Suddenly, It's the Big Hiring Freeze
Like the once high-flying Nasdaq itself, Americans' fortunes have swung wildly in the past year. And nowhere is that truer than in the workplace. Last year, blue- collar workers were swimming in overtime, while the talk among job-hopping techies and managers alike was all about options and IPOs. These days, however, a suddenly sober U.S. workforce has a new acronym to learn: RIF, as in reduction in forces.
Still, despite the pileup of layoffs, the U.S. unemployment rate is hovering near 30-year lows. Until recently, the sizzling growth in service jobs seemed to have no problem scooping up any and all laid-off workers into new jobs.
Now, that could change. The problem: an onslaught of hiring freezes throughout Corporate America. Many a job searcher has been hit with a cold lesson in reality this past winter: the signing perks, fancy recruiting lunches, and multiple job offers of a year ago have given way to good old-fashioned pounding the pavement for months at a stretch. Sighs former Chicago dot-com public relations exec Katherine Sopranos: "I've interviewed with four major companies, and all four said they would hire me on the spot if it weren't for a hiring freeze."
NO VACANCY. Sopranos is not alone. From the unemployed blue-collar workers cast off by a manufacturing sector deep in recession, to white-collar managers, marketing executives, and info-tech workers facing layoffs at companies stunned by the suddenness of the downturn, job seekers in a wide swath of industries are finding their prospects limited as a slew of No Vacancy signs pops up across the country. The new hiring freezes may well prove to be a harbinger of worse news to come. Low unemployment and the buoyant job market have been a key reason consumer confidence--and consumer spending--have remained relatively strong even as the economic downturn has intensified. But if the number of jobs on offer continues to shrink, while layoffs ratchet up, a sharp rise in unemployment could be the inevitable result.
Already, evidence is mounting that the labor market is shifting from a shortage to a surplus. Until very recently, workers who were bounced could feel confident about new opportunities. But that's no longer the case. The Conference Board's Help Wanted Advertising Index has plunged 20 points since last year, to 71, its lowest level since 1993. The index' 22% plunge is a source of worry for economists: Since the 1970s, whenever the index has fallen by 15% or more, a recession soon followed. "Just about everybody has freezes on right now, even if they are quiet freezes," says Jeffrey E. Christian, CEO of Cleveland search firm Christian & Timbers.
There are plenty of other indicators of tough times ahead for U.S. workers as well. Private unemployment--which tallies jobs in the private sector, excluding government posts--jumped from 4% in December to 4.5% in February. Equally ominous, the National Association of Purchasing Management surveys of hiring at both manufacturing and service companies show precipitous declines over the past year. If economists' worst predictions come to pass, and if weak earnings persist into the second and third quarters, the overall unemployment rate could rise to 5% by the end of this year, according to John Graham, finance professor at Duke University's J.B. Fuqua School of Business. That may still be a healthy employment level by traditional standards, but try telling that to the multitude of workers who will be joining the unemployment rolls.
The economic warning signs are clearly mirrored in the wave of hiring freezes announced by companies high-tech and low since March. The freeze is on at Texas Instruments (TXN ), Walt Disney (DIS ), Procter & Gamble (PG ), NBC (GE ), and Northwest Airlines (NWAC ), to name a few. Moreover, in a recent Duke University survey of 153 chief financial officers at companies whose median revenues run from $100 million to $500 million, half said they intended either to reduce employment or hold it steady for 12 months. Just three months ago, 75% of the CFOs, half of them at manufacturing companies, said they planned on increasing hiring. Says Duke's Graham, who conducted the survey: "Getting a new job will not be easy."
For the first time in years, many recruiters say, they are starting to have more job candidates than corporate clients looking to fill jobs. Companies are also scaling back campus visits and offering fewer jobs. Even demand for those once-impossible-to-find information-technology workers has fallen 44% this year, according to the Information Technology Assn. Companies that were caught completely off guard by the slowdown are taking quick action, spurring loads of layoffs, with announcements soaring to an average of 9,000 per day in March, more than twice the prior peak levels in the mid-1990s, according to International Strategy & Investment, an economic consulting firm.
Even for employed workers, hiring freezes are having a sobering effect. Auto plants that only a year ago demanded so much overtime that assembly-line workers were splurging on new pickups and boats are now barely producing. The shift is equally wrenching for many a white-collar employee. Instead of car allowances and first-class travel, this year promises slim raises and budget hotels.
And that could be just the beginning of a painful period of adjustment for college-educated workers, the segment of the workforce that benefitted most during the boom. So far, unemployment for those with college degrees is just a tiny 1.6%. But the spread of hiring freezes, which some economists predict will continue for at least the next quarter, could quickly spike up that number to 2% or 3%, the same level it reached in early 1992. That would put a big dent in consumer confidence. With more unemployed people needing more time to find jobs, even people who have jobs "could get really nervous and say: `I'm not going to buy a new van' or `I'm not going to put money in the stock market,"' says Graham.
BYE-BYE, GOOD TIMES. To be sure, the long-term outlook for skilled workers remains excellent. And many small and midsize companies are still hiring, taking advantage of the new supply of labor that would have commanded premiums only months ago. In some states, such as Texas and Minnesota, shortages are still acute, with fast-food managers continuing to collect signing bonuses. And many large companies with freezes are still hiring key people where needed.
But in countless ways large and small, the good times are clearly gone for now. Even those for whom job woes seemed an impossibility a few months ago are feeling the heat. Consider the Hollywood exec who last year dumped his hotshot studio job--with a seven-figure salary, two assistants, and a car and driver--for a dot-com. When that job fell apart, his old studio refused to take him back. Sure, they would have loved to, if it weren't for the hiring freeze. After a few months of searching, he recently found a new gig working in a generic office park in an unglamorous job for a new cable programming outfit at half his old salary. Such diminished expectations weren't part of his five-year game plan when he left his cushy job to join that doomed dot-com. But increasingly, for many who lose their jobs, that's the cold reality they now face.
By Michelle Conlin, with Michael Mandel in New York, Michael Arndt in Chicago, Wendy Zellner in Dallas, and bureau reports