Study: Job Market Will Mend in 2010
After starting the year with the heaviest downsizing in nearly a decade, the number of announced job cuts declined dramatically in the second half of 2009, providing hope for an eventual job-market turnaround. The turnaround should become more evident in 2010, as job creation finally begins to outpace job losses, according to a study by the global outplacement firm Challenger, Gray & Christmas, Inc.
However, while hiring is expected to accelerate in the new year, unemployment could remain stubbornly high, as millions of Americans who abandoned the job search out of frustration – and, therefore, not counted among the unemployed – re-enter the labor pool.
The economy is just beginning to pull out of the worst economic downturn in decades. Since the recession began in December 2007, employers have announced nearly 2.5 million job cuts. The heaviest downsizing occurred between July 2008 and June 2009, with more than 1.6 million job cuts announced.
Job cuts appear to have peaked in January 2009, reaching 241,729, the highest monthly total since January 2002.
In the months to follow, announced layoffs steadily declined, but the monthly average remained above 130,000 through the first half of the year. Since July 1, however, monthly job-cut announcements have averaged about 69,000. In November, job cuts fell to 50,349, the lowest monthly total since December 2007.
“The end of the year is typically when we see a surge in layoff activity. The fact that job cuts continued to decline in the fourth quarter is a good sign that the job market has truly started the recovery process. Unfortunately, the recovery process is slow, so it could be several months or even years before unemployment returns to pre-recession levels,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.
“One of the factors that will keep unemployment high, even as companies begin to increase hiring, is the re-entrance of many people who have been sitting on the sidelines, waiting until a stronger job market emerges. Once these individuals enter the fray, they will again be counted among the unemployed,” said Challenger.
There were approximately 15.4 million unemployed Americans in November, up from 7.2 million in November 2007, just before the recession began. In addition to the unemployed, there were 6.0 million Americans in November who want a job but were not considered part of the labor force because they had not sought employment for at least four weeks.
That figure is up from 4.2 million in November 2007.
“Even if we begin to see net payroll gains in the 200,000 to 300,000 range by the end of 2010, it probably will not be enough to offset the influx of job seekers re-entering the labor pool after months of self-imposed exile,” said Challenger.
“Of course, we may not see job gains exceeding 200,000 until 2011. The 2010 job-market recovery will be felt first by the millions working in temporary help positions and those working part-time for economic reasons. As employers start to feel confident about future business conditions, they will increase the hours of part-timers and make temporary workers permanent,” he added.
The number of people working part time for economic reasons stood at 9.2 million in November, more than double the 4.4 million in these positions in November 2007. Meanwhile, employment at temporary help firms has increased each of the last five months, after 19 consecutive months of declines.
“Needless to say, improvements in the job market may not be that evident in the labor market statistics until 2011 or later.
However, job seekers should not assume that simply because unemployment figures continue to hover in the nine- to 10-percent range that no one is hiring,” advised Challenger.
According to the latest available data from the Bureau of Labor Statistics, employers hired an average of 4.1 million workers per month, between July and October. Moreover, there were nearly 2.2 million additional job openings as of the last business day in October.
By comparison, employers averaged about 4.8 million new hires per month during the same period in 2007 and there were more than 4.0 million openings at the end of each month.
“Currently, we are still seeing more separations – both voluntary and involuntary – than new hires. This explains why payrolls are still experiencing net losses every month. But those payroll losses are getting smaller by the month and, as the data show, employers are still actively seeking new workers,” said Challenger.
According to Challenger, some of the areas that will begin to see renewed job creation in the new year include health care, information technology, government, financial services and energy.
“The sector with some of the best potential for long-term job growth is probably energy. We are probably still a few years away from a dot.com-era job boom, but the push toward increased energy independence and the quest for alternative energy are really gaining momentum,” said Challenger.
“The ongoing need for health care and technology guarantee that these sectors will continue to be strong areas for job growth in the coming years. In fact, the intermingling of the two stemming from increased pressure to digitalize all medical records could provide a large number new jobs,” he added.
Other industries that have announced hiring plans in recent months include retail, which has announced plans to add more than 84,000 workers. Government agencies are adding nearly 30,000, while entertainment and leisure plans to add about 22,000.
“Of course, these figures represent just a tiny fraction of the hiring and available jobs out there. We track hiring announcements, but the vast majority of employers do make formal hiring announcements unless they are building a plant, opening a new facility or store, or announcing expansion plans that might affect their stock value,” said Challenger.
“Even newspaper and online help wanted ads do not tell the whole story when it comes to hiring and job availability. In fact, help wanted ads probably represent less than half of the actual job openings and possibly as little as 20 percent. Within the hidden job market are companies that plan to fill positions through employee referrals, those that use recruiters to find the right candidates, as well as those that have no plans to hire, but will do so if the right person comes along,” said Challenger.