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).

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."

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.

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.

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.

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.

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.