Is the technology sector about ready to turnaround, or has it at least hit bottom?

The Department of Labor says that technology related-employment actually rose by 7,400 in July, after several months of declines. Granted, 7,400 jobs isn't a lot for the entire country, but that sure beats the 247,000 jobs that were lost overall, and one of the first really positive bottoming-out signs seen yet, at least in the employment arena, which tends to be a lagging economic indicator.

To date, most of the euphoria about the economy bottoming has been about things getting less bad, as opposed to seeing actual positive numbers (like increased retail sales or increased hiring). So, to see the technology sector actually increasing employment is a huge plus.

Of course, one month does not make a trend, but this at least indicates that a bottom is near or here, at least in technology.

If you work in the technology sector, have you seen any positive changes? Leave a comment about what you're seeing in your crystal ball.

In today's hyper-paced, cost-conscience world, jobs can disappear in a flash, as we've seen in the past year.

An article on the MS-NBC's site from yesterday, subtitled "In the modern economy, industries vanish and it takes time to replace them" captures todays' world of work well. 

Labor market dynamics have changed dramatically in the past two decades.  In previous generations, mutual employer/employee loyalty helped to fuse together years of long-term employment at a single employer.  That world has gone virtually extinct in today's new short-term thinking, combined with today's economic challenges.  In today's world, productivity, performance, and the immediate economic landscape rule the day.

Today, "Most forecasts predict that Americans are in for a long, painful slog as they try to get back to work. Some forecasts don't have the unemployment rate getting back to "normal" levels of around 5 percent until 2014." We concur with this assessment.

That's not a pretty picture, but one that we have to anticipate as we consider two major forces: a fundamental change in employee/employer dynamics, and a very weak economic landscape.

While the employment rate actually dropped 0.1% in July, don't be fooled; that was just a statistical artifact of people dropping out of the labor force, not the beginning of a labor market resurgence.  The labor market always lags the overall recovery, so don't expect a sustainable improvement until the economy starts recovering and employers feels safe enough to start hiring again.

"Part-Time Workers Mask Unemployment Woes"

Reads the headline in the NY Times.  We all know the labor market has done a serious nose-dive in the past year, but its actually worse than the primary government statistics on unemployment indicate. 

That's because the "official" rate that's published doesn't include "discouraged" workers who have dropped out of the labor force (stopped looking for work), and especially the "under-employed," such as persons working part-time instead of full-time, or working in full-time jobs they wouldn't even consider in better times.

June's "official" unemployment rate of 9.5% pales in comparison to the the U.S. Department of Labor's broadest measure (which include the part-time workers described above). For instance, in Michigan, California and Rhode Island, and Oregon, the rate exceeds 20%, or one in five workers in these states (and several other states aren't too far behind this 20% mark).

Most of the hardest hit states are more reliant on manufacturing, housing construction and other infrastructure-related industries.

Since the labor market tends to be a lagging indicator, which often continues to worsen even after the economy officially bottoms, nearly all economists agree that we won't see any significant improvements this year, even if the economy bounces off the bottom in the second half of 2009, as many are predicting today.

Please checkout the article if you're one of those twisted soles (like me!) who enjoys economics. There's a lot of good information in it.

An article in today's Wall Street Journal points out just how weak the labor market picture is, based on the most recent batch of monthly state reports.  Not more than two week's ago (see earlier post) it was predicted that in the third quarter, the employment outlook would be stable, according to the Manpower Employment Outlook Survey (MEOS).  It that's true, than the most recent set of employment reports must be the storm before the calm.

Here's a few examples of how bad things have gotten recently:

• May 2009 state employment reports showed only two states did not report increased unemployment rates (congrats to Nebraska and Vermont!) for the month.
• Eight states reported all-time record unemployment rates (since accurate records have been kept - the 30s would certainly have been worse, but that's not much solace today). Here's a quick sampling of a few of the records: 14.1% in Michigan, Oregon at 12.4%, and California at 11.5%.
• Payrolls were lower in 48 states, compared to the year before.  The largest decline was a 7.4% drop in Arizona, which has been devastated by a crushing real-estate led recession.

Suddenly, the MEOS-predicted 3rd quarter stability is looking pretty shaky, especially since the labor market tends to lag overall economic trends.  Many economists are predicting further labor market weakness in the second half of this year, even if the economy levels out and starts to recover, which many expect will happen sometime in the 3rd or 4th quarter of this year.  Let's hope they are right, at least about the recovery part.

The 3rd Quarter U.S. Employment Outlook is Stable (not down, and that's a good thing!).  Labor market trends have been quite negative for over a year now, so "stability," if it occurs, would be a vast improvement.

The Manpower Employment Outlook Survey (MEOS), which just published its latest results last week,  shows that the employment outlook over is stable for the 3rd quarter vs. the 2nd quarter of 2009.  Not exactly growth, but as one of my colleagues said recently, "flat is the new growth." For now at least, no further deterioration is the new "up."

"When we account for ongoing calibration of the data, employer attitudes about hiring remain essentially unchanged compared to the previous quarter," said Jeffrey Joerres, chairman and CEO of Manpower Inc. "While the numbers may not be as optimistic as we would like, it is positive to see no further deterioration."

The survey of over 28,000 employers found that 15% anticipate an increase in their staffing levels,  while 13% expect a decrease in their payrolls. Two-thirds (67%) expect no change in their July-September hiring plans and 5% said they were undecided about their hiring intentions.

"The data shows continued hesitancy among employers," said Jonas Prising, president of the Americas for Manpower Inc. "They are treading slowly and watching with guarded optimism, hoping a few quarters of stability will be the precursor to the recovery."

The survey results show employers in seven of the 13 sectors studied expect hiring to remain stable in third quarter compared to second quarter. The survey shows that employers in construction as well as wholesale and retail trade anticipate moderate increases; non-durable goods manufacturing and leisure and hospitality employers expect a slight increase in hiring activity compared to second quarter.

Slight decreases are expected in education and health services and government (these have been among the strongest sectors over the past year). Employers in the following sectors said they will keep hiring levels relatively stable for third quarter: durable goods manufacturing, transportation and utilities, information, financial activities, professional and business services, and other services.

Regionally, the West has a weaker outlook for third quarter compared to second quarter;  all regions have a weaker outlook compared to this time last year.

Let's hope that the anticipated stability in the 3rd quarter leads to improvement in the 4th quarter!

According the Watson Wyatt report "Effect of the Economic Crisis on HR Programs-- Update: April 2009,"  the worst may be over in terms of corporate cutbacks.  This doesn't mean we're "out of the woods" yet, but or at least a majority of firms surveyed believe they are done with making cuts to salary budgets, freezing pay, doing additional layoffs, etc.

Despite this encouraging information, it may well be too early to call a "bottom" to this economic cycle, and especially to the labor market, which tends to lag the overall economy anyway.

According to the Watson Wyatt study, it does appear as though many, if not most firms believe they are done, or nearly so, with making additional cutbacks.  For instance, according to a SHRM summary of the study, the majority of participating firms said they planned:

• No further salary reductions (89 percent).
• No further salary freezes (76 percent).
• No further hiring freezes (67 percent).
• No further organizational restructuring changes (65 percent).
• No further layoffs (53 percent).

We don't know if we're at the bottom yet, but it looks like we're at least starting to get close.  It is possible that maybe the worst is over, but only time will tell if that's the case. Keep your eye on weekly unemployment claims (which tend to peak 2-3 months before an economic upswing starts), a bottom in housing (not yet!), and improved consumer confidence. Consumer confidence has recently turned upward, but from a very low level, so its too early to say we've turned the corner yet in this area.

Does that mean it's off to the races, once a recovery starts?  That's highly unlikely, and the almost no one is predicting any significant economic recovery before 2010, with the labor market recovery trailing the rest of the economy upwards.  But, it does look like we are starting to near to a bottom, and that would be a good thing for just about everyone.