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Job Creation Scenarios

(March 10, 2004) - Yesterday, we talked about the differences in job creation processes in the information economy. Where a manufacturing economy replaces temporarily laid off people, an information and services economy invents new positions. The investment, in time, planning, energy and resources, required to create a new job in our economy is different than it was in the last century.

As we move into the future, our metrics will have to change. The BLS data, as good as it is, is rooted in manual collection techniques (as if they'd never heard of the web) and fairly flawed. Listen to the political rhetoric this year. You will hear a variety of stories about job creation all rooted in data collected by the same people. The transition from one form to the next will be rooted in the experiences we have in this recovery.

No one can really forecast the job growth prospects over the next four or five years. The charts we presented on Monday (see the archives) make it clear that history has little to offer in the way of insight. We are into something new.

The reason that Job Creation forecasts are important in our industry is simple. Growth of the industry is clearly a cyclical process that depends on a certain level of job creation. When no one is hiring, no one is buying Recruitment Advertising, ATS or Recruiting Software. As job creation heats up, our sector grows disproportionally. Having a clue about job growth creates the possibility of sound forward planning in HR and the vendor community that serves it.

We lost our crystal ball in late 1999. So, instead, we present the following 5 scenarios for the way that job growth might resume in our economy. The reality is probably somewhere in the middle of them. It's worth mentioning that these scenarios could be expanded at great length. They are conversation starters, at this point.

  • Things As Usual (Solve Iraq, Solve Deficits, Incremental Growth)
    Several years of slightly negative growth makes slightly positive incremental steps forward seem like a good thing. By focusing on detailed improvements in security issues, R&D budgets start to increase slightly. This scenario suggests a modest but sustained uptick beginning in 2006.
  • Pent Up Investment Explodes (Getting The Boomer's Money In Play)
    There's an awful lot of pension and retirement money sitting on the sidelines after the crash. Netting 2% on a retirement fund is not going to finance the livelihoods of the baby boomers who have set this money aside. It's simply a question of time before the finances that drove the 90s market expansion return to the playing field. If investors need higher returns, they will take correspondingly higher risks. (This is one way of saying that we're just experiencing a time-out and a recalibration of reasonable returns). With investment flowing back into the market, job growth spikes pretty quickly (post-election regardless of the outcome.)
  • The Beginning Of The Dark Ages (Japan Comes East)
    Conventional wisdom suggests that the underlying cause of Japan's decade long recession is the age of their workforce. With an observably decreasing ability to innovate (because of age), international investment has shied away from Japan. Since the core American population and workforce is in numeric decline (any growth is the result of immigration), the same logic could be applied here. Rather than any uptick in hiring, we could well be looking at the beginning of 10 years of flat or negative growth in the workforce.
  • Waiting For The Next Thing (Info Economy Is Boom and Bust)
    There is a chance that we've really turned the corner in becoming an information economy and, like our adventures elsewhere on the planet, have no idea what to do now that the reality is here. One potent possibility is that the economy will start to resemble California's boom and bust pattern. Over time, Silicon Valley appears to lurch from innovation to innovation in 6 or 7 year cycles followed by severe downturns.
  • Plateau Before The Long Boom (Everything Is The Next Thing)
    You might want to reread the now infamous Long Boom and its update. In this scenario, we are in a plateauing rest period before explosive growth that results in a continuous doubling of the economy every twenty five years. Driven by technology now, bio tech next and nanotech after that, we are simply resting up for a vigorous long haul. In retrospect, this seems incredibly idealistic but stands some chance of being the way things work out. Any forward planning should include a hyper-growth scenario.

John Sumser

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