The Outlook for Recruiting

The recession we’re in will have long-run consequences for employment and consequently recruiting. The world is about to see the biggest increase in unemployment in decades. The World Bank and the IMF predict that global trade will contract at the fastest rate since 1930 and global economic output will drop for the first time since the Second World War. Employment is a lagging indicator of problems in the wider economy, so unemployment will continue to rise even if economies start to recover today. The consensus estimate among economists is that in the developed world average unemployment will exceed 10% before the end of 2010.

There are glimmers of hope. Inventories have fallen to such low levels that production will have to be increased just to meet the current level of demand. The fall in consumption is beginning to level out. In the U.S., auto dealer and homebuilder surveys are heading up. Japanese automakers have announced production increases. A broader indicator of an upturn — JPMorgan’s global manufacturing index — posted a second consecutive gain in February, and its new-orders index is rising. A realtor friend just wrote that she has five closings this month. 5. F-i-v-e. 5. Way to go.

What Will Emerge?

Regardless of when we emerge from this situation, there are some major changes in the employment landscape that will change recruiting in terms of where it occurs and how it is done. Where recruiting occurs will depend on where there is growth — somewhat debatable but getting clearer. Where it will not occur is in finance and housing construction; they will not return to past levels for a very long time. Also, if you work in an industry that’s heavily dependent on exports, then don’t expect an upturn either. Domestic demand is also falling overseas, and countries will increasingly strive to protect their domestic industries, further reducing the need for imports.

Where?

A recovery will be weak: losses in asset values and the need to reduce debt will all but guarantee that. But there will still be pockets of growth. These will be largely in infrastructure, IT, education, healthcare, government, and energy.

Infrastructure will be an early winner because so much stimulus and other funds are being directed at it — not just in the U.S. but also overseas. In particular, India and China are channeling billions of dollars at infrastructure projects to both boost employment and enhance economic activity. That means industries that support infrastructure — heavy equipment, architecture, cement, safety equipment, etc. will see near-immediate upturn in demand.

IT and engineering are perennial job creators, and will remain a source of employment for recruiters. For the simple reason that supply cannot match demand, a problem that will be exacerbated by restrictions on companies receiving stimulus funds from hiring foreign workers. This gap is even wider overseas. In India and China, compensation in IT is estimated to increase this year by 11% and 8% respectively because of the extreme shortage of qualified professionals.

Education will see jobs growth because of three factors: 1) large cohorts of teachers reaching retirement age; 2) a massive expansion in funding for education and student aid in the current federal budget; and 3) large increases in enrollment in higher education by people unable to find work.

Healthcare is another engine of job growth. Enough has been written elsewhere on the shortage of nurses, doctors, etc. that it doesn’t need to be repeated here. The U.S. Bureau of Labor Statistics also predicts an increase in social services jobs as a swelling number of retirees check-in for medical care.

Government payrolls at the federal level will swell to accommodate the administrative needs created by the vast expansions of regulatory authority being proposed — over banking, transportation, education, labor, and healthcare. The situation is likely to be the opposite at the state level where most states find themselves facing huge budget shortfalls.

Energy in general and green energy in particular will see significant growth. Biofuels, wind energy, and solar all will benefit from new investments and tax incentives. Consequently jobs that are related — research, infrastructure, maintenance, and sales can expect to benefit. However, the number of jobs in these industries is small to begin with, so the overall impact may not be much.

Interestingly, much of the increase in employment is expected to occur in small businesses and startups. One impact of a recession is that more people start businesses because they can’t find work. With expansions in federal grants for some of the above industries, expect to see a lot of new companies emerge. Also expect to see geographical shifts in areas of employment growth. California and New York continue to shed jobs as employers move away because of high taxes and burdensome state mandates. The beneficiaries are many Midwestern and southern states that have low taxes and fewer restrictions.

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Recruiting will become more difficult in this new landscape that emerges. Unemployment is not evenly distributed, and for many of the industries mentioned above there is not an abundance of unemployed talent. The employed are also less interested in changing jobs in an uncertain economic climate and will likely remain so for years. Finally, mobility for many is restricted by their inability to sell their houses. Many people will be forced to delay retirement, but that will not solve the supply problem. Many of the new jobs that will be created cannot be easily filled with skills available in the current labor pool.

How?

Changes in how recruiting is done are harder to predict, but some trends can be discerned. Given that a recovery will be weak, employers are more likely to turn to part-time and contract recruiters than have full-time staffs. This will be reinforced because much of the growth in jobs is expected to occur in small and medium-size businesses that have no need or cannot support full-time recruiters. An increase in needs for sourcing, as opposed to full-service recruiting, will occur as employers seek to minimize costs.

Technology will need to adapt. The major boards are not designed for use by the occasional recruiter. It’s likely that products and services targeting small-businesses will be where we see most changes in recruiting technology.

The Legend of the Phoenix

What we’re experiencing is known in economic theory as creative destruction. Jobs are destroyed and new ones emerge. In the past it has been a somewhat gradual transition, but not this time. In past downturns the mood has never been so sour. In 1990 and 2001 most saw the recession as a slow-down, a readjustment, perhaps even a necessary realignment of the business cycle — something to be concerned about not a lot. The future was bright. After all, this is America. But this time is different. It shows up in many little ways. Several people I know have asked that we use Skype to talk to lower their phone bills; that they’ve cancelled their magazine subscriptions and only read online; that they’ve changed their home page from CNN to the BBC because there’s less negative news. Larger numbers of friends than I’ve ever seen are online late at night and available to chat. Someone I know to be an eternal optimist wrote to me that the American dream was an illusion and they don’t believe it in any more. Much has gone wrong if it has come to this.

This time it’s like the legend of the Phoenix. It lives for a thousand years and once that time is over, it builds its own funeral pyre, and throws itself into the flames. As it dies, it is reborn and rises from the ashes to live another thousand years. We’re at the end of the thousand years.

Raghav Singh, director of analytics in Korn Ferry's products group, has developed and launched multiple software products and held leadership positions at several major recruiting technology vendors. His current role includes developing data and analytics products to support candidate sourcing. His career has included work as a consultant on enterprise HR systems and as a recruiting and HRIT leader at several Fortune 500 companies. Opinions expressed here are his own.  

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