Even the most recent report from the WA State Employment Security Department showed technology employment increasing in the area in May 2008, despite most other employment groups being down, some significantly).
So, while the AeA report was interesting, it's hardly insightful or news to anyone who follows pay and labor market trends. See this link or several other sources for a summary of the AeA release.
Jun 18, 2008
Extra! Extra! 6/18/08 Labor Market Update
Wow, what a difference a day (actually 10) makes! Yesterday, the WA State Department of Employment Security released unemployment and labor market data for May 2008. In the state overall, the unemployment rate shot from 4.7% to 5.3% (but still below the national 5.5% rate), while the Seattle metro area rate jumped from 3.4% to 4.1%. Both monthly increases were among the largest in the past 25+ years.
Overall, since non-farm employment peaked in February '08, the state has lost about 5,000 jobs.
Seattle metro isn't quite as bad as it sounds, but it still doesn't sound good. Software and and aerospace actually gained jobs (700 and 600, respectively), and each are doing a good job of buffeting this area from what could be a far worse situation, economically speaking. Construction employment in the area fell sharply (-900 jobs) during a time when construction hiring is typically rising. Several other areas didn't look too hot either, so thank you tech and aerospace!
Well-known regional economist Bill Conerly predicts that due to the strength in technology, that overall the state will experience "only a minor dip" in employment this year. Again, thank you tech, and aerospace wherever you can pitch in.AHRS' Regional Labor Market Update - Summer 2008 (as of 6/08/08)
Regional labor markets off slightly, but still more healthy than nationally – recently released data shows slight job losses in Washington State and Oregon in April, in both cases less than the previous month. April unemployment rates of 4.8%, 5.5% and 3.1% respectively in Washington, Oregon and Idaho, up only slightly (0.1% in most cases) from late 2007. Regionally, as job growth has ground to a halt, job losses have remained small so far, and less in April than in March, which was the first month of declines in most states The star of the region though remains Idaho, despite its unemployment rate shooting up to a still extremely low 3.1% in April (from only 2.7% in November).
Metro areas remain stronger, with the Seattle at only 3.5% unemployment rate, seasonally adjusted, and actually below rates in late 2007. Year over year job growth of 2.0% in Seattle isn’t bad either, considering the national economy. The Portland area was also below the state’s overall unemployment rate at last check. In general, urban areas are stronger than less populated areas.
Housing markets have slowed down in the Pacific Northwest but remain substantially stronger than the US as a whole for the past two years. It still remains to be seen if the housing slowdown will have a substantial impact on the regional economy. Most economists assume there will be some slowing in the regional economy, but there is no clear evidence that the area is in a recession, despite an obvious slowing of economic activity. Most regional economists are less sanguine than a few months ago, but few are claiming that we’re in a recession right now. Oil prices also remain an unpredictable wild card for the economy.
Jun 16, 2008
NY Times - "Lost In E-Mail, Tech Firms Face Self-Made Beast"
Wow, have I (we?) been here before (and continue to be). Like some of us, maybe a tech version of a 12-step program is the solution for us. I will be following this story for more ideas how we can all get a breather from information overload (that's why I'm doing this post near midnight!).
"It is a song that has been sung before. People are drowning in information overload. The very technology tools that were touted as an aid to productivity improvement are now being seen as counterproductive when overused. Several large-tech firms, including Intel, IBM, Microsoft, and Google are banding together to fight information overload. They realize some of the problem is of their making and they should make a stab at solving it. They plan to study the problem, publicize it, and come up with ways to help people cope with the digital deluge. Some of the companies are already experimenting with solutions. Intel encourages workers to check e-mail less frequently, to send group messages judiciously, and to avoid having e-mail messages constantly reorder to-do lists. Google has introduced E-Mail Addict. It allows employees to cut themselves off from e-mail for 15 minutes at a time. Zero e-mail Fridays is another idea to cut down on the flow of e-mails." (The New York Times, 14-Jun-2008, National ed., p. A1). (Courtesy, Hewitt Associates daily E-MAIL news feed).
Jun 13, 2008
Another Comp Professional's View on Glassdoor.com
I just received this quote from a compensation analyst colleague and client of ours. I thought it was worth passing along (with permission):
"I already have looked at glass door and found how easy it was to put in false data (I started filling out a false report myself and stopped just short of saying “submit”). There apparently is nothing stopping me from saying that I work anywhere I want at whatever job title and job salary I care to enter. I can enter past or “current” information."
"I feel the same way you do and other comp professionals. Unfortunately, most employees look at this stuff like it is the gospel which makes it as difficult as heck to get them to believe the real survey information."
Jun 12, 2008
Keeping an Open (but skeptical) Mind...
A Seattle-area executive recruiter friend of mine brought to my attention that there are opposing views of the new employment and pay "intelligence" website, Glassdoor.com.
So, in the spirit of keeping and open mind, as well as welcoming alternative points of view, I am providing a link to an article/posting from the employee perspective (well, at least of one's particular perspective). You can visit this link at www.stalkingvenus.com.
Interestingly, even the opposing viewpoint addresses some of this writer's concerns:
Actually, after reading the article on StalkingVenus and re-reviewing glassdoor.com myself again, I must say, the site does offer some interesting and cool approaches to reporting employer "intelligence" such as pay data, employee viewpoints about their employer, and company leadership. Kudos for creativity and a truly fresh approach. But this site is geared towards employees (or potential ones) seeking "data" and/or "ammunition" for their own self-serving purposes, not for empirical truth-seeking.
I must confess, I see the appeal of the concept and the website itself, but as a compensation consultant, my job is to provide clients and colleagues with valid and objective data, as well as dispassionate but incisive analysis, not the opinions of employees and data supplied by incumbents with no understanding (or care) about key compensation concepts. Concepts such as proper job matching (for true "apples-to-apples" pay benchmarking), a consideration of factors that impact pay, such as geography, industry, company size, etc.; the impact that a company's compensation philosophy has on the choices it makes with regard to pay and other elements of total rewards (base pay, benefits, short and long-term incentives, work-life issues, etc.). These are critical considerations in assessing a company's pay program, and this aspect is seriously lacking, at least as far as I can tell so far.
I could go on and on, but if you are an HR, recruiting or compensation professional, or company executive, and really want to know what's going on in the "real world,: review glassdoor.com and similar sites for anecdotal employee relations, attraction/retention data points, but rely on much more rigorous data sources and HR/compensation professionals that understand them for "real" compensation data and analysis.
I'm getting off that soapbox again...
So, in the spirit of keeping and open mind, as well as welcoming alternative points of view, I am providing a link to an article/posting from the employee perspective (well, at least of one's particular perspective). You can visit this link at www.stalkingvenus.com.
Interestingly, even the opposing viewpoint addresses some of this writer's concerns:
- Potential confidentiality issues
- Potential (or purposeful) inaccuracies, or outright falsely provided information
- Cheer-leading or "slashing" company reviews for those with an agenda, or a score to settle
- The lack of data validation and data "vetting"
Actually, after reading the article on StalkingVenus and re-reviewing glassdoor.com myself again, I must say, the site does offer some interesting and cool approaches to reporting employer "intelligence" such as pay data, employee viewpoints about their employer, and company leadership. Kudos for creativity and a truly fresh approach. But this site is geared towards employees (or potential ones) seeking "data" and/or "ammunition" for their own self-serving purposes, not for empirical truth-seeking.
I must confess, I see the appeal of the concept and the website itself, but as a compensation consultant, my job is to provide clients and colleagues with valid and objective data, as well as dispassionate but incisive analysis, not the opinions of employees and data supplied by incumbents with no understanding (or care) about key compensation concepts. Concepts such as proper job matching (for true "apples-to-apples" pay benchmarking), a consideration of factors that impact pay, such as geography, industry, company size, etc.; the impact that a company's compensation philosophy has on the choices it makes with regard to pay and other elements of total rewards (base pay, benefits, short and long-term incentives, work-life issues, etc.). These are critical considerations in assessing a company's pay program, and this aspect is seriously lacking, at least as far as I can tell so far.
I could go on and on, but if you are an HR, recruiting or compensation professional, or company executive, and really want to know what's going on in the "real world,: review glassdoor.com and similar sites for anecdotal employee relations, attraction/retention data points, but rely on much more rigorous data sources and HR/compensation professionals that understand them for "real" compensation data and analysis.
I'm getting off that soapbox again...
Seattle area ranks third in venture capital growth
The Seattle area ranks third in venture capital growth over the past decade– Venture capital (VC) investments in the state continue strong, and the Seattle area is the third fasting growing region in the past decade according to a recent report. The two fastest growing areas, New Mexico and Pittsburgh, are much smaller in terms of dollars invested, so they have more room to grow faster. Of course, the 800 pound gorilla remains California, but relatively speaking, the Puget Sound region is stronger.
Investments in the area have remained strong in early 2008, although slightly below last year’s level, virtually ensuring that the relatively tight tech and related labor markets will continue for a while, at least. The areas doing well recently are software, biotech, wireless, and “clean” technology, such as biodiesel.
Most analysts and VCs believe that current funding levels are healthy and sustainable, barring a major hit to the economy and/or equity markets. This should keep the regional area from any near-term significant drop-off in labor demand in technology oriented industries, like what happened in the 2001 – 2002 period.
Glassdoor.com Offers Yet Another Source of Pay Data for the Masses
Doesn’t the world already have enough unverified and/or less methodologically rigorous sources of pay data for the masses? Apparently, the newly-unveiled glassdoor.com doesn’t think so.
We already have vault.com, salary.com, payscale.com and others to provide data-thirsty workers ammunition to “verify” their under-compensated belief systems and to complain to their employers with (of course, if the “data” shows them “fairly” compensated, then no one ever hears about that!). Vault.com, for instance, has been supplying employer pay data “intelligence” for about a decade already.
Glassdoor.com is brought to you by the some of the same folks that founded zillow.com, a truly revolutionary and “disruptive” technology venture that blew the lid off real-estate valuation. Zillow isn’t perfect either, but at least they use real and verified data (publicly available real estate sale and tax records).
Is glassdoor.com the same revolutionary or disruptive technology as zillow.com? This compensation consultant certainly doesn’t thinks so, unless I’m missing something (it wouldn’t be the first time!). Self-depreciating humor aside, collecting anonymous incumbent-supplied data and presenting it as accurate and statistically-relevant/representative data isn’t new, and it isn’t valid either.
I won’t bore you with my long-winded recitation on why real compensation professionals rarely ever use these data sources. Let’s just say that most compensation professionals tend to want more methodologically-sound data sources than websites that offer incumbent-supplied data and/or “proprietary” (i.e. secret) data sources or methodologies.
OK, I’m getting off my soapbox now…
We already have vault.com, salary.com, payscale.com and others to provide data-thirsty workers ammunition to “verify” their under-compensated belief systems and to complain to their employers with (of course, if the “data” shows them “fairly” compensated, then no one ever hears about that!). Vault.com, for instance, has been supplying employer pay data “intelligence” for about a decade already.
Glassdoor.com is brought to you by the some of the same folks that founded zillow.com, a truly revolutionary and “disruptive” technology venture that blew the lid off real-estate valuation. Zillow isn’t perfect either, but at least they use real and verified data (publicly available real estate sale and tax records).
Is glassdoor.com the same revolutionary or disruptive technology as zillow.com? This compensation consultant certainly doesn’t thinks so, unless I’m missing something (it wouldn’t be the first time!). Self-depreciating humor aside, collecting anonymous incumbent-supplied data and presenting it as accurate and statistically-relevant/representative data isn’t new, and it isn’t valid either.
I won’t bore you with my long-winded recitation on why real compensation professionals rarely ever use these data sources. Let’s just say that most compensation professionals tend to want more methodologically-sound data sources than websites that offer incumbent-supplied data and/or “proprietary” (i.e. secret) data sources or methodologies.
OK, I’m getting off my soapbox now…
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