Applied HR Strategies, Inc.

Are You Getting What You

2010-02-19T00:34:00.001-08:00

Are You Getting What You're Paying For?

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Is Engagement the New Retention?

2010-02-19T00:32:00.001-08:00

Is Engagement the New Retention?

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The Future of Wage Increases in America

2009-09-21T08:19:00.000-07:00

The future isn't looking too good for the typical wage earner in America these days. Not surprisingly, wage growth is quite slow right now, but there is also no foreseeable impetus to increase that growth any time soon, unless you're lucky enough to be in a few selected high demand roles (such as for skilled health-care workers and selected technical professionals).

Not only is the labor market in the worst shape in decades, we likely haven't hit bottom yet. In addition, nearly all economists are predicting a painfully slow jobs recovery over the next few years. Of the millions of jobs lost in this recession, the concern among many labor market pundits is that a good chunk of these jobs may never come back (i.e., many of the manufacturing job losses), and of the ones that do, the recovery will be several years in the making.

Back to wage growth though, here's the current situation relative to the pre-recession period: in the first half of 2007, wages were growing at a healthy 3.7% annualized rate. In the first half of 2009, wages increased at a 1.3% annualized rate, and that may well go down as the labor market continues to deteriorate (labor market conditions generally lag overall economic trends, so even though we've hit bottom overall, according to most economists, the labor market probably hasn't yet).

The current (August) national unemployment is at 9.7%, and is expected to bottom in the 10%+ range sometime early next year. That's the good news. IHS Global Insight is predicting that in 2014, the unemployment rate will average 7.6%, which is still well above the unemployment rate before the recession started in late 2007. The predicted molasses-paced recovery will have a major impact on wage growth in the U.S. for the next few years at the least.

Labor market dynamics are a complex brew of many factors, but at its core is the same "supply and demand" that you learned in Econ 101. With labor current market supply quite high and demand very low (and expected to stay weak for the next few years, due to the slow economic growth being projected), the the case for a strong rebound in wages is not in the cards, barring a much more robust recovery than expected.

It is likely that wage growth could be stuck in the 1.5% to 2.5% range for years, or roughly one-half to two-thirds of historical wage growth.

If this predicted scenario plays out, the implications for the typical American wage earner will be profound. It will also have a large impact on employers, who rely on economic growth to fund their pay-for-performance programs. For some ideas on how to address these issues, see fellow Compensation Cafe' blogger Margaret O'Hanlon's recent post on dealing with "tiny" merit budgets, and my earlier post on using your professional creativity in these lean times.

Doug Sayed, SPHR, CCP is founder of Applied HR Strategies Inc., a Seattle area strategic compensation consultancy, and lead author of the StrategicPay Series "Base Pay Toolkit."

Is your recognition program stuck in the 80s?

2009-09-08T08:31:00.001-07:00

Is your recognition program stuck in the 80s?

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Is Technology Bottoming?

2009-08-11T15:17:00.000-07:00

Is the technology sector about ready to turnaround, or has it at least hit bottom?

The Department of Labor says that technology related-employment actually rose by 7,400 in July, after several months of declines. Granted, 7,400 jobs isn't a lot for the entire country, but that sure beats the 247,000 jobs that were lost overall, and one of the first really positive bottoming-out signs seen yet, at least in the employment arena, which tends to be a lagging economic indicator.

To date, most of the euphoria about the economy bottoming has been about things getting less bad, as opposed to seeing actual positive numbers (like increased retail sales or increased hiring). So, to see the technology sector actually increasing employment is a huge plus.

Of course, one month does not make a trend, but this at least indicates that a bottom is near or here, at least in technology.

If you work in the technology sector, have you seen any positive changes? Let us hear from you about what you're seeing.

Seattle VCs Project Increase in Layoffs at Funded Companies

2009-07-21T16:31:00.000-07:00

An article in today's TechFlash say that a large chunk (50%) of VC funded businesses in the area are looking to decrease their workforces in the coming months.

With funding WAY down, and most of these businesses not generating enough (or any) cash flow to support their current payroll, staffing has nowhere to go but down.

Just another example of what we've been projecting all along: we have more to go on the downside, before the labor market bottoms.

Projected Salary Budget Increases Lowest in 36 Years

2009-07-13T00:45:00.000-07:00

Salary budget increases are at there lowest in 36 Years, according to preliminary results released last week by WorldatWork.

In addition, according to the press release, at least 40 percent of salary budgets are frozen for officers and executives, says the WorldatWork survey of U.S. organizations.

Below is the press release from WorldatWork that was published earlier today:

Washington, D.C. – July 8, 2009 – Corporate salary budget increases have dropped to historic lows, according to the WorldatWork 36th Annual Salary Budget Survey. At 2.2 percent, the 2009 increase is the smallest in the survey's history and 1.7 percentage points below the 3.9 percent that had been projected in the previous year's report. The WorldatWork survey, the largest of its kind, clearly shows that the economic crisis continues to put pressure on employee salaries, though projections for 2010 suggest improvement.

The 2,600 respondents to the survey are WorldatWork members who are employed in the compensation and benefits departments of various employers, representing a total of 16 million U.S. employees.

"A projected salary budget increase of 2.8 percent for 2010 indicates we may have touched the bottom this year and a turnaround may be on the horizon," said Anne C. Ruddy, CCP, president of WorldatWork. "While it's heartening to think the worst may be behind us, compensation plans will likely be in flux for at least the next 12 months. We plan to re-survey our members this summer to monitor thawing of any kind."

"This recession is having a greater impact on compensation than the previous recession brought on by 9/11, when employers still managed to increase salary budgets by 3.6 percent," observed Alison Avalos, research manager for WorldatWork. In spite of the falling budgets, the survey shows employers are committed to awarding raises to about eight in every 10 of those employed. "This may come as a surprise to many given that one in three survey respondents indicated they are planning zero-percent salary budget increases this year," added Avalos. "Layoffs, hiring freezes, shifting pay increase dollars from executives to staff, and other cost-saving actions may be allowing employers to continue planning for at least some pay increases for remaining employees, especially top performers," Avalos explained.

Human resource practitioners continue to use variable pay, which consists of cash bonuses and other incentives, to reward results. For 2009, employers are budgeting an average of 5 to 11.5 percent for variable pay, depending on employee category.

About the Survey:
WorldatWork collected survey data in April 2009. The full survey report includes results for North American regions, all 50 states, major U.S. metropolitan areas, major industries as well as data by organization size, performance category and employee category.

Additional data cuts are now possible via SBS Online, which gives subscribers the ability to customize data cuts. A free Webinar will be held on August 25 for members and non-members.

In an independent survey by IOMA (April 2009), the WorldatWork Salary Budget Survey was rated the most popular source by 74 percent of large companies surveyed.

About WorldatWork® - The Total Rewards Association
WorldatWork is a global human resources association focused on compensation, benefits, work-life and integrated total rewards to attract, motivate and retain a talented workforce. Founded in 1955, WorldatWork provides a network of more than 30,000 members and professionals in 75 countries with training, certification, research, conferences and community. It has offices in Washington, D.C. and Scottsdale, Arizona.

WA State Unemployment Rate Hits 9.4%

2009-06-16T15:27:00.000-07:00

After stabilizing for one month in April (after a long string of unemployment rate increases), the State's unemployment rate has resumed its upward march, standing now at 9.4% for May 2009 (up from April's adjusted 9.0%).

In the past year, the total number of unemployed in the state has nearly doubled rising from 177,000 to 336,00. Over the past year 116,000 jobs have been lost in the state, but even more surprising is that over 40% of those losses have taken place since the beginning of this year.

Even some of the formerly strong areas such as high tech workers are now on the decline. "Information" workers are down 2.9% in the past year.

The only areas showing net increases over the past year are healthcare, social services and government (virtually nothing can't halt the growth of government!). The view the compete report from the state, click here.

Visit Doug at the Conference!

2009-06-14T23:05:00.000-07:00

When I was at the WorldatWork conference in early June in Seattle, I ran into an old friend and colleague, Matt Johnson of NextComp (developer of a great market pricing tool you should checkout at www.Nextcomp.net).

Matt was nice enough to shoot a brief video of me introducing the new StrategicPay Series (www.strategicpayseries.com). You can find that blog post and accompanying video here.

Enjoy!

Healthcare Cost Containment?

2009-06-14T23:02:00.000-07:00

If you see any real healthcare cost containment going on, please let me (and the rest of the country) know.

Each year some major consulting firms and others conduct their annual healthcare cost studies, and while the trends seemed to be moving toward slightly lower annual increases (down to the upper single digits, from the low double digit percentage annual increases), the last two studies I've seen are predicting roughly 10% annual increases in healthcare cost for 2009 and 2010, in the middle of major a major recession with virtually no (non-healthcare) inflation!

For instance the Buck Consultants 20th National Health Care Trend Survey is predicting between 10% and 11% annual increases (depending on plan type) for 2009 and 2010. In other words, while wages are are flat to down in real (post-inflation) terms and companies suffering from falling sales and profits, somehow, healthcare can increase 10% in cost.

I've been reading about how many consumers are delaying going to the doctor, and not electing to have elective procedures done, but costs still go up 10%? Somewhere I recall hearing about this concept called "the law of supply and demand," but apparently I was mistaken about that!

Healthcare costs for employers have more than doubled since the turn of the century and employee's out-of-pocket cost have tripled. Healthcare is slowly bankrupting our country.

I'm not a fan of government intervention in the free market, or of government-provided healthcare, but something has to be done. In 1980, healthcare was about 9% of GDP, and in 2009 it will be approximately 18%. We're heading toward 20% of GDP being spent on healthcare in this country within a few years. Yes, you read correctly, one out of every five dollars spent in this country, will be spent on healthcare alone.

Announcing the StrategicPay Series!

2009-05-28T21:32:00.000-07:00

Today, Applied HR Strategies is announcing the publication of the first of several planned "hands on" guidebooks to help business, HR and even compensation professionals to be able to "do it yourself" ("DIY") on compensation development projects that are normally hired out to compensation consultants, at many times the cost of the Series modules (we call then toolkits).

The StrategicPay™ Series was created for HR, compensation and business professionals that want to have technically sound and professional compensation programs, but who can't afford (or don't want to afford) the high cost of hiring outside compensation consultants. It's also designed to help HR and compensation professionals learn and grow professionally in strategic areas of compensation planning and program development.

Also, effective immediately, the StrategicPay Series website will also be the home of our main blog. We will continue to periodically post compensation and HR stories directly related to the Pacific Northwest here, but for our main blog, visit us here.

Are Wages Falling?

2009-05-16T02:55:00.000-07:00

Are wages falling in this recession?

The answer to that question depends on who's wages we're talking about. Different angles of this question will yield different answers.

With nearly 15 million Americans unemployed (and that doesn't count "disaffected" job seekers who've dropped out of the labor force or taken part-time work in the interim), competition for jobs hasn't been this high in decades.

And just like many of us learned in Economics 101, when demand falls and supply increases, prices fall (in this case, prices = wage rates). Generally this is most pronounced at the hiring level, as most companies are generally reluctant to cut wages for their workforces overall.

Despite the downward pressure, if you consult salary surveys coming out the first half of 2009, most will probably show a modest (albeit small) increase in overall wage rates from last year. Why? The reason is that salary surveys are generally measures of pay for employed workers, not a measurement of how hiring rates are changing, although that data eventually works its way into databases that survey vendors report data from.

Chances are that for most jobs, hiring rates are indeed falling, while overall wages rates are fairly stable (wages rates are stable to slightly increasing for those that have remained employed). For instance, an article on the SHRM (Society for HR Management) website reports that hiring rates have dropped 7.0% in the service sector and 10.0% in manufacturing year over year (March '08 to March '09). While these are large drops by any standard, that doesn't mean that wages are falling precipitously everywhere. We know that both of these areas are very weak right now, so these drops are not too shocking.

But what about stronger areas like health care or government (almost nothing can stop the growth of government!). We doubt wages have fallen for nurses and many other still in-demand health care workers, and for "hot skill" roles in technology, such as experts in web search technology or social networking (Twitter anyone?).

A good labor market analogy is that labor markets are much like the regional weather patterns, full of micro-climates within larger overall weather trends and systems. We know, for instance, that certain areas within specific wine growing regions are slightly cooler/warmer or wetter/dryer than other nearby areas, sometimes just a hundred yards away, and it's the same with labor markets. We know the macro trend is down in this labor market, but that doesn't mean it's a universal trend that applies to all jobs and all regional labor markets. Do your research before making sweeping generalizations based on the larger overall pay trends.

Doug Sayed, SPHR, CCP, is principal at Applied HR Strategies, Inc., a compensation consultancy based in the Seattle area. Doug is a Certified Compensation Professional (CCP) with over 20 years of HR and compensation experience, and a Master's degree in HR management from the Ohio State University. He is the lead developer of the StrategicPay™ Series, a series of "do it yourself" compensation resource toolkits, the first edition of which has just been released for publication.

What's Happening in CEO/Executive Comp

2009-04-22T16:14:00.000-07:00

Attended the Wall Street Journal / Hay Group 2008 CEO Compensation Study webinar earlier this week and learned a lot about what's happening in CEO pay over the past year. The trends and changes are many.

The study looked at proxy filings for 200 large (>$5B in revenue) public companies that filed their proxy reports in the 10/08 to 3/09 period, so the data is very current. While I realize that most of our blog followers are not in companies of this size, many (if not most) major trends in executive compensation tend to come out of larger firms, who have the internal and external resources to research, develop and implement new and new, different and "game-changing" executive compensation programs.

While the issues and trends discussed in the study are too numerous to cover here, below are some of the major trends and issues discussed with regard to CEO compensation:

CEO total compensation dropped in 2008 for the first time since 2001, when the U.S. was in a recession and suffering from post-Internet "bubble."
The drop in Total Cash Compensation (TCC) was -8.5%, due to a drop in cash incentives of over 10% in 2008 vs. 2007 (base pay was up 4.5% in 2008; it won't be up that much this year though).
Total Direct Comp (TDC), which is total cash comp or TCC, plus realized gains from stock or other sources was down 3.4%.
The shift away from stock options towards performance shares (stock that grants and/or vests based on the achievement of predetermined performance targets) continues. The use of restricted stock was down slightly, largely at the expense of performance shares.

Some major executive comp practice trends noted in the survey were:

More and more companies are reducing or changing some of the more egregious (at least from the outside critics' perspectives) executive compensation practices (see details below).
Executive perquisites or "perks" were roughly flat in 2008 with 2007, after several years of gains. Recently imposed reporting requirements, as well as increased scrutiny of these perks may have slowed down their growth.
Gross-ups (covering the taxes owed by an executive on compensation, often on special perks) are declining in prevalence, due to their widely negative perception. There's an article on this in the 4/21 Wall Street Journal (paid subscription required).
Clawbacks (the ability to recover an ill-gotten gain) are increasing in usage (and are required under the Federal TARP program).
The "Say on Pay" (non-binding shareholder votes on executive compensation plans) movement is gaining steam. While not required now, it was the feeling of the expert panel that eventually, this may be required by Congress (it already is for TARP recipients).

Unemployment Soars in the Pacific Northwest

2009-04-14T11:51:00.001-07:00

Having lived in the northwest since the mid-80s, I missed the "will the last person...turn out the lights" era. Back then, in the early 80s, the Puget Sound regional economy was dominated by Boeing, and today we're far more diversified than that. Our economic diversity has been no savior in this recession though (sort of like the stock market, where diversification hasn't helped there either).

But at least since I've been here in the northwest, this is by far the worst labor market I've seen (although my hometown - in the Detroit suburbs - is far worse off than we are, and won't be seeing any recovery for many years). Today's labor market makes the 2001-2003 jobs downturn look downright wimpy by comparison (and I thought the '01-'03 period was was pretty ugly at the time).

Oregon reported today that unemployment rose to 12.1% in March. That's tied for the highest rate the state has reported since it began tracking unemployment in 1947 (equaling the high point in the 1982 recession). That record will be broken soon.

While not as bad off as Oregon, Washington state is now up to 9.2% unemployment for March, jumping up nearly a full point from February's 8.3% revised rate. Meanwhile in Seattle, a jobs "safe haven" in the past few years, unemployment rose to 8.1%, from February's 7.6% rate.

Just one year ago, Washington's unemployment rate was 4.8%, and the Seattle metro area was well below 4%, so unemployment has doubled in the past 12 months.

If you've seen my earlier posts, I've been predicting for some time the worst labor market in many years, and now we can safely change "years" to "decades." We've also noted that the labor market is a lagging indicator, and so it's likely that unemployment will continue to worsen for several more months, even if the economy starts bottoming out and/or recovering soon (and no one knows when "soon" will be).

Join me at the Compensation Cafe'

2009-04-09T17:22:00.000-07:00

I've started writing for the new Compensation Cafe' blog that was just launched earlier this week.

We have an excellent lineup of writers with strong and varied backgrounds in compensation.

Stop by for a taste at the Cafe', which promises “Serving up straight talk, original thinking and caffeinated discussion on everything compensation.”

See you there!

Merit Budgets Plunge to Lowest Level Ever

2009-03-04T11:31:00.000-08:00

A recent study done by Watson Wyatt show merit budgets plunging to their lowest level ever (at least since records of these kinds of things have been kept), and we at AHRS think they are going even lower. Why? Just follow the news...

It's hard to be sanguine about the state of the labor market in the face of recent news:

GDP fell a -6.2% in the fourth quarter of 2008 (worst fall since 1982).
The Federal Reserve is predicting a -7% drop in 1st quarter GDP (from the Fed's "Beige Book" report released 3/4/09), followed by a projected 3% drop in the second quarter.
The ADP National Employment Report(R) reported today that that private sector employment decreased by 697,000 in February.
As companies sales, profits and balance sheet continue to deteriorate, there is nowhere for compensation budgets to go but down, and then down even further.

At this point, we do not see any reasonable hope for labor market improvement until 2010, at the earliest. Since labor markets tend to lag the economy's lead, and almost no one expects the economy to improve much this year, the likelihood of a turnaround in the labor market this year simply is not in the cards.

Employment and Income Drops in Silicon Valley

2009-02-17T17:15:00.000-08:00

For the fist time since 2003, per capita income in the world's largest technology playground, Silicon Valley, has dropped. Year-over-year employment also dropped for the first time in years as well.

According to various reports, until the past few months, the tech sector was feeling pretty smug about possibly taking a pass on this recession, but now it's arrived in full force. No one is immune.

According to an article in today's Wall Street Journal, quoting Jason Hancock, CEO of Joint Venture Silicon Valley, "There was a feeling that Silicon Valley had special assets to help weather the crisis, but we now know we're in for the same pain." "We haven't hit bottom yet and it will be a while."

Employment was down 1.3% over the past 12 months, while per-capital income is own 0.8% over the same period. Both numbers had been rising steadily since the area started recovering from 2000 tech bust, which hit the Valley area economy quite hard.

I remember that prior to the tech bust in 2000, many in the industry felt that technology was recession resistant, but it turned out to be highly cyclical. Proctor and Gamble is recession resistant, technology is not. People need soap, but they can run their XP machines for another year without loss of life, or even of personal hygiene.

We expect employment, personal income, job prospects, wage growth and salary budget to continue to decline until the housing and banking crunch have hit bottom and started to recover. Honestly, nobody knows when that will be at this point, not even Federal Reserve Chair Ben Bernanke or Treasury Secretary Tim Geithner.

U.S. Unemployment Rises 4.9% in One Year

2009-02-07T08:13:00.000-08:00

The U.S. unemployment rate spiked up 4.9% over the past 12 months based on January's 7.6% rate. This is the largest one-year increase since 1975 (the year after I graduated from high school - yikes!).

While the 7.6% rate seems awfully high, and it certainly is by any recent standard, the sheer volume of job losses is more staggering. 3.6 million jobs have been lost since the decline started in late 2007, but the past three months (11/08 - 1/09) have averaged approximately 500,000 jobs lost per month, an unprecedented pace.

More scary perhaps is the the BLS (Bureau of Labor Statistics) “U-6″ rate, that includes disaffected workers who have dropped out of the labor force in frustration and those who are "marginally" employed (such as those working PT, but wanting FT work, etc). This wider measure is now at an astounding 13.9% rate (up from 13.5% in December), or about one in seven workers in the U.S.

We at AHRS believe that joblessness will continue to rise at a fast clip, and unemployment will approach (or maybe even exceed) 10% before we hit bottom.

Merit and other salary increase budgets will continue to decrease, even though they are near historic lows already.

Our hope (and it's just that, a hope) is that the labor market and business demand will bottom in the second half of 2009. This hope assumes that the alleged stimulus plan (that full of all sorts of non-stimulus pork) has its intended affect, that the banking system can be stabilized (at taxpayer expense, of course), and that business and consumer sediment bottoms and starts to improve.

Even if all of these good things occur, it will likely be the second half of 2010 (at the earliest) before the labor market would start to rebound. The labor market tends to be a lagging indicator, as employers are generally reluctant to open their wallets, until they feel confident that a true turn-around is in place.

Merit Budgets Continue to Plummet

2009-02-02T22:01:00.001-08:00

Just released results from the WorldatWork Salary Budget Survey Special Update reveal that merit budgets continue to plummet, and that Seattle-area budgets are down more than the nation as a whole.

Overall, results from the Special Update (data was collected in early December) show the average merit budget dropping to 3.1% from the 3.9% projected for 2009 when the survey was originally done in the spring of 2008.

Back here in the Pacific Northwest where we hail from, budgets have dropped even lower, to 2.8% in both Seattle and Portland, tied for the lowest large metro area merit budgets in the country.

Approximately 1 in 6 employers reported a 0% salary increase budget for 2009, a dramatic increase over recent years.

Merit budgets are back to historic low levels, last seen early in the decade, after the stock market collapse starting in 2000, and 2001 recession.

We at AHRS expect salary increase budgets to continue to drop from current levels in early 2009, although the pace of the decrease should slow, barring new unforeseen major economic events yet to unfold.

Unemployment Spikes Across the Northwest

2009-01-23T10:17:00.001-08:00

Unemployment rates spiked in the final month of 2008, as jobless rates in Washington, Oregon and Idaho all went up up dramatically.

Just this week, Washington State reported a 0.8% increase in its December unemployment to 7.1%, just a tad below the 7.2% national rate. While still slightly better than many areas in the country, the worst is yet to come for the region. Oregon’s unemployment rate in December also shot up to 9.0%, a dramatic rise from year-earlier levels.

What a difference just a few months make! Last summer, the Seattle area maintained a 3.5% seasonally adjusted unemployment rate, and actually below jobless rates of late 2007. Today that rate is 6.2% (12/08 data). Not bad though, considering the unemployment rates for Washington (7.1%), Oregon (9.0%) and the U.S. (7.2%) are much worse off.

Oregon has been particularly hard hit. In the past year, unemployment has soared from 5.7% in November 2007 to 9.0% a bit over a year later. In the past year, only government, heath and education employment are up in Oregon. The next strongest is high tech, at -1.9% in job “growth.” Construction and manufacturing have taken a hard hit, down 12.1% and 14.5% respectively.

Idaho had been the employment shining star of the region at “only” 6.6%, but it has taken the hardest fall of the three northwest states on a percentage basis over the past year. At 6.6%, Idaho’s 12/08 unemployment rate is up from only 2.7% in December 2007! The current 6.6% rate is also a 15-year high in Idaho, so it has been hit hard, despite its seemingly overall low rate of joblessness.

And the worst is yet to come. Keep in mind the December figures don't even include a bevy of recently announced layoffs (Boeing, Microsoft, etc.), the 1/1/09 effective date of many of the WAMU layoffs, and the trickle-down impact of these and other jobs cuts in the past couple of months.

We at AHRS expect the employment picture to worsen for at a minimum several more months, and then to stay in recessionary territory for many months after the overall economy bottoms and starts to recover.

State and Local Unemployment Soars in December

2009-01-21T11:27:00.000-08:00

Washington State's employment picture deteriorated quickly in December, as the state's unemployment rate took its biggest one-month jump in more than three decades.

The state jobless rate rose to 7.1% in December, up from 6.3% in November. That's the highest rate since March 2004, as the state was recovering from the 2001 - 2003 jobs slump.

The Seattle metro area's jobless rate also spiked from 5.4% in November to 6.2% in December.

The unemployment rate has nowhere to go but up in the coming months, as Boeing's recently announced layoffs (approximately 4,500) and the full effects of WAMU's collapse have yet to be reflected in the latest data.

To keep up on the latest layoff announcements, see the Seattle Times Layoff Ledger.

Seattle's Strengths Turning into Weaknesses?

2009-01-15T16:57:00.000-08:00

Up until a few months ago, the Seattle area's labor market was stronger than in most of the rest of the nation, and stronger than just about anywhere else in the Pacific Northwest. But recently, a new shoe seemingly drops every week, signaling a serious deterioration in Puget Sound region's labor market in the first half of 2009, and quite likely beyond that.

Strengths Turning to a Weaknesses? Some examples:

Washington Mutual, the largest employer and tenant in downtown Seattle is laying off the vast majority of its workforce (and vacating most of its office space) after its spectacular collapse in late 2008.
Aerospace, an area of strength until mid-year 2008, is suddenly looking pretty weak in the knees. Last week Boeing announced the upcoming lay-off of thousands (up to 5,000, reportedly). Continued delays in the new 787, weakness in the airline industry and worldwide economy have all had impacts. In the past few months, several other aerospace suppliers in the area have announced and/or already implemented layoffs.
Technology: until recently one of the last bastions of private-sector strength (other than healthcare), now looks to be a drag on the local economy and labor markets in 2009. In late 2008 Microsoft signaled a slowdown in hiring, and Google announced it was slowing down its regional growth plans as well. And just this week, the rumors of impending mass layoffs at Microsoft are working their way through the local and national media. When Microsoft and Google (two of the deepest-pocketed companies in the industry) are pulling back, you know you've got a serious slowdown happening. If the Microsoft rumors prove to be true, it will have a major impact on the area high-tech sector, as Microsoft is the largest tech employer in the area, by far.
Government & Education: The only two areas of employment growing in the latest state labor market reports, now seem destined to fall. With a possible $6 billion dollar state budget deficit, the City of Seattle closing schools, and the state pulling back on education funding in general, two of the the last areas of strength will start heading south soon.
Healthcare: maybe the last bastion of relative strength in this labor market. Word has it that many consumers are electing to forgo doctor visits and elective procedures. Still, nurses are in short supply, and healthcare will remain stronger than nearly all other industry sectors.

Employment is a lagging economic indicator, so even after the economy hits bottom and starts to climb its way back up, the labor market recovery will likely lag for at least a year or more beyond that. (Remember 2002 and early 2003? The last recession ended "officially" in late 2001, but the labor market didn't really start recovering until the second half of 2003).

I wish we had more upbeat news, but this looks to be the worst labor market in decades - including in the Puget Sound Region.

2008 - The Largest Job Loss Since WWII

2009-01-09T07:59:00.000-08:00

Wow, what a year 2008 was, and not in a good way, especially for the American worker.

Today, the U.S. Labor Department reported that the U.S. economy lost 524,000 non-farm jobs in December, its 12th straight monthly decline. Now that the year's tentative final tally is in, the 2.6 million jobs lost in 2008 is the worst since 1945, the year WWII ended. Of course, the population and economy are a lot larger now, but that doesn't dampen the sobriety of the news, since the employment blood-letting is likely to continue well into 2009.

According the Labor Department's data, over 11 million workers are now unemployed, and the country's unemployment rate has jumped 2.2%, just since April.

Just a few months ago, many leading economists were projecting unemployment topping out in the 7% to 8% range, but now it's looking like these projections will end up being too optimistic, possibly by a long shot, as layoffs are accelerating, and several big layoffs announcements in the past month or so have not even worked their way into the data yet.

Lest some say this blog has gotten too morose, here is what today's Wall Street Journal has to say: "By some broader measures, labor-market conditions are even worse than the main numbers suggest. When marginally attached and involuntary part-time workers are included, the rate of unemployed or underemployed workers reached 13.5% last month, up almost six percentage points from a year earlier." (WSJ 1/9/08, on-line edition).

On the positive side, a few areas are showing resilience, with increased employment in healthcare, education and government (seemingly nothing can stop the government from growing!).

Whatever your political persuasion may be, every American should be rooting for the incoming Obama administration to achieve many early successes on the economic front.

Latest Labor Market and Comp Trends Update

2009-01-08T12:42:00.001-08:00

AHRS has just published its latest newsletter on comp and labor market trends, primarily focused on the Pacific Northwest region.

Since it's too lengthy for a blog posting, if you are interested in a copy, please email me directly at doug@appliedHRstrategies.com, or request a copy of the AHRS newsletter via our website at www.appliedhrstrategies.com/subscribe.php.

Let's hope 2009 is better than we think it's going to be!

2009 Compensation & Labor Market Predictions

2008-12-29T00:03:00.000-08:00

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!

Revised Pay Budgets Slashed

2008-12-18T13:44:00.000-08:00

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.

Happy Holidays?

2008-12-05T09:38:00.000-08:00

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.

Labor Market Woes Continue to Compound

2008-11-07T08:51:00.000-08:00

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).

Special Report on Merit and Comp Trends

2008-11-04T08:47:00.000-08:00

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."

Prepare for the Worst Labor Market in Many Years

2008-10-03T07:45:00.000-07:00

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.

Healthcare Cost Inflation Receding?

2008-09-25T11:08:00.000-07:00

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.

What's "HOT?"

2008-09-11T15:43:00.000-07:00

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.

2008 Layoffs Worst in Several Years

2008-09-04T09:06:00.000-07:00

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.

Worker Confidence Down to 2001 Recession Levels

2008-08-28T08:56:00.000-07:00

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.

Inflation and Wages

2008-08-27T01:17:00.000-07:00

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.

Studies: Bulk Of Pay Raises To Go to Best Performers

2008-08-14T16:05:00.000-07:00

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,

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.

"Companies are trying to use their money more wisely," said Steve Gross, a global practice leader at Mercer LLC. The Mercer study suggests that employers are shifting what little they have to offer in the way of merit raises to their best performers. With inflation rising and business conditions deteriorating at the same time, employers are going to have to be more "discriminating" in how they spend their limited pay increase dollars to retain their top talent.

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

2008-08-14T08:12:00.000-07:00

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.

Also this week, the WA State Department of Employment Security reported that the state unemployment rate rose to 5.7% in July (up from 5.5% in June), equaling the overall U.S. rate. Most of the increase is attributable to weakness outside of the Puget Sound region, and to an increase in the number of persons seeking employment. Relative strong spots remain in technology, healthcare, education and aerospace.

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...

Inflation in Seatte Among Nation's Highest

2008-08-03T13:01:00.000-07:00

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.

IT Employment Up 10% Over Past Year

2008-07-24T11:31:00.000-07:00

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.

Expect a Lengthy Period of Wage "Dis-inflation"

2008-07-24T11:24:00.000-07:00

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).

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.

A "Slow-Motion Recession"?

2008-07-02T11:15:00.000-07:00

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:

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.

And these are just a few of the factors I can reel off the top of my head. I'm sure there are others. So, while I know I'm sounding glum, the sum total of what's happening in the economy and labor markets in the region are not pretty, even if it's less ugly than in many other parts of the country.

At least the weather has improved lately!

Cybercities 2008 Report from the AeA - is this News?

2008-06-24T16:56:00.000-07:00

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.

Extra! Extra! 6/18/08 Labor Market Update

2008-06-18T20:25:00.000-07:00

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.

Despite the relative regional strength, slow job and economic growth for the remainder 2008 is still likely. Even though the northwest economy is healthier than the national one (WA Stage GDP was the third strongest in the nation in 2007 and early 2008), it doesn’t mean we’re “out of the woods” yet. Despite this, even in today’s weaker economy, many employers continue to report difficulty in hiring some skilled workers, especially experienced technology and engineering professionals, and in the nursing/health care, accounting and finance areas.

NY Times - "Lost In E-Mail, Tech Firms Face Self-Made Beast"

2008-06-16T22:52:00.000-07:00

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).

Another Comp Professional's View on Glassdoor.com

2008-06-13T15:19:00.000-07:00

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."

Keeping an Open (but skeptical) Mind...

2008-06-12T23:51:00.001-07:00

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:

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

2008-06-12T12:10:00.001-07:00

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

2008-06-12T11:33:00.000-07:00

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…

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2006-08-21T12:04:00.000-07:00

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2006-08-21T11:38:00.000-07:00

2006-08-21T11:27:00.000-07:00

Welcome to the NEW (and yet to be improved) blog of Doug Sayed of Applied HR Strategies, Inc.

Visit this blog periodically to catch up on the latest news on compensation in the northwest, especially if you work in the technology and/or life science industries.

If you would like to contact Doug directly, please feel free to at doug@appliedHRstrategies.com or via www.appliedHRstrategies.com.