Time to Work on Plan B

Weekly initial jobless claims continue their rise, overall unemployment stays flat to last month, Congress just passed the "bailout" which the President has signed, so now what?

I have heard the statement "From Wall Street to Main Street" many times recently on the local and national news when reporters or "experts" are referring to the current economic crises. Just because we have an economic rescue package does not mean that the economy is going to quickly turn around. It is going to take a while for the impact of this economic "bailout" to help aid the economy. The main purpose is that it will remove the "toxic" assets from banks' balance sheets so they can start to lend money to other banks (at lower rates than the recent record high rates), small businesses (many that use short-term loans to make payroll) and ultimately to consumers. These economic crises took a while to develop. I was emailed an article this week by a senior manager in our organization that was from the New York Times in September of 1999 that reads as though the author of the article has channeled Nostradamus' predictive powers. In the article reporter Steven A. Holmes wrote, "Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits." Later in the article he declares, "In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's." Maybe I could call Mr. Holmes to find out when my beloved St. Louis Rams will win their first game!

Congress has taken a positive step in aiding the prospect of financial recovery, although it will be a while before we start to see the effects of the bailout make its way down to "Main Street." Congress should continue to work to find additional ways to help those on "Main Street." I read an advertisement in the Wall Street Journal today that was a letter from the CEO of Interactive Brokers Group, Thomas Peterffy, in which Mr. Peterffy recommended that the "bailout" be "fixed" so it would simply pay the first $250 of every home owner's mortgage in the US for the next five years (at a cost of about $10 billion monthly). I find this idea very intriguing. You would think that it should have at least hit the radar screen of CNN or Fox News? In the advertisement Mr. Peterffy points out that his idea is "progressive" and would cover a larger portion of the mortgages for those with "modest homes" verses high-dollar estates. Maybe Congress will be wise enough to continue to work on this issue and develop contingency plans in case our economy continues to slip, even in the face of passage of the "bailout." Let's hope we do not have to go there, but it would be refreshing, reassuring, if we knew that Congress was hoping for the best but planning for the worst. Plans such as that put forward by Mr. Peterffy need to be examined and considered when it comes to putting together the proverbial Plan B.

How do you feel about the "bailout" package, and do you see it as a positive or negative move by our leaders in Washington?

Two Steps Back

I am sure you have heard the old saying, "One step forward and two steps back." That is, in my opinion, what the United States economy has been doing over the last several months. It seems as though we start to witness improvements that create enthusiasm that our economy is showing signs of beginning to pull out of the downturn, and then... Wham!, more poor economic news such as last week’s release of the “Employment Situation,” which reported the national unemployment rate at a new high of 6.1%, on the heels of the most recent initial jobless claims report, which spiked back up to 444,000 (although all of the labor news wasn't bad given that in healthcare we have added 367,000 jobs year-to-date). Another good indication of how fast economic sentiment is changing is the fact that all last month experts focused on inflation, and now their concern has changed to deflation. So what are today's headlines, and how will today's changes impact on our economy, good or bad?

Today's headlines are all about the Fed bailing out mortgage giants Freddie Mac and Fannie Mae. Is this good or bad? Wall Street liked the news early as stocks rallied. Most of the articles I have read indicate that this will lead to lower interest rates for would-be homeowners. It would be even better news if it means that folks who are in a tough position given that their short-term rates have adjusted higher could refinance and stay in their homes. Unfortunately for these individuals, the lower rates are going to come with a much higher scrutiny over credit ratings, etc. There is also good news in the fact that folks who are currently living with an adjustable rate, interest only, etc., kind of mortgage who have maintained good standing and have not missed any payments will be able to capitalize on this move by the Fed to lock in a low, fixed rate. If you are in this position be ready to strike once the impact makes its way through your financial institution.

Could this move be the first step in solving the housing crisis after last week's report of foreclosures being at an all-time high? Not yet. It is going to take much, much more to recover, but as I mentioned earlier in this article, it was once again time for the "one step forward" after taking "two steps back" last week.

I personally think that lower interest rates will spur the purchasing of both new and existing homes. Yes, I said it, and, yes, I am an optimist at heart. Even with the high unemployment rate, there is still a group of would-be first-time home buyers that have been waiting for the perfect time to step into the wonderful world of home ownership. I also believe that there is another group, one that is focused on investing, who will also take advantage of the lower rates to scoop a deal on a second home or vacation rental to pad their portfolio with good tax advantages in planning for their future. If both of these scenarios come to fruition, it will be a nice "step forward" again for the economy which could even extend into the labor economy.

Keep a close eye on mortgage rates if you are a potential first-timer, or if you are in the market to refinance. All of the articles I have been reading foresee the 30-year fixed dropping below 5.5%. Let's keep our fingers crossed!

What kind of impact do you foresee the Fed's move to take over the mortgage giants having on your local economy and local labor situation?

Stabilization

Has the U.S. economy started to enter a phase of stabilization? The following are indicators that point to this being the case.

• According to the Commerce Department/U.S. Census Bureau orders for durable goods or big-ticket manufactured goods rose for a second month increasing in July by 1.3% over June, which posted an equal level of increase. The July increase included jumps in orders for commercial aircraft, motor vehicles and transportation equipment. (Read more.)
• Consumer confidence is recovering. The Conference Board's index that measures consumers' moods rose to 56.9, which is the highest reading since May. The Conference Board's inflation expectation also dropped to 6.7%, the lowest level since March.
• The US dollar is on the rise against foreign currencies.
• Oil and gas prices are lower, and overall demand for oil in the US is down more than 5%.

When combined, these positive economic happenings indicate that we are starting to see signs of stabilization in the economy. Even with oil prices rising on fears that current weather issues could halt production in the Gulf of Mexico (where 25% of the US oil is produced), gasoline prices remain stable due to the aforementioned drop in consumption. This trend will give consumers disposable income that could be used for going out to eat, shopping for back to school, etc. This potential boost in consumer activity could lead to businesses needing to add staff, which in-turn would start to aid the labor economy. Given that current productivity levels are as high as they are, companies are likely going to have to add staff to meet the need of any increased demand for their products and services.

I am by no means trying to say that I believe we are solidly on our way to economic recovery as yet. The overall economy has a long way to go before we can use the good "R" word. Based on the information that is available, I personally think we are witnessing the economy beginning to stabilize. Once we experience a multi-month decline in the unemployment rate and the weekly jobless claims consistently fall below the 400,000 level, we can be confident that recovery has begun. I personally believe that this will come to fruition in 2009.

What are the key economic indicators that you watch closely and are important to your business or industry?

Headlines

There have been a lot of headlines in the news of late about the condition of our economy, the fact that we are in a recession, or are on the verge of one, companies laying off workers, hiring freezes, etc. How you lead a business through these kinds of conditions is going to determine the ability for your business to ultimately be successful in the future, or not. One of the immediate moves of a business in a recessionary period is to cut expenses. This is obviously smart and for most businesses is an ongoing practice even in the good times. I was recently emailed a good newsletter distributed by The Recruiter's Digest and written by Bill Radin that I feel outlines some pretty good steps to take, and although they are referring to the recruiting industry, their recommendations can apply across all industries and leadership positions. Here is a copy of the article and a link for you to view it on Mr. Radin's site which also offers other resources and tools for folks in the recruitment industry.

Learning from Past Recessions by Bill Radin (Source: Recruiter's Digest April 2008 newsletter) If you've never experienced a recession, here are 10 things you should know:

1. Jobs that made you rich in good times can make you poor in a recession. This is especially true with mid-level positions, in which duplications in skill sets or job titles exist within a single company.
2. You may need to switch from a "delivery" business model to a "value-added" model. If your business depends on delivering mass quantities of average-quality candidates or you do little to add value, you'll find it harder to compete.
3. Some job markets and desk specialties will be spared. Case in point: After 9/11, when job cuts were rampant across the board, certain job markets, such as defense contracting, construction and legal services, actually thrived. If you can identify the markets left standing, they can be your lifeline.
4. The greater the supply of "active" candidates, the more valuable "passive" candidates become. Since layoffs flood the job boards with unemployed or marginal candidates, you'll need to brush up on your cold calling skills and find creative ways to source top-flight candidates who are currently employed.
5. Employers are more cost conscious. As a result, you can expect more pressure to reduce your fees, and for hiring cycles to slow to a crawl. And as more recruiters fight over fewer jobs, you'll need to tighten up your "ownership" rights to candidates; otherwise you'll fight more frequent battles over who gets paid.
6. Candidate marketing will become more common. Most employers will throw out the rule book if you bring to their attention a candidate who can make an immediate, positive impact. If the candidate has enough sizzle, employers will find a way to make the hire, even if they have to create a special position.
7. Your time management becomes more critical. With fewer positions to work on, you'll need to be highly selective about which assignments will give you the greatest return on your investment of time.
8. Weaknesses in your selling skills are more exposed. Recessions leave little margin for error. The better you are at qualifying, closing, handling objections and making presentations, the more efficient you'll be with respect to converting activities into income.
9. A recession is the best time to be in the recruiting business. I know this sounds counter intuitive. But look at it this way: When times get tough, the weaker recruiters will wash out with the tide. If you can weather the storm and find ways to gain market share and build your reputation, you'll be positioned to grow as the market recovers.
10. Cash flow is everything. Learn to control your spending or make cuts in your budget. Otherwise, you might end up working with your back to the wall.No doubt about it: A recession is a buzz kill. But it can also be a great teacher, because it humbles you and makes you more aware of your weaknesses. If you can stick it out and learn from your mistakes, you'll make tons of hay when the sun shines again, and you'll be more immune to future downturns.

Very compelling!

Now back to my opinions...

If I were to add to the list of ten items above, my contribution would be to increase your level of activities and focus on what has the most obvious link to driving your business. Are sales activities the best driver of your business? Is it association involvement? Maybe even attending trade shows? Find what works best, clear your schedule of all other time consumers and focus on what is going to allow you to build your business. The businesses and leaders that are going to emerge on the other side of the current economic conditions on top of their industries are going to take some calculated risks to gain market share and increase their customer counts. This will be successfully accomplished by being wise with where their organizations focus resources and by taking necessary risks to grow their market share and ultimately their business.

What activities are the most important to your business? Are you investing all of your time focusing on this most important aspect of your business?

Pull It Apart

In order to be an effective leader you have to be willing to take risks and set goals that others might perceive as too extraordinary, too difficult to achieve or too visionary. Today's business and economic climate has created an environment in which an out of the box approach to traditional business as we know it could represent a refreshing approach that would act as a magnet for attracting customers.

In order to explore what this type of approach would mean for your business, you have to step outside of what you do on a daily basis, which is difficult to do. You need a fresh set of eyes to take a look at what you do that will give you the ability to ask the "why" question on everything that you are currently doing. Why do we do this in this particular way? Why are we investing here? Why do we measure this, and why is it important? Sometimes, in order to put something spectacular together, you have to first pull it completely apart.

Our business is structured in a way that we have multiple business units with our parent company. This gives us at The Employment Guide the ability to look at how other businesses approach certain aspects of their business and find what might make sense for us to try. One of our sister companies is For Rent and another is Homes.com. We like to compare notes on what they are doing to give us a fresh perspective on some aspects of our business. It is almost like having a built-in consultant team.

This type of resource is going to be of even greater value in 2008 than in years past. Given the conditions with which we are all faced, including the credit and investment market upheaval, slower job growth (projected to fall to a total of 100,000 in 2008 by Kiplinger), identifying new ways to approach your business will be invaluable. After the innovation process, you have to make sure you have the resources to develop. That in and of itself can be a challenge, especially if you are in an industry that has faced restructuring, layoffs, etc. (such as the automotive industry). Then you have to allow for the proper amount of time for testing, quality control and a trial period before taking your new product or service to market. What is interesting is that while this process takes time, it is the businesses that can compress this time-frame and get their new product or service out to market first within their industry that will typically be looked at as an industry leader. It is my opinion that within the realm of electronic or internet related businesses the understanding that back-end development will need to take place after a product is launched is readily accepted more so than the "make sure the product is 100% before we roll it out approach." This is largely due to the fact that you can measure what your customers are doing with your product and modify the product to better meet their needs as you track usability. In fact, within our electronic media industry, this is now becoming the norm. Typically the website that you are on this week will change in some form or fashion next week. These changes are not readily noticeable, but they are in fact designed to enhance the returning visitor's experience.

So what are you going to do in today's business environment that will change the way you are approaching your business? What are you going to do differently? If you are ever going to take a great risk with the potential for high rewards, now is the time!

Take what you have currently and pull it completely apart. Can you put it back together in a way that so the end result is better than what you currently have? If so, do it.

Any time there is change there is opportunity. So it is paramount that an organization get energized rather than paralyzed.- Jack Welch, CEO, General Electric

Looking Ahead

As our business begins the budgeting process for 2008, we are starting to focus some of our attention on what is in the cards for all aspects of the employment industry that directly impacts our performance. The Employment Guide is focused on the non-exempt, hourly workforce or the service industry side of the labor economy, which now represents close to 80% of the entire workforce in the United States. Given that we are so closely aligned with the labor economy, it should be no surprise that we pay particular attention to job growth projections and related statistics. Some of the more interesting statistics as far as the labor economy goes is in the fact that in 2006 the US labor economy added 2.26 million jobs verses projections of up to 1.5 million in 2007. All reports that I have come across from multiple resources indicate that 2008 should hold steady and be a close mirror of 2007. The economy will continue to grow, there will be a steady decline in the national unemployment rate, seasonal hiring trends will remain in tact and businesses will have an increasingly hard time staffing their companies as more boomers decide to exit the workforce.

Older workers are the key to satisfying many of the needs of businesses that are feeling the pinch of the tightening labor market. Just like the economy has been fueled by this great American generation, so will the next five to ten years of the labor economy (barring significant immigration reform or increased automation through improved technologies). What can an older worker bring to your organization? Experience for one thing, which in and of itself has a great value. Not to mention is professional maturity and potentially a new perspective.

Due to the majority of the readers of my blog being employees of The Employment Guide, I am sure most of you are well aware of the initiative that we have in place in partnership with the Department of Labor's upcoming Employ the Older Worker Week, as well as our corresponding job fair series of more than 40 job fairs in 26 states to help hiring managers and companies tap into this great labor resource. The AARP Foundation is also a major sponsor of this event. This is a significant event that represents a new opportunity given that in the very near future one out of every three employees will be 50+ years old. While a lot of time and effort from a multitude of folks in my organization have gone into putting together the logistics of this event, I must give kudos to Amy Hoster, regional marketing coordinator in our Phoenix office, for leading our efforts and ultimately bringing this to the forefront of our efforts. Great job, Amy!

So back to the economy and looking ahead a bit into the future. What else can we expect? A couple of positive items are that inventories are going to need to be replenished, which will place increased pressure on the transportation industry as freight demand increases steadily throughout the rest of 2007 and into 2008. It is also projected that one out of every four jobs that will be created in 2008 will be in the healthcare industry due to the increased needs of the boomers. Both of these projections fit well with our plans as a business as we continue to position our organization for higher levels of success by placing increased focus on serving both the transportation and health care verticals.

"The economy will add about 1.5 million jobs both this year and next, or an average of 125,000 per month -- enough to sustain income growth and consumer spending. Unemployment is likely to stay below 5% through 2008 -- quite low enough to keep the labor market tight. Many employers, particularly those that depend on skilled labor, will continue to face challenges finding new qualified candidates." (Kiplingerbiz.com: June 1, 2007)

We as a business are not immune to the tightening of the labor force. I am interested in hearing what you are currently doing to keep your staffing complements at desired levels that might fall outside of the normal recruiting and hiring protocol. Obviously for my folks, you will first need to maximize your presence and utilize the opportunities that exist in our suite of recruiting products. What tools do you use and what methods do you employ to keep your hiring funnels full of suitable candidates?