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Slow Job Creation Could Become Postrecession Norm
Longer recruiting processes, doing work with fewer employees slowing recovery

By SHRM Online staff  6/21/2013
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Results of a survey of human resource executives released June 20, 2013, provide further evidence of just how difficult it is in a nonmanufacturing-based economy to quickly increase employment after an economic downturn and reveal why it could be another year or more for the unemployment rate to fall to prerecession levels.

Fifty-three percent of the HR executives polled by outplacement consultancy Challenger, Gray & Christmas Inc. said their companies implemented workforce reductions as a result of the recession that began in December 2007 and ended in June 2009. The good news is that 82 percent of companies have added new workers since January 2010. However, while 33 percent of those hiring said they were able to bring back some of their former workers, 67 percent indicated that the restaffing process started from scratch.

Meanwhile, the survey revealed that:

  • Only 43 percent of the companies adding new workers have reached or surpassed the number of workers they employed before workforce reductions.
  • Forty-three percent indicated that their companies will meet future demand with fewer employees, suggesting that their payrolls will never return to prerecession peaks.
  • Nearly 15 percent expect to eventually return to prelayoff workforce levels.

“What we have come to know as ‘the jobless recovery’ may be the new postrecession norm as employers rebuild their workforces from scratch, take more time to vet candidates and find ways to operate with fewer workers,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas, in a statement.

Added Challenger: “All of these factors slow the rebuilding process, which has led many to perceive this jobs recovery as being especially sluggish. This perception is understandable, considering that we are now four years out from the official end of the recovery and employment is still more than 2 million jobs below the prerecession peak. However, the fact is that the economy is actually adding jobs faster compared to the last two postrecession recoveries. It is just taking longer to rebuild due to the fact that we started in a much deeper hole.”

According to the National Bureau of Economic Affairs, the Great Recession officially ended in June 2009. Even after the 18-month recession ended, payrolls continued to shrink for another seven months. Overall, the economy lost 8,736,000 jobs.

“To put that in perspective, more jobs were lost in this recession than in the previous three recessions combined,” Challenger noted. “Basically, every one of the 8,030,000 jobs created between August 2003 and January 2008 plus another 700,000 were wiped out. While both Democrats and Republicans have tried to blame one another for the slow jobs recovery, the fact is that there is probably little that either party could have done to quickly re-create the more than 8.5 million jobs lost as a result of the recession.”

To regain the more than 8.7 million jobs lost, the economy would have had to average nearly 230,000 new jobs per month for the past 38 months. The last time the economy achieved that type of monthly employment growth in a recovery was after the 1981-82 recession, when layoffs were heaviest in manufacturing.

Currently, the economy has averaged 162,000 net new jobs per month (through April), which is actually better than the job gains that occurred after the 2001 recession, when employers added an average of 157,000 new workers each month. After the 1990-91 recession, an average of just 85,000 new jobs were created each month during the 21 months it took to recoup the more than 1.6 million jobs that were lost. 

“Today’s economy is simply not built for the type of accelerated hiring that would lower unemployment quickly,” Challenger said. “The high-skill jobs being created in this recovery require longer recruiting and interviewing processes, and low-skill jobs are not numerous enough to make a significant dent in joblessness. In areas where we do see significant hiring surges, such as retail, the jobs tend to be seasonal—meaning temporary.”

Challenger said that during the 1980s, the heaviest job losses resulting from recessions occurred in manufacturing, where faster recoveries were possible because factories could call back laid-off workers. But since then, plants have become increasingly automated, millions of jobs have shifted overseas, and the economy has transformed into one based on services and information.

“When layoffs occur in these industries, the rebuilding process is seldom as simple as calling back [those] workers,” Challenger added. “We simply do not have a sector of the economy that can create jobs as quickly as manufacturing did in its heyday. Even when major tech firms go on a hiring spree, we are talking about adding hundreds of new workers, not thousands. We will eventually reach and surpass the prerecession peak employment level, but anyone who thought it would occur within two to four years after the end of the recession had unrealistic expectations.”

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