Fact or Myth: Our Current Job Market
According to the NYTimes, the United States was on a ‘recession watch’ as of September 2019. Check out the data we pulled on the subject as well as what we feel is the truth.
What Qualifies as a Recession?
If you’re a professional in the job market for years and years, you remember the Great Recession of ‘08 that left many unemployed and many fearful that they could be next. According to The National Bureau of Economic Research or NBER, a recession is "a period of falling economic activity spread across the economy, lasting more than a few months." According to TheBalance.com, a few signifiers or qualities of a recession include as follows:
Decline in real gross national product for two consecutive quarters.
A 1.5% decline in real GNP.
Decline in manufacturing over a six-month period.
A 1.5% decline in non-farm payroll employment.
A reduction in jobs in more than 75% of industries for six months or more.
A two-point rise in unemployment to a level of at least 6%.
Why is this Important?
According to many top magazines, sites, and business platforms, the US was in the red zone for a potential recession over the next 12 months due to a slew of negative instances across the job market and Wall Street. This, of course caused a string of panic-stricken articles and blog posts on the subject only causing more alarm and worry for anyone with or without a job. Especially those who were affected by the crash in ‘08, over ten years later, this would be detrimental to our current market.
The Problem
Obviously a recession happens due to a string of specific factors such as the bulleted points above. But what specifically happened to cause this increase in the potential for a recession? According to the Washington Post, the “economy had slowed from July through September, in part because of a contraction in business investment.” It’s normal for the market to contract or ebb and flow but this particular instance over a 3 month span, was alarming especially with what the Times calls “glum forecasters” and their expectations for economic shrinkage for two quarters as we enter into the new year. Unfortunately, during this particular contraction, the spending took a rather large hit which slowed the economy and could cause issues going forward (WashingtonPost). The Post continues by saying “consumer spending continues to power the economy, but business investment has now contracted for six straight months, falling 3 percent in the third quarter, the biggest drop since the end of 2015.” Infact, this contraction was so drastic that it affected over half of the industries, a whopping 12 of 18 industries reported contraction which thus affected factory employment which experienced a second-straight drop this past October due to the GM strike. (Bloomberg)
The GM Strike
A key player in the major contraction amongst 12 industries falls back onto the GM Strike put on by unhappy employees, around 48,000 to be exact. A strike of this magnitude at a company as impactful as GM is something that is noteworthy and will have a rippled effect even after the strike ends. Here are a few of the important effects of the strike by the Bureau of Labor Statistics, relayed by a WashingtonPost article:
The number of workers in auto and parts manufacturing declined by 42,000.
Federal employment decreased by about 17,000, as temporary workers engaged in the 2020 Census completed their work.
The economy would have generated about 187,000 jobs in October if not for the strike and Census completions, besting the monthly average of about 167,000 for the year.
Although this damage has been done, the 48,000 workers have returned to work after a long and impactful 6 weeks which cost GM $2 billion in lost production and $1 billion in lost wages for the employees on strike. (Vox) It’s incredible how the strike affected both GM, the economy, and of course, those on strike. At such a hefty cost, what did this strike accomplish? The strike was created due to a decade of cut benefits and pay for workers during the ‘08 recession. Now, after 6 weeks of the GM Strike, the new deal for these workers includes:
Pay raises: Workers are guaranteed a 3 percent pay raise and 4 percent lump sum increase in alternating years. That’s not great, considering that employees got the same thing last time they negotiated a contract in 2015, without going on strike. One big difference is that GM agreed to lift the $12,000 cap on profit-sharing, so there’s no limit to the cut workers can get from GM’s profits. Right now, they each get $1,000 for every $1 billion the company earns.
Factory investments: The Detroit-Hamtramck factory was one of four slated for closure before the strike began. It will now stay open, and GM will build electric trucks and vans there. That’s a $3 billion investment in 2,225 jobs. The company will also invest $1 billion in two other factories — one in Tennessee and another in Michigan — to build mid-size SUVs.
Temps and transitional workers: There is now a process for temporary workers to become permanent employees after three years on the job and for newer hires to earn the full pay rate in four years instead of eight. That top wage rate was increased from about $30 to $32 per hour.
Health care costs remain the same: The cost of workers’ health care plans, among the lowest in the nation, was left untouched. The company had announced plans to increase premiums but backed down during the strike.
*According to Vox*
Fact or Myth?
So, what’s the verdict? While this recession scare was legitimate and something that should still be monitored, it seems we may have dodged the bullet. According to the Washington Post, the “US added 128,000 jobs in October as the jobless rate ticked up to 3.6 percent, outperforming analyst forecasts during a month in which one of the largest private-employer strikes in recent years weighed on the economy.” In fact, our labor market is and has remained incredibly resilient and healthy as we head into the 11th year of economic expansion. Check out a few more stats/facts that prove towards a more positive outlook:
The Bureau of Labor Statistics also revised the monthly job total from August and September upward, to a net of 95,000 more jobs. (Washington Post)
The slowing but positive growth, weaker business investment, and resilient labor market paint a picture of an economy that has decelerated a bit from 2018′s strength but doesn’t appear close to dipping into a recession, despite fears that were sparked several months ago. (Washington Post)
Right now, the indicator estimates the chance of a U.S. recession at some point in the next year is 27%. That’s higher than it was a year ago but lower than before the last recession. There are reasons to keep a close eye on the economy but no need to panic yet. (Bloomberg)
Reports of companies beating expectations are widespread. (Forbes)
Consumer spending has remained strong and consumer confidence has improved. (Forbes)
Stock ownership (excluding “safe” stocks) continues to look desirable. (Forbes)
What our Recruiters Have to Say about Job Applications during Hiring Slumps
Make sure you are using every resource you can to get your name, resume, and skill-set on the market. Don’t assume that creating one or two profiles with a job board is doing the trick. Create a profile and upload your resume to a minimum of five major job board sites (Indeed, Zip Recruiter, Monster, CareerBuilder, LinkedIn, etc).
Your resume has to be as thorough as it can be. Write a brief introductory paragraph at the top of your resume explaining your career and areas of expertise. Your latest career with start and end dates should be at the top, under your introductory paragraph. (example: Start date: 1/2018 - Present). In descending order, list your jobs, dates, and what you did.
Pro tip: Don’t put your address on your resume. Put only the city, state, and email or phone number you want to be reached at under your name.
Example:
John Doe
Tampa, FL USA
813.555.9999 or johndoe@anywhere.com
Leave no stone unturned. Don’t assume a hiring manager would or wouldn't be interested in a skill you have. If you have computer skills, list them (Example: Microsoft Word, Excel, Google Office, etc). At the end of the day, make sure your skill set is related somehow to your career.
If you have people skills, be specific and give examples of how and when you had effective communication in the professional environment.
At the bottom of your resume, list any and all education you have received. It doesn’t have to be high school or college only, this portion can include certificates, training at previous employers, or online courses of any kind you have taken.
While we seemed to have narrowly missed a potential recession relapse, it’s important as business professionals, especially CEO’s to keep an eye on the state of our job market. Remaining informed allows for leverage if, another recession does happen years down the road. And, if this does happen— you, as the potential hiring manager or candidate, have great recruiting tips if you find yourself in a job-panic. By preparing, executing your duties smartly, and staying ahead of the economic curve, you could potentially save your company from cuts. Don’t catch yourself off guard!