Musical Chairs in the Job Market
By Amey Stone
Edward Yardeni, chief investment strategist at Oak Associates, was visiting European clients in June when he met with a French investment strategist who lamented the high rate of unemployment in that country. Yardeni told him, as he related in a June 29 research note, "In my opinion, if you want to keep your job, stay in France. If you want to find a job, go to America."
Yardeni's basic take on the U.S. job market -- "it seems to be hard to keep a job, but easy to find another" -- might sound callous, given the emotional turmoil and hardship created by losing or seeking a job. "People who lose their job tend to pay a big price," says Dean Baker, co-director of the Center for Economic Policy Research in Washington. Not only do they have to endure a period of unemployment, but "they often end up taking a job at lower pay with less benefits."
Yardeni's analysis has appeal, however, since it offers at least one explanation for this summer's puzzling juxtaposition of headline-grabbing layoff announcements (10,000 jobs lost at Kodak (EK ), an estimated 10,500 at Ford (F ), 14,500 at Hewlett-Packard (HPQ )) at the same time that the nation's jobless rate continues to decline.
According to Yardeni, more people are being laid off at the same time that more new jobs are being created. He notes that 11.7% of the labor force was unemployed at some point during the year ended May 31. But payroll employment increased during that time by a net 2 million, for a "whopping" 19.4 million new jobs created in that 12-month period.
A U.S. labor market that's becoming more like a game of musical chairs is one of the byproducts of globalization, say economists and analysts. As whole classes of jobs -- including higher-paid, white-collar professions -- move overseas, it's becoming more important than ever for American workers to be able to reinvent themselves, says Nick Colas, director of research at Rochdale Securities, who says he has reinvented his own career on Wall Street several times in the past 10 years. "The average American worker isn't going to have one career for his or her lifetime," he says. "Think about what your key skills are. You're going to have to change careers."
It may no longer grab headlines, but the fact remains that the job security of middle managers at large companies is evaporating, says Baker. "White-collar jobs are still more secure than blue-collar jobs, but it's much more likely for a white-collar worker to lose their job than it was 15 years ago," he says.
Tim Lewis, a managing director at turnaround consulting firm TRG, is on the front lines of these changes. The struggling companies he works with usually have little choice but to outsource non-core parts of their business or close their doors entirely. That means job cuts for lots of employees.
And while low-wage workers can usually find another job easily (in fact, he says, one of the hardest parts of his job is convincing them to stay when a plant closing is imminent), midlevel workers often have a tough time landing a new spot. For them, the only way to find a job that pays as well as the one they lost may be to relocate, something many are reluctant to do, he notes.
TRYING TO IMPRESS.
"In my experience, there's always a job out there for a great employee," says Lewis, "but it might not be a great job." The key question for the U.S. labor market going forward, he says, is: "Are we as a country giving people the skills they need so they can be flexible and move from one role to another role?"
The question is important considering that even though the domestic employment market is improving, the pace of job creation in the past four years has lagged other periods of economic recovery. According to the Labor Dept.'s June payroll report, a net of 146,000 jobs were created that month. The unemployment rate was 5%, continuing to fall from 5.4% in February this year and a recent high of 6.3% in June, 2003.
Initial claims for unemployment insurance for the four weeks ended July 16 has averaged 318,000, which indicates payroll growth of 150,000 to 200,000 a month, according to research firm Action Economics. It expects payrolls to jump 200,000 in July, making up for some weakness in May and June.
The massive layoff announcements are coming now mainly because it's second-quarter earnings season. "They're really meant to impress Wall Street," Baker says, noting that companies have an incentive to exaggerate the amount of cost-cutting they have planned. "These people haven't lost their jobs today," he observes, even though many of them will eventually.
Moves meant to impress Wall Street, though, feel rather depressing on Main Street. Even though Conference Board confidence surveys in May and June showed that consumers thought employment opportunities were improving, July's results, released July 26, showed more people believe jobs are harder to get.
Still, the current measure is well above levels in 2004 and strong enough to indicate improving hiring, according to Action Economics. And Baker, who has been pessimistic in the past about the state of the labor market, believes now that it has improved in the past few months.
Yet he and others agree that it's still a much tougher job market than it was 10 or 15 years ago, despite a low unemployment rate and healthy job-creation pace. Wage gains, which are modestly improving, at best portray the struggles that many workers face if they lose their jobs and try to replace them with just-as-good-as or better jobs. America may still be the land of opportunity, but for many workers, landing a better job is a whole lot tougher.
Stone is a senior writer for BusinessWeek Online in New York
Edited by Beth Belton