How to Keep Employees in the Downturnaround

The unemployment rate is still high and new layoffs are announced each day. In other words, we’re not in a recovery yet. But companies should start thinking now about what happens as the labor pool shallows out.

Right now there are countless people who have had to take unpaid leaves or were hired on the cheap; when the economic situation improves, don’t expect them to show much loyalty to their employers. They’ll be interviewing on company time, taking calls from recruiters and jumping ship like crazy.

I frequently receive calls from candidates tied to the automotive industry. A former director of human resources who had to take a job as the HR manager of a very small operation and a 25% pay cut asked me to find him a new position. He told me that he was willing to take a pay cut but in exchange for flexibility with vacation and company car, but the Japanese company we were dealing with would not negotiate. Even though he has more than 20 years of experience, he won’t receive any vacation time until year two of employment. The vacation time for the five years after that is only one week. Do you think he’ll be sticking around that long if he has a choice?

Smart employers will be prepared to keep strong employees and add new (or old) ones to stay competitive. Ask these seven questions to get on track…

The Recession Will End… Wait, It Already Did

Says who: Christopher Rupkey, the New York-based chief financial economist at Bank of Tokyo-Mitsubishi UFJ

“Consumers and businesses have postponed purchases for six months, the population is still growing about 1.2% per year, and if the unemployment rate is close to peaking, then growth may be firmer than expected in the second half of 2009.” [Rupkey] points to a series that in the past has proven a remarkably good indicator of business cycle troughs: weekly claims for unemployment benefits, [which] … peaked in the week of March 28. (via WSJ)

Why it might be crap: Sounds a little like the aftermath of 9/11, no? “I encourage you all to go shopping more,” George W. Bush said in 2001. Looking at the indicators themselves, there’s disagreement over when Americans will return to the malls in force, or when housing starts will improve, or even whether unemployment has bottomed out — considering how much of a surprise last month’s number was, and the fact that many are predicting the rate will move comfortably into the double-digits…

The Recession Will End… in Six Months (End of 2009)

Says who: Wachovia

“In a clear sign that the economic winds have shifted, our recession model puts the latest probability of recession two quarters from now at 37 percent—down significantly from the 80 percent readings earlier this year…the results suggest economic recovery is likely in six months…our outlook is that the recovery will begin in the third quarter of this year.” Wachovia Economics Group

Why it might be false: Who are they to say? Wachovia itself won’t be around much longer as it’s absorbed bit by bit into Wells Fargo. But back to the data: The Wachovia prediction relies on an increase in consumer spending to support economic recovery…

The Warp Speed Recession

Several months ago, when every Monday seemed to bring news of a new economic catastrophe, we started throwing around the idea of “recession speed.” It’s the accelerated pace at which things—usually bad—happen during the downturn. Sometimes it seems like we’re living some economic offshoot of the theory of relativity.

One week there is “no liquidity crisis” at Bear Stearns; the next, the bank collapses. In the morning you accept a new job; in the afternoon, the company folds. One day your investments are doing great; the next the world learns that Bernie Madoff is a crook. In two weeks last October, the Dow dropped 17 percent, wiping out big chunks of retirement accounts. As Mark Cuban recently blogged, this is the year of WTF.

But recession speed isn’t necessarily a bad thing…

The Recession Will End… Not Until 2011!

Says who: The World Bank

“While the global economy is likely to begin expanding again in the second half of 2009, the recovery is expected to be subdued as global demand remains depressed, unemployment remains high, and recession-like conditions continue until 2011,” said Hans Timmer, Director of the World Bank’s Development Prospects Group. (via World Bank report)

Why it might be false: Governments worldwide have announced about $2 trillion in economic stimulus programs, and China targets GDP growth of around 8% this year, keeping it in a position to suck in more raw materials and capital goods…

Why You’re Not Feeling the Recovery

The market is up. Home foreclosures are down. Unemployment rolls have shrunk, and some people think the downturn is winding up. So how come you’re not seeing it?

You picked the wrong city.

If you live in Austin, Dallas or—amazingly—Pittsburgh, you have a better chance of being on the upswing. Out of the biggest 100 metropolitan areas, they’re among those with the strongest economies right now, according to the Brookings Institution, a non-partisan think tank in Washington, D.C. People who live in Fresno, Las Vegas or Providence: you’re screwed.

The Recession Will End… Later this Year

Says who: Richmond Federal Reserve President Jeffrey Lacker

“It now appears as if the pace of contraction is diminishing, and at some point later this year, activity will bottom out and begin expanding again.” (via Reuters)

Why it might be false: Well, for starters, how about those rising interest rates? Rates on 30-year fixed mortgages increased to 5.79% last Wednesday – that can’t be very good for the single family housing starts which have risen steadily since a low in January. And we think that generally, Lacker’s just a bit too U.S.-centric and myopic. Let’s not forget, the Treasury Secretary Timothy Geithner just met with his G-8 counterparts. The U.S. economy is not an island, it’s entangled in the global one – for better or for worse. Any prediction on the recession’s end can’t ignore international market indicators like a record loss of 1.22 million jobs in the 16-country euro zone in the first quarter.

Why it might be true: We’re not about to call these “green shoots,” exactly, but it seems like good omens that new jobless claims and consumer spending are no longer in freefall. Also, ten big banks are expected to start repaying the government bailout funds, a big sign considering that the financial industry played a big role in the creation of this crisis. On the global front, there are also some positive signs from China with industrial output increasing 8.9% and retail sales up 15.2%, at least according to the Chinese National Bureau of Statistics.

Our call: The end of the year is not completely unrealistic given the positive shifts in unemployment, consumer spending and banking, but it also depends both on how domestic and international factors play out. Either way, we’re going to have a little faith that the bank repayments are good signs that an industry that helped create the crisis will try to redeem itself and lead us out of it.

The Recession Will End… Q309

Says who: National Association for Business Economics

The NABE surveyed leading forecasters to come to this conclusion. From USA Today: “About 74% of the forecasters expect the recession — which started in December 2007 and is the longest since World War II — to end in the third quarter. Another 19% predict the turning point will come in the final three months of this year, and the remaining 7% believe the recession will end in the first quarter of 2010.”

Why it might be crap: Unemployment is still expected to climb through the end of the year, and many other signs remain wobbly: Housing starts and foreclosures are inconsistent; banks are still carrying toxic debt; credit is still…

Recession Briefing 5.15

What you need to know today to survive and thrive in the recession.

In the recession, more people are learning how to re-cut a dress or alter their Levi’s to look like Dior. Renata Espinosa looks at the new breed of DIY seamstresses. (The Daily Beast)

The recession has been a boon for the mental health industry: the use of psych services doubled in the first four months of this year. (Psych Central)

Mommy vice? One in three moms surveyed this spring said they have turned to a vice such as overeating, drinking, drugs and/or gambling to cope with the stress. (CNBC)

Broadway theaters aren’t seeing audience declines as a result of the recession, and historically New York’s theater row has been virtually impervious to economic declines. (Reuters)…

Signs of the Recovery?

Spring is here, the sun is shining – and some days it feels like the dark days of the recession are over. A spate of headlines in the past few days indicated some are ready to call it a day on the recession:

Central Bankers See Turning Point Near – Wall Street Journal, May 12, 2009
Is the worst of the economic downturn over? – CNN.com, May 11, 2009
Recession ‘could be over by August’ says OECD as housing market perks up – The Daily Mail, May 12, 2009
Has the recession bottomed out? – BBC, May 12, 2009

But what are the economists saying? The bears, as usual, are still being bears. Everyone else is being erratic…