Receive daily articles & headlines each day in your inbox with your free ERE Daily Subscription.

Not logged in. [log in or register]

Economists Give U.S. 1-in-3 Chance Of Recession. What Should HR Do?

by Sep 16, 2011, 1:23 pm ET

The financial markets are abuzz today over a Wall Street Journal survey that says economists now give the U.S. economy a 1-in-3 chance of falling into recession in the next 12 months.

According to the Journal, the odds are the highest since the start of the recovery and rose 4 percentage points since the August survey. In addition, the economists in the survey doubt that anything the Federal Reserve will do during its meeting next week will make a difference.

The Journal‘s survey follows a similar Reuters poll earlier this week in which a consensus of economists put the likelihood of recession at 31 percent. A similar survey in August put the chance at 25 percent.

The Reuters survey of some 70 economists also found them cutting their growth predictions to 1.9 percent in the current quarter and 2.0 for the fourth quarter. Previous surveys had them expecting 2.3 percent and 2.6 percent growth rates in the 3rd and 4th quarters respectively.

Almost as if on cue, the nation’s two largest ports reported a slowdown in cargo during August. Imports fell 5.8 percent at the Port of Los Angeles and 14.2 percent in Long Beach over last year. Economists and Wall Street watch those numbers as an early indication of what retailers expect for the holiday season. August is when the first shipments of holiday merchandise begin to arrive, so a slowdown in imports may mean retailers are expecting slower sales this year.

Thursday’s unemployment report offered little reason for optimism. Initial unemployment claims rose by 11,000 to 428,000 for the week ending Sept. 10. A year ago, the number was 450,000.

“It feels like a recessionary environment,” Bart van Ark, chief economist of The Conference Board, told the Wall Street Journal. He put the odds of a recession at 45 percent, a signal event, the paper noted, since for the last 23 years, a downturn has followed every time The Conference Board’s estimate topped 40 percent.

With the economy sputtering, corporate leaders are becoming ever more cautious about their hiring. Manpower’s quarterly employment outlook predicted hiring in the 4th quarter would be slightly better than last year, but for the first time in just over two years, it will be lower than the quarter before.

Says Manpower: “The Net Employment Outlook for Quarter 4 2011 is +7%, up from +6% during the same period last year and down from the +8% Outlook during Quarter 3 2011.”

What should HR be doing? In his HR Executive column, Professor Peter Cappelli, director of the Center for Human Resources at The Wharton School, recommends scenario planning.

“First, talk to whoever is in charge of setting strategy, goals, direction for the organization. Ask them what the two most important uncertainties are right now that will affect the future of the operation in the next year or so,” he says. Then draw up a box matrix of the uncertainties and possible outcomes and “tell the human resource story associated with it.”

Share it with senior management. By getting ahead of the curve, he says, “It demonstrates that you, as a leader, understand how to contribute to the strategy process.”

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • Keith Halperin

    Hmmm. This seems to be the worst recession the U..S. has ever talked itself into.

    -kh

  • Mark Hornung

    H.R. should heed the immortal words of Meatloaf: “two outta three ain’t bad.” Hey, we still have a 66% chance of squeaking by. Let’s look on the sunny side of life… oops, that’s another lyric from another song.

  • http://www.TheBigGameHunter.net Jeff Altman

    The President’s stimulus proposals have favored government hiring and big companies. If you’re the CFO of a large firm, you’re 3-5 weeks from finalizing your 2012 budget. Given the economy, how enthusiastic do you think he/she will be to authorize lots of new hiring? Given that the European turmoil that brought us to this stage took place at the beginning of the budget cycle for these firms, how many managers had the nerve to ask for lots of new hires and new spending?

    And here’s the scariest part . . .

    WE already know what both the President will do and what a Republican President will do if they are elected. Do you think that if we aggressively cut government spending or aggressively increase it, that 2013 and 2014 will be better or worse?

    WE are in deep doodoo for much of this decade.

  • http://www.ethicalsearch.com Jim Sullivan

    There is an old cliche’ that comes to mind from my Marine Corps Days – “If you think you can’t; you won’t”. I agree with Keith, we have a media spurned recession, if the media says it’s bad it must be – right? What has happened to the American companies that once drove innovation and new technology? Have they become the “I Can’t” instead of the “We Can” companies of our future? We here at our small company are having one of our best years in the last decade – why aren’t you?

  • http://www.verticalelevation.com Carol Schultz

    @Jeff and Jim: You both make good points. Our government has always been a friend of large companies. Their comments about being small company friendly is just smoke. And who wouldn’t want a government job? It’s got great benefits and is run by a bunch of incompetents who don’t know how to hire well. Just call any big government agency.

    As for you comments, Jim, about a media spurned recession, you are partly correct. Our media inflames and creates much that the nation of sheep believe. However, B of A announcing they’re going to lay off 30k employees will only make their stock price increase as a consequence of lower payroll dollars. That’s real. All companies laying off people contribute to exacerbating the situation our country is in.

    Look at Netflix and its recent changes. If they have their way and get more people on streaming and away from DVD rental this will enable them to lay off workers in its distribution centers, adding to the unemployment problems.

    I am a small business and get Jim’s points very well. However you can’t just say you’re a small company and having one of your best years ever without identifying the reasons. I have a long time client who is VP NA Sales for a well known company in the SAAS space. They are killing their numbers, but not because their product is any good. They know how to market and sell. Is this what we believe should be acceptable?

  • Keith Halperin

    @Jim:”What has happened to the American companies that once drove innovation and new technology?”
    They’re fighting over the “Fabulous 5%”-everybody else should be grateful for whatever they can get.

    @Carol: “They know how to market and sell. Is this what we believe should be acceptable?”
    Of, course we should, Carol-it’s what we Americans do best! We’re best in the world at selling and marketing ideas which make some people very wealthy. The fact that they were bad ideas and cost millions of people their jobs and homes is unimportant-those people aren’t the “self-starting, hard-charging fearless entrepreneurs who go for the brass ring and not just the low-hanging fruit, started with nothing more than a (probable) upper-middle class/upper class background, an Ivy League degree, and some great connections, and built multi-million dollar fortunes”. Those other folks- America’s LOSERS, wannabes, and ride-alongs: they don’t count. The sacred “Invisible Hand” will sweep them all away…..

    :(

    Keith

  • http://www.TheBigGameHunter.net Jeff Altman

    So I go back to my original post:

    The President’s stimulus proposals have favored government hiring and big companies. If you’re the CFO of a large firm, you’re 3-5 weeks from finalizing your 2012 budget. Given the economy, how enthusiastic do you think he/she will be to authorize lots of new hiring? Given that the European turmoil that brought us to this stage took place at the beginning of the budget cycle for these firms, how many managers had the nerve to ask for lots of new hires and new spending?

    And here’s the scariest part . . .

    We already know what both the President will do and what a Republican President will do if they are elected. Do you think that if we aggressively cut government spending or aggressively increase it, that 2013 and 2014 will be better or worse?

    Yes, there will be companies that make it through OK but without demand in most of the country or resolution of the housing crisis, we will muddle along at 1% growth. Maybe.

    Yes, Apple will do well . . . and some others but most of the economy will be dealing with a complicated economy no matter who is elected.

    So, if you’re HR, you’re waiting for management to approve the 2012 budget. You try to demonstrate great value in a variety of ways, not just recruiting while making sure that someone else becomes the target for layoffs should staffing stabilize or be cut for 2012.

    Jeff Altman, The Big Game Hunter
    http://www.JeffAltman.com
    http://www.TheBigGameHunter.net