Chaos theory offers useful insight into the jobs picture.
By Michael Beygelman
Today’s current events could have great impact on the U.S. economy and job market. The unrest in the Middle East has already begun impacting oil prices, which is beginning to show signs of slowing down the economic recovery. Japan’s devastating earthquake has had an impact on stock markets, but also leaves much undetermined about how the aftermath will affect the global economy moving forward as far as supply chain and other processes. Many economists predict that rising food and oil prices will impact consumer spending, which would slow the employment picture’s progress. This should remind Americans, yet again, to exercise caution when making decisions dependent on the economy’s performance.
Moving forward, education will become a more important differentiator for job seekers as more companies look to add specialized workers. Recent temporary job growth indicates that more robust full-time hiring could also be on the horizon. Temporary positions have grown in the fields of IT, engineering, and accounting. Thus, in the near future we can look to these sectors in particular to pick up hiring. In the greater future, job seekers should look to build skills that are transferable to these industries. Within the leisure and hospitality industry, current job seekers around the nation were recently treated to a delight: McDonald’s hosted a national hiring day on April 19, in an attempt to fill up to 50,000 open positions in their restaurants nationwide.
Another Month, Another Gain
The phrase “job gains, yet again” is something we could get used to hearing. The private sector added more than 200,000 jobs for the second month in a row following the March 2011 report from the Bureau of Labor Statistics (BLS). There had not been two straight months of private sector job gains exceeding 200,000 since 2006, more than a year before the recession began.
A total of 216,000 jobs were gained in March 2011, with the private sector gaining 230,000 jobs and the public sector losing 14,000 jobs. The additions surpassed forecasters’ expectations. Among the sectors that contributed the highest counts of jobs to the economy in March were healthcare, professional and business services, manufacturing, temporary, retail, and leisure and hospitality.
The revisions included in the March report added optimism to the picture, as an additional 5,000 jobs were revised into the January statistics, and an additional 2,000 jobs were revised into the February data. The hiring patterns of Q1 2011 are meeting the expectations of many forecasters, who predicted that employers would increase hiring significantly to add talent as new fiscal budgets opened up. The pace of the progress is still slower than optimal capacity, and this is important to remember, because cautious spending is still “the name of the game” in today’s business environment.
With a growing population, the economy will need to add more than 300,000 jobs a month consistently to continue to decrease the unemployment rate. As 7.5 million jobs were lost during the recession, getting unemployment to prerecession levels will take years, even with gains similar to this month’s.
Geography Is Destiny
Slightly more than one in every two states saw unemployment rate decreases, according to the month-over-month March data from the Bureau of Labor Statistics. Only seven states experienced unemployment rate increases, with 16 states holding steady at the previous month’s rate.
From a regional perspective, the West registered an unemployment rate of 10.8 percent, two full percentage points above the national average. The Northeast remains the strongest region, with an unemployment rate of 8.3 percent. (The measure of diversity of industries and population size within each region has proven to be the most important factors in differentiating employment levels.)
On the state level, business tax laws as well as transportation and climate attributes contribute to the state’s employment picture. The difference of state unemployment rates ranges from 13.6 percent in Nevada to 3.7 percent in North Dakota. In addition to Nevada, California, Florida, and Rhode Island are dealing with higher than average unemployment—reporting rates of 12.2 percent, 11.5 percent, and 11.2 percent, respectively.
Less than half of the 50 states registered unemployment rates lower than the national average (which was then 8.8 percent.)
Back to the international context for a moment. Various countries in Europe are struggling. The economic recession hit the continent powerfully, leaving many nations on shaky ground. The euro recently reached a 15-month high against the dollar. The rising euro increases the price of products made within the 27 countries of the European Union (EU), making them more expensive in outside markets and thereby affecting exporters within the EU.
The so-called PIGS countries (Portugal, Ireland, Greece, and Spain) continue to be in the spotlight. Portugal and Ireland are thought to be most vulnerable to economic pressures; Portugal recently requested assistance in the form of a bailout from the EU. Spain remains on the brink, while Greece is still stabilizing following support from the EU. The jobless rate within the Euro Zone is currently 9.9 percent.
When it somes to the Japanese earthquake and tsunami, the Asia-Pacific region is natually projected to experience the worst effects. Compared to the rest of the world, Asian countries have the highest reliance on Japan for intermediate goods.
Supply chain delays and interruptions, as well as increased price pressures amidst already rising global prices for food, energy, and other commodities are the expected impact. Economists are also watching a potential looming inflation problem in the region, as local economies boom with prices following suit. The region’s largest economy, China, has indicated that the Japanese crisis will not impact its efforts to fight inflation. Historically, interruptions in the Asian-Pacific supply chain resulting from world events have led to increased prices for both consumers and producers.
Finance ministers from the Group of 20 met April 14 and 15, 2011, to discuss global economic policy including Japan’s nuclear crisis. The primary goal of the meeting was to agree to standards for monitoring individual economic indicators in order to call early attention to policies that could negatively affect the greater world economy.
The U.S. job market is increasingly being influenced not only by domestic economic conditions and policies, but also by global events. And this makes chaos theory useful for purposes of analysis, as that construct’s so-called butterfly effect conceives of “sensitive dependence on initial conditions, where a small change at one place in a nonlinear system can result in large differences to a later state.” For example, the presence or absence of a butterfly flapping its wings could lead to creation or absence of a hurricane—or so the theory goes, anyway.
Although the butterfly effect might appear to be an ethereal concept, it is easily applicable to our very own job market. Employers and job seekers need to pay much closer attention to what is happening domestically and internationally, to be better positioned to adapt to our ever changing economic and employment environment.
Portions of this article were excerpts from the Workplace Economy, published by Adecco Group North America.
Michael Beygelman is president of RPO solutions at Adecco Group North America, the world’s largest workforce solutions provider. He can be reached at email@example.com