If landlords across the country can make it through the coming layoff season, (November - January), they may begin to see some stabilization in demand from commercial tenants for space. Looking out 12 to 24 months, business owners say they expect their companies to emerge from the recession well positioned for growth over the next two years, according to a crop of employment outlook reports issued this week.
The reports were a welcome reprieve following last week's announcement from the U.S. Bureau of Labor Statistics (BLS) that the U.S. unemployment rate has climbed to 10.2% as 7.3 million jobs have been lost since the start of the recession in December 2007.
The good news in the latest BLS report is that the number of job losses has been declining over the past three months. The bad news is that, if the BLS nine-year averages are borne out, job losses could skyrocket in the coming three months. Over the past nine years, the number of jobs lost in mass layoffs in November, December and January has been 61% higher on average than the number laid off in the previous months from February through October.
If that trend holds, employers could be laying off more than 1.1 million workers in the next three months. If this past week is any indication, the trend is likely to continue.
Adobe announced it would lay off about 680 in the coming year, which is about 9% of its workforce.- Applied Materials announced late Wednesday that it planned to lay off from 1,300 to 1,500.
- Borders Group announced it was closing 200 of its mall-based Waldenbooks stores in January and would lay off 1,500.
- Electronic Arts Inc. announced it was closing several sites and would lay off 1,500.
- Pfizer Inc. announced it was closing six R&D sites in the U.S. and would lay off 2,000.
- Sprint announced that it plans to lay off another 2,000 to 2,500 employees.
While some economic experts say they believe that the recession is over, the job market remains bleak and small businesses - the largest employer group - fear the economy will not sustain the need for more employees, according to a recent poll by George S. May International.
A new survey of 830 small business owners across the United States found that 74% of respondents do not plan to increase employee headcount in the next 90 days.
"The term 'Help Wanted' has become obsolete in this recovery setback period," said Paul Rauseo, managing director of the George S. May International. "Small business owners feel they do not have the need for more employees and, in fact, see sizable portions of their staff as an unnecessary expense."
Among the respondents not hiring, 62% say they have no confidence in the economy sustaining the need for more employees, while 38% are simply replacing hours from employees cut by adding them on to existing employees' workloads.
The nation's high unemployment threatens to trigger loan defaults and drag on consumption next year, World Bank President Robert Zoellick told reporters this week in Singapore.
Zoellick warned that the U.S. unemployment rate would likely remain elevated in 2010.
Government stimulus spending will likely fuel economic growth through the middle of next year, Zoellick said. After that, consumer spending and business investment must take the baton to boost expansion, he said, adding that he did not see that happening.
"You're going to have problems with delinquencies of credit card loans, consumer loans, people won't be able to pay their mortgages," Zoellick told reporters in Singapore. "Some banks are going to continue to be troubled by bad loans."
Following This Winter of Discontent, However…
Looking beyond the short term, business owners are beginning to demonstrate some optimism. Guardian Life Insurance Company of America in a report released this past week reported that overall, 92% of small business owners expressed optimism about their enterprises, with 54% expecting to maintain business as usual and 38% confidently looking forward to expanding their businesses over the next 12 to 24 months.
The Guardian Life Index examined small business owners within 13 key industry sectors. Optimism varied across these sectors with respect to revenue projections for 2009. Sectors with the highest number of owners who anticipate stable or increased 2009 revenues are traditional health care (72%), financial services (68%), high tech products/services (66%), dining and accommodations (66%) and manufacturing (57%).
From a regional perspective, the South has the highest percentage of owners (62%) who project stable or increased revenues for 2009, followed by the Northeast (61%), the Midwest (59%) and the West (56%). Texas is the state with the highest percentage of owners (69%) who project stable or increased revenues for 2009. That optimism contrasts with California (51%), New York (49%) and Florida (49%).
The Conference Board Employment Trends Index released this week increased for the second consecutive month.
"The Employment Trends Index has likely turned a corner in September, and the historical relationship between the index and employment suggests that job losses will end in early 2010," said Gad Levanon, senior economist at The Conference Board. "While layoffs have certainly declined in recent months, we still expect to see employers adding hours to their existing workforce before hiring will strongly increase."
The latest quarterly results from the Wells Fargo/Gallup Small Business Index also showed optimism among small business owners improved during October, driven by improved outlook for revenue, capital spending and hiring.
The Spherion Employee Confidence Index, which measures workers' confidence in their personal employment situation and optimism in the economic environment, reveals that although fewer U.S. workers believe the economy is getting stronger, slightly more workers are optimistic in the future of their current employer.
"Our latest Employee Confidence Index suggests that workers remained concerned about the economy and job market as a whole," said Roy Krause, president and CEO of Spherion Corporation. "Although economic indicators seem to be pointing in a better direction, confidence levels are likely to bounce around a bit until workers see more definitive signs of a turnaround such as positive job growth. Undeniably, this downturn has many businesses operating in a 'doing more with less' mode, which may become standardized in a post-recessionary economy. Even though the appetite for aggressive hiring may not be seen for some time, companies are starting to talk about the need to potentially add new staff in order to maintain productivity. In a number of cases, this is tied to a desire to be fully 'battle ready' for the recovery and to augment teams that may struggle because recession cuts were perhaps a bit too deep."
Tig Gilliam, CEO of Adecco Group North America, which provides temporary staffing, permanent placement, outsourcing, consulting and outplacement, said his firm is seeing further steps toward the gradual improvement in U.S. labor market trends.
"A primary example of this can be found in the temporary job market which has historically been a leading employment indicator," Gilliam said. "For the first time since late 2006, the U.S. labor market created a significant number of temporary jobs in October, increasing by 33,700 positions."
"We are actively discussing workforce solutions and staffing needs for 2010 with our 100,000 clients around the world," Gilliam said. "What's clear from these conversations is that employers are focused on learning from the lessons of this recession, and now more than ever, they are embracing strategies to achieve workforce optimization and increased flexibility. We're being consulted to develop solutions for questions like how can I have an on-demand workforce that expands and contracts more easily, based on my business needs? How can I improve productivity while keeping the employees I currently have from being overworked and overstressed?"
"These approaches," he added, "represent a significant improvement in employer confidence and it marks a real shift from where we were just a few months ago when clients were asking, how can we effectively reduce our headcount? This shift in perspective suggests that we can expect these early improving job trends to continue."
By Mark Heschmeyer
November 11, 2009
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