Data, data everywhere,
But what of it to think?
Data, data everywhere,
It makes the markets shrink.
My apologies to Samuel Taylor Coleridge, but the unemployment claims numbers out today and Wall Street’s reaction made me think of that great sea tale that starts out promisingly, then takes a turn into the terrifying.
Initial claims for unemployment took a small, but unexpected jump last week. After trending more or less down for several weeks, claims have been going back up. Last week, unemployment claims rose by 2,000 to 484,000. Economists had been expecting a decline.
An increase of 2,000 might not seem like much, but it’s now higher than at any time this year since February. For the week ending July 24, the U.S. Department of Labor reported 460,000 jobless claims were filed. By itself, those increases wouldn’t set off the kind of alarms that caused the Dow to plummet 100 points at the opening today. But with yesterday’s plunge on discouraging news from the Federal Reserve and this morning’s unexpected negative financial report from Cisco Systems, traders were especially sensitive to the news.
If you watch the markets at all, you may remember that big rally in the late spring. It abruptly ended in May, when the Dow reversed itself hitting a low of 9868 last month.
It doesn’t take an MBA to see the connection here to hiring. Revenue changes are particularly important to economists and forecasters, but CEOs live and die on earnings. Revenue growth is important to them, too, because, as any CFO knows, you can’t save your way to prosperity. However, there are only so many ways to keep earnings positive with flat revenue and the easiest is not to hire people.
Uncertainty, even with revenue growth, is also a powerful disincentive to add staff. And that’s just what we’ve been seeing for the last two quarters. Corporate financials are improving year-over-year — not a time to party exactly, considering how poor last year was — however, everywhere there are questions about the sustainability of this improvement.
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Terms like double-dip recession, a “W” recovery, are part of water cooler, lunch-time conversations.
No wonder there’s uncertainty. There’s data everywhere that can support almost any view. Consumer confidence on the rise for most of the year, headed down these last two months. Help-wanted ads are increasing, and SHRM is saying hiring will be up in August. But the U.S. Bureau of Labor Statistics reports show job growth is anemic. Private sector hiring has been barely perceptible.
Zoom back for a moment to a high-altitude view and the numbers and the data point the same way: 2010 is an improvement over 2009. Admittedly, it’s a bit like the view an earthworm has: everything looks up from its perspective.
Nevertheless, since the beginning of 2010, more than 650,000 jobs have been added and the economic trends, as reported by no less than The Conference Board, are improving. SHRM’s LINE report for August says “Job growth will make small strides in August and layoff rates will approach three-year lows.”
Although the possibility of a double-dip can’t be discounted, the trend is decidedly up — slow, for sure, but steady. At some point, those 40 percent of workers who say they’re ready to change jobs, will become active. There’s plenty of pent-up worker frustration; just look at how the Internet is making a folk hero out of the JetBlue flight attendant.
So while today’s unemployment report is disappointing, keep watching the broader trends. Already recruiters are telling SHRM researchers that hiring top talent is getting harder. It makes sense and cents to refill pipelines, assess the most likely future needs, and identify candidates.
To end this post the way it began, recall that the Rime of the Ancient Mariner concludes with a statement of its intended lesson.