The Outlook for Recruiting

The recession we’re in will have long-run consequences for employment and consequently recruiting. The world is about to see the biggest increase in unemployment in decades. The World Bank and the IMF predict that global trade will contract at the fastest rate since 1930 and global economic output will drop for the first time since the Second World War. Employment is a lagging indicator of problems in the wider economy, so unemployment will continue to rise even if economies start to recover today. The consensus estimate among economists is that in the developed world average unemployment will exceed 10% before the end of 2010.

There are glimmers of hope. Inventories have fallen to such low levels that production will have to be increased just to meet the current level of demand. The fall in consumption is beginning to level out. In the U.S., auto dealer and homebuilder surveys are heading up. Japanese automakers have announced production increases. A broader indicator of an upturn — JPMorgan’s global manufacturing index — posted a second consecutive gain in February, and its new-orders index is rising. A realtor friend just wrote that she has five closings this month. 5. F-i-v-e. 5. Way to go.

What Will Emerge?

Regardless of when we emerge from this situation, there are some major changes in the employment landscape that will change recruiting in terms of where it occurs and how it is done. Where recruiting occurs will depend on where there is growth — somewhat debatable but getting clearer. Where it will not occur is in finance and housing construction; they will not return to past levels for a very long time. Also, if you work in an industry that’s heavily dependent on exports, then don’t expect an upturn either. Domestic demand is also falling overseas, and countries will increasingly strive to protect their domestic industries, further reducing the need for imports.

Where?

A recovery will be weak: losses in asset values and the need to reduce debt will all but guarantee that. But there will still be pockets of growth. These will be largely in infrastructure, IT, education, healthcare, government, and energy.

Infrastructure will be an early winner because so much stimulus and other funds are being directed at it — not just in the U.S. but also overseas. In particular, India and China are channeling billions of dollars at infrastructure projects to both boost employment and enhance economic activity. That means industries that support infrastructure — heavy equipment, architecture, cement, safety equipment, etc. will see near-immediate upturn in demand.

IT and engineering are perennial job creators, and will remain a source of employment for recruiters. For the simple reason that supply cannot match demand, a problem that will be exacerbated by restrictions on companies receiving stimulus funds from hiring foreign workers. This gap is even wider overseas. In India and China, compensation in IT is estimated to increase this year by 11% and 8% respectively because of the extreme shortage of qualified professionals.

Education will see jobs growth because of three factors: 1) large cohorts of teachers reaching retirement age; 2) a massive expansion in funding for education and student aid in the current federal budget; and 3) large increases in enrollment in higher education by people unable to find work.

Healthcare is another engine of job growth. Enough has been written elsewhere on the shortage of nurses, doctors, etc. that it doesn’t need to be repeated here. The U.S. Bureau of Labor Statistics also predicts an increase in social services jobs as a swelling number of retirees check-in for medical care.

Government payrolls at the federal level will swell to accommodate the administrative needs created by the vast expansions of regulatory authority being proposed — over banking, transportation, education, labor, and healthcare. The situation is likely to be the opposite at the state level where most states find themselves facing huge budget shortfalls.

Energy in general and green energy in particular will see significant growth. Biofuels, wind energy, and solar all will benefit from new investments and tax incentives. Consequently jobs that are related — research, infrastructure, maintenance, and sales can expect to benefit. However, the number of jobs in these industries is small to begin with, so the overall impact may not be much.

Interestingly, much of the increase in employment is expected to occur in small businesses and startups. One impact of a recession is that more people start businesses because they can’t find work. With expansions in federal grants for some of the above industries, expect to see a lot of new companies emerge. Also expect to see geographical shifts in areas of employment growth. California and New York continue to shed jobs as employers move away because of high taxes and burdensome state mandates. The beneficiaries are many Midwestern and southern states that have low taxes and fewer restrictions.

Article Continues Below

Recruiting will become more difficult in this new landscape that emerges. Unemployment is not evenly distributed, and for many of the industries mentioned above there is not an abundance of unemployed talent. The employed are also less interested in changing jobs in an uncertain economic climate and will likely remain so for years. Finally, mobility for many is restricted by their inability to sell their houses. Many people will be forced to delay retirement, but that will not solve the supply problem. Many of the new jobs that will be created cannot be easily filled with skills available in the current labor pool.

How?

Changes in how recruiting is done are harder to predict, but some trends can be discerned. Given that a recovery will be weak, employers are more likely to turn to part-time and contract recruiters than have full-time staffs. This will be reinforced because much of the growth in jobs is expected to occur in small and medium-size businesses that have no need or cannot support full-time recruiters. An increase in needs for sourcing, as opposed to full-service recruiting, will occur as employers seek to minimize costs.

Technology will need to adapt. The major boards are not designed for use by the occasional recruiter. It’s likely that products and services targeting small-businesses will be where we see most changes in recruiting technology.

The Legend of the Phoenix

What we’re experiencing is known in economic theory as creative destruction. Jobs are destroyed and new ones emerge. In the past it has been a somewhat gradual transition, but not this time. In past downturns the mood has never been so sour. In 1990 and 2001 most saw the recession as a slow-down, a readjustment, perhaps even a necessary realignment of the business cycle — something to be concerned about not a lot. The future was bright. After all, this is America. But this time is different. It shows up in many little ways. Several people I know have asked that we use Skype to talk to lower their phone bills; that they’ve cancelled their magazine subscriptions and only read online; that they’ve changed their home page from CNN to the BBC because there’s less negative news. Larger numbers of friends than I’ve ever seen are online late at night and available to chat. Someone I know to be an eternal optimist wrote to me that the American dream was an illusion and they don’t believe it in any more. Much has gone wrong if it has come to this.

This time it’s like the legend of the Phoenix. It lives for a thousand years and once that time is over, it builds its own funeral pyre, and throws itself into the flames. As it dies, it is reborn and rises from the ashes to live another thousand years. We’re at the end of the thousand years.

Raghav Singh, director of analytics at Korn Ferry Futurestep, has developed and launched multiple software products and held leadership positions at several major recruiting technology vendors. His career has included work as a consultant on enterprise HR systems and as a recruiting and HRIT leader at several Fortune 500 companies. Opinions expressed here are his own.

Topics

16 Comments on “The Outlook for Recruiting

  1. This time it’s like the legend of the Phoenix. It lives for a thousand years and once that time is over, it builds its own funeral pyre, and throws itself into the flames. As it dies, it is reborn and rises from the ashes to live another thousand years. We’re at the end of the thousand years.

    As always, thought provoking.

  2. Another great article – Maureen is right – thought provoking indeed…….some folks clearly have a gift and Raghav is one of them …..thanks

  3. I also believe that while “Finance” may not have big hiring needs, the flip-side is the Insurance industry, which may be a dark horse here. However, given the catastrophic failure of AIG and other big firms, job seekers look for stability, which private Insurance companies can offer. At the same time, these businesses will grow because of their very nature – private/mutual vs. for-profit – and time-tested business models that can still experience growth in tough financial times.

  4. Let’s be honest here, nobody, myself included, really knows what the future holds. We have all been affected (personally and professionally) by the recession, but I certainly don’t think the mood is “more sour than ever before”. There was a perfect storm in the financial and mortgage markets brought about by 20+ years of greed, incompetence and irresponsibility. The government is taking steps (hopefully the right ones) to right the ship and when the dust settles, we will be able to start putting the pieces back together again.

    I had the privilege of visiting with an engineer from Germany on a recent flight and he reminded me that America is still the most innovative country in the world and that we “make some really great stuff”. I am a bit embarassed to admit that it took the words of someone from another country to remind me of how privileged we are to live here and that despite the short-term challenges we face, our resolve will see us through. We all need to step up and start believing in ourselves and each other and tune out the gloom and doom.

  5. Good article, thought provoking but still too negative in my opinion. We still have over 90% of the population employed and paying their bills on time.

    Even in the worst of times some companies are hiring and taking advantage of getting the best people to help their companies grow and prosper. We still have a lack of good professional talent in this country – that is not going away anytime soon.

    The entreprenurial spirit is still alive in this country and even though the “big” companies are reducing staffing levels – none of them can continue to do so without impacting the employees that are left (they end up being overworked and lacking any sense of stability and in turn start looking for better opportunities). The smaller companies and new start-ups will now be able to hire top notch talent without the stiff competition from the “big” firms. This in turn will help these companies grow and hire more people and the cycle repeats.

    The doom and gloom that is presented by the media is (per a journalist friend) what the metrics say people want. I have stopped listening to them and have decided that the way to go is forward with a positive attitude that hard work and persistence will, as always, pay off in the long run.

    The only thing that is guarenteed is that things will change. If you stand still and don’t change then you could be part of the unfortunate group that doesn’t make it to your goals.

  6. A bit too pessimistic for my taste. The Phoenix analogy is a bit over-the-top and dire for the reality of a business correction. Unfortunately, the Eco-Hypochondria that plagues our society today will make this a far steeper cyclical downturn than it would typically have been.

  7. I agree with the comments that have been posted regarding this being a great article, but also still being too negative. As an immigrant to this country, I firmly believe there is no place like the U.S.A., where you have a conglomerate of people from all races and cultures, constantly pushing the envelope of innovation to higher and higher levels. My take is that out of this period of “necessity”, (the word necessity is relative if we compare ourselves with many other countries), will come even more innovation and more opportunities….they may just be different ones. The word opportunity is described in the Thesaurus as: a favorable condition, an advantageous chance…. I think I see the glimpse of a positive message somewhere in that description!

  8. Interesting perspective Raghav. It is interesting that since the market has been up over the last week; it has created some optimism… at least in Chicago. Hopefully, it is not a false rally. If you enjoy Raghav’s writing, take a look at “Presidential Pardon” a great book he authored that stands up over time. You can find it at Amazon.com

  9. “20+ years of greed, incompetence and irresponsibility.” : That’s a good description of what the fortunes of the recruiting industry have been built upon. (I’d also add arrogance and fear.) I sense that there is an underlying belief/hope/prayer that after this economic “blip” is over, we’ll go right back to “business as usual,” where large numbers of decent, hardworking, reliable recruiters and sourcers are able to make middle/upper-middle class incomes hiring people for companies in the same old ways, or maybe using “the Wonderful Web 2.0 which changes everything!” Well folks, I believe we’re do for a “sea change,” because *95% of corporat recruiting (at least for big companies) relies on processes which can largely be eliminated completely, automated, internalized if external, or outsourced for no more than around $3,500/month. If you’re an Executive Recruiter or a Specialty Recruiter, you’ll be sitting pretty for the foreseeable future. On the other hand, if you aren’t delivering a world-class or high-value add or high-touch staffing service, you better improve/change your skills, or start looking for a new job.

    I liked Maureen’s, Shally’s and Glenn’s recent ERE article on training. We should train/retrain folks for these areas which pay well and won’t go away. These include things like being master- closers, relationship builders, and project managers to act as liaisons for the outsourced teams and the client/employer.

    One way or another, we should learn to adapt to new circumstances or prepare to be overwhelmed by them.

    Cheers,

    Keith “Ask Me How” Halperin
    keithsrj@sbcglobal.net 415.586.8265

    “In the 21st century, everything changes and you gotta be
    ready!”
    – Captain Jack Harkness

    *This is based on http://www.careerxroads.com/news/SourcesofHire09.pdf
    100%- (7.8% Direct Sourcing + 2.7% Agency)/2 = 94.7%. This assumes that half of agencies’ hires and sourcing could have been done internally with better planning. (The sourcing figure already includes internal sourcing, but doesn’t break it down.). -kh

  10. Great article. Recruitment will continue, but its ranks may shrink considerably, beyond what we witnessed at the beginning of the decade. I read an ERE article a few weeks ago in which the case was made that sourcing will become extinct as social networks begin to interact. This article reinforces that sourcing will not go away anytime soon, and I concur. The only thing that will change are the people in sourcing (or recruiting) who are unable to adapt to the new marketplace and evolving technologies. I didn’t respond at the time, but since I’m typing, here goes: As long as in-house recruiters do not have the time to adequately scour their ATS or utilize the ever increasing pool of recruitment tools available to identify qualified applicants for their open positions, sourcers, contract recruiters, and agencies will step in to fill the void.

  11. Who knows how weak or long the recovery will be. In this downturn, even our strong candidates need great advice on how to compete. Rather than hire career development professionals to provide formal training, our firm is generating additional revenue by partnering with a career coaching organization founded by a fortune 500 HR VP. This business goes to market through a MLM model and you earn money by simply introducing people to a career coaching service. http://www.mycareermovement.com/members/larissasearch/

  12. As an alternative, I can also provide a personalized job search for $2,000 for the first month and $500 for each month thereafter.

    Cheers,
    Keith 415.586.8265 keithsrj@sbcglobal.net

    ………………………………………………

    Rather than hire career development professionals to provide formal training, our firm is generating additional revenue by partnering with a career coaching organization founded by a fortune 500 HR VP.

  13. Philosophical perspective on the recruitment industry. I think the industry needs down turns like this. Recruiters who are resourceful will come out of this recession better equipped for whatever happens in the future. Nothing mystical about it, just common sense, innovative thinking and positive focus on moving forward.

Leave a Comment

Your email address will not be published. Required fields are marked *