2009 Labor Market Review

Friday's Bureau of Labor Statistics' (BLS) Unemployment Report offered a glimmer of hope in an otherwise gloomy economy. Although the unemployment rate rose to 9.4 percent, the overall pace of job losses slowed to 345,000 in May.

On the heels of this announcement, one of our clients asked me to pull together my thoughts on the market. The most recent Yoh Index of Technology Wages showed very minor change in wages, just a slight increase over the past 12 months. This trend is indicative of the uncertain economic climate, and counter-intuitive to an economy with high unemployment.

However, as companies continue to cut jobs, remaining staff is expected to be more productive. Some companies only retaining high-performers may find this population demanding more recognition and upward mobility during these trying times. While this may artificially lower labor costs in certain sectors, the unforeseen wage increases are likely to off-set a portion of savings.

As the economy gets back on track, these areas are projected to be of specific concern:

• Benefits: With renewed focus on retaining the remaining high-performers, companies will have to carefully consider changes to benefit programs. The most competitive employers will be one of the first companies to improve in this area once the economy starts moving.

• Legislation: President Obama's administration is likely to enact legislation in health care and employee rights which may impact HR processes and labor costs.
  

• Recalibration: As companies look to be more competitive, focus shifts back to core businesses and processes. This change in focus impact talent needs and demand. Companies able to provide a timely response to changing conditions will need streamlined talent evaluation processes in place.

• 1099s: Independent contractors are a target for cash strapped states looking for revenue. As states become more aggressive in pursuing non-compliant 1099 tax revenue, employers will suffer from fines, interrupted work and full-time employees burdened by auditors. Traditionally, this category of workers has seen limited controls and oversight on quality and visibility. Yoh Talent Solutions' Workforce Trends Survey found that companies haven't reduced the use of independent contractors as significantly as in other areas of the workforce. Independent contractors will prove to be a substantial risk in the months to come.
  

We believe that the economy is trending upwards, and anticipate an uptick in late 2009. Companies will begin to build the workforce back up in order to finish projects and plan for growth in 2010; but, given recent volatility, employers will use caution and postpone robust hiring patters well into 2010.