Bob Miano's Blog

An Executive journal

Economics and Hiring: These ARE the Best of Times

The simple fact is we are living in the best of times—especially those in the employment industry. Sunday’s New York Times article by Edmund L. Andrews features the revealing, not widely published, fact that a surprising jump in tax revenues is actually curbing the U.S. deficit. As the article points out, an “unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.”

The national debt is actually predicted to decline this year as corporate tax receipts have nearly tripled since 2003. Additionally, Andrews points out that continued interest rate hikes really haven’t had a negative effect, as companies are carrying historic levels of low debt and are flush with cash.

And what’s more, computers are drastically improving worker productivity.

So what does low debt and greater productivity equate to? U.S. companies are prospering and as they prosper, they HIRE more. The more companies hire, the tighter the labor market becomes. And that is in fact what we are seeing at this very moment in time as most staffing firms report the following talent shortage indicator: a flattening of temporary worker engagements as organization are now seeking to hire full-time staff.

The question for employment market watchers is this: Will this permanent hiring trend going to continue? Almost certainly not. Economic history tells us these hiring patterns are always cyclical. What normally follows the hiring phase is a move to employing contingency workers.

Barry Asin (Chief Analyst with Staffing Industry Analysts) revealed at the latest SIA seminar data that showed businesses will clearly be using more contingent IT workers in the future. In the next two years, the percent of contingent workers is forecast to grow to 12 percent from 10 percent today. The main reason for businesses to increase their contingent workforce, according to a Staffing Industry Analysts customer survey, is “coping with a fast-changing workload” (the reason cited by 84% of buyers).

This means that we can predictably see a future of 1) more job hopping, 2) increased frustrations for companies trying to hire and 3) pressures of corresponding raises in pay rates.

So what can companies do to compete ? Well some companies are wisely investigating and moving to incorporate off-shoring to lower waged countries. But experience teaches us that there is never a single panacea for solving economic and labor issues. That is why it is essential for companies to develop comprehensive talent strategies and pick the right mix of on-shore, near-shore and off-shore approaches in order to address talent shortages and demands.

And at the same time, what can we in the staffing and human capital industry be doing to help our clients? I believe three things are essential:

1) We must educate our clients on the changing dynamics of the supply/demand labor equation.

2) We must urge companies to move quickly when they identify a suitable candidate. If you don’t move fast today, the candidate is gone.

3) We must understand that there is going to be a natural evolution towards increased salaries and bill rates, especially in the professional services arena of IT and finance and accounting.

I also think that this situation will shift companies away from Vendor Management Systems and rate cards so that they are able to meet the demands of hiring managers. But that’s a completely different and highly provocative topic for another day.