By Gary Burnison
Our July survey of top level executives shows that executives “intending to increase hiring” rose from 19% in October 2012 to 33% in July 2013; a 74% increase. Yet, while executives want to hire, they won’t without solid visibility into top line revenue increases driven by consumer spending.
Without jobs, consumers can’t spend. It is a hiring catch-22.
The hiring situation is validated by July’s Bureau of Labor statistics report that had tepid, if not mixed, hiring results.
First the good news: at 7.4% unemployment in July, it was the lowest rate since December 2008. We had something cheer about.
Now the marginal/negative news:
- The US added 162,000 new jobs - below the consensus forecast of 183,000.
- Average hourly earnings declined by 1/10 of a percent. It was the first decline in average hourly earnings since October 2012.
- The downward trend of the employment rate continued. July had a 63.4% employment rate – down from 63.5% in June.
- 4.2 million or 37% of those unemployed have been out of work for six months or longer.
It adds up to a job economy with an undercurrent of “hidden unemployment.” It is the elephant in the room. The real telling number is U6 unemployment rate, which is at 14%.
The discouraged economy
The U6 unemployment rate includes people without work seeking full-time employment (the U3 rate reported at 7.4% above), plus it includes marginally attached workers (those who want more work) and those working part-time for economic reasons.
It was reported in The July Bureau of Labor Statistics that “Among the marginally attached, there were 988,000 discouraged workers in July, up by 136,000 from a year earlier.”
We looked at the U6 rate at the start of the recession versus the Dow Industrial Average. While the U6 rate is 14% now versus 8.8% at the start of the recession, the Dow closed at 15,628.02 on August 2, 2013, versus 13,314 on December 3, 2007 (the start of the recession).
What's holding back hiring?
So, the market is back, but the work force is not. It shows why this has been a jobless recovery. The main cause of hiring hesitation by executives is that there is no robust consumer spending. So, executives cannot count on growing top-line revenue. Yet, with consumer spending, executives said they would hire.
We surveyed executives in July and asked: “What ‘outside factor’ would make you most prone to increase US hiring?” The top response by 33% of those polled was “the need to increasing consumer demand.” A distant second was the “lack of EU economic stability” at 17%; followed by “the U.S. lowering its corporate tax rate” at 16%.
The lack of consumerism is verified by The US Consumer Demand Indices (USCDI) which forecasts Personal Consumption Expenditure. Dr. Roger Selbert, a partner of USCDI, wrote about their July 2013 report: "… sluggish growth in US consumption is driven by a minority of households. The majority of households are still in a "balance-sheet-repair" mode, having rebuilt less than half of the wealth lost in the recession. Hours worked and per capita income are still alarmingly weak. New car buying is up thanks to low rates, great deals and extended payment contracts. Frankly, I'm concerned." The bottom line is that a “robust stock market” is not bringing hiring back.
In the meantime, to prop up consumer demand, we continue to rely upon ultra-low interest rates and pumping $85 billion per month in the economy via QE3.
Meanwhile, executives who intend to increase hiring are waiting - waiting for consumer demand. It is why we are in a "hiring catch-22.”
Gary D. Burnison is CEO and board member of talent management firm, Korn/Ferry International. He is a New York Times best-selling author of No Fear of Failure, The Twelve Absolutes of Leadership, and LEAD released September 2013.