Economics 101. Not!
Most people are either truly mystified by economics or have no interest in the dismal science. But that doesn’t stop people from having a wide range of opinions on the economy – everyone’s an expert when it appears there are warning signs. It’s also like a bull market – everyone is a great stock picker. I was recently asked my opinions on how the economy impacts the staffing and recruiting industry by one of our business partners. It seems that their customers were giving them wide ranging opinions, from the staffing and recruiting industry is recession proof to we’re headed into a strong contraction. Well it’s not that simple and here’s why – all economic environments are different, based on the unique circumstances in play at that time.
In the last recession (2001 – 2002), IT was hit very hard and so were contractors, and to an extent temps. However, retail really wasn’t. The reason? In the last recession, IT spending declined due to the completion of Y2K work, the dot com bust, and offshore outsourcing. Retail was not impacted significantly because consumer spending remained high due to a stronger dollar, low inflation and the wealth effect of home equity (more Americans own homes than they do stocks). In this “so-called recession,” which shows no evidence yet of a real recession, the impact has been limited to financial services, housing and to an extent retail. Each of these industries represents less of a percentage of overall employment than others that the staffing and recruiting industry traditionally services. Additionally, all the data to date points to the fact that permanent placement and executive search is still experiencing strong demand. Healthcare is largely recession proof. And for the most part, so is accounting. There are mild declines in temp and contract staffing, but we still hear from many of our customers that their businesses are going strong. Keep in mind a couple of current facts:
- Unemployment is only 5% right now, and that is only 1 point off what economists consider full employment.
- Despite current economic uncertainty, demographics and global economic trends are in the U.S.’s favor to keep down unemployment. Baby boomers retiring are still creating a candidate shortage, which offsets any slowdown in hiring. The relatively strong health of foreign economies (fueled by demand from China and India), plus the weakness of the U.S. dollar, is fueling exports, which in turn keeps unemployment low in the U.S.
I am reading Alan Greenspan’s memoir right now, The Age of Turbulence. Whether you view him as an economic maestro or the scapegoat for our last two bubbles (stock market and housing), one thing is pretty clear – before coming to a conclusion on the economy pay attention to fact rather than hysteria. Take the time to talk to your customers and your colleagues in the staffing and recruiting industry. But don’t take their word for it at a surface level. Ask for some numbers, and then come to your own conclusion. We talk to our customers and they’re telling us that their businesses are strong. Bullhorn also had a great Q1 and you’ll see our announcement on it in the next week. How is your business doing?
This Bullhorn Blog post was written by Joe Cordo.