NEWS RELEASE
CORESTAFF COMMENTARY:
PRODUCTIVITY GROWTH PEAKING. CONDITIONS IMPROVING.
By Steven Drexel,
CORESTAFF president and chief executive officer
This article is among a series of commentaries written by Steven Drexel discussing
key issues and trends affecting today's labor market. Drexel is a member of the Bureau
of Labor Statistics' Business Research Advisory Council. An archive of past commentaries
may be found at www.corestaff.com/press. Please attribute information to Steven Drexel,
president and chief executive officer of CORESTAFF Services if you adapt all or part of
this piece for articles. If you are interested in connecting with Drexel or receiving more
information about CORESTAFF, please contact Sally A. DeVito Jozwiak at 713-438-1567 or
sally.jozwiak@corestaff.com.
Below, you will find Drexel's remarks on:
- Positive indications to improving conditions
- Factors restraining employment growth
- Consumer sentiment
October 2004 - The economic story this month is one of improving conditions compared to late spring and early summer, but slower growth than that achieved early in the year. The robust growth that carried the economy through the first quarter stumbled during May and June. However, strength in manufacturing, durable goods, housing, corporate profits, mild inflation and easy credit is expected to have pushed third quarter Gross Domestic Product (GDP) growth above four percent. If so, growth at that rate easily exceeds the 3.3 percent estimated for the second quarter of this year, which was roughly equal to the long-term or “trend” rate of growth. Offsetting the strength -- and therefore restraining the economy -- is the rising cost of energy, and to a lesser extent, waning consumer confidence. Consumers are sensitive to gasoline prices, the labor market, and political rhetoric or discourse.
What about the labor markets? They are poised to improve. Until now, the recovery from the recession that ended in November 2001 has been notable only for weak employment growth. The weakness was largely due to unprecedented productivity improvements achieved during the last 10 quarters. Most analysts believe that continued productivity growth is unsustainable; therefore, the growth in GDP, particularly growth above the long-term average or trend rate, will require more people working. Supporting employment-related economic statistics include:
- Hourly earnings of workers rose in August following a similar rise in July. This was the best two-month increase in several years. Further, the average workweek is inching up, another indication of a better labor environment
- Jobs are expected to grow by an average of almost 220,000 per month over the next year, according to a recent projection from the National Association of Business Economists
- Following three difficult years marking the worst stretch in 50 years, the executive recruitment industry is forecasting growth during 2004
- During September, Institute of Supply Management employment indexes expanded for both Service-Sector and the Manufacturing sectors
- Private surveys of business executives indicate improving hiring intentions
- Initial jobless claim have been pushed up by the series of hurricanes that have battered the Southeast. Yet despite this challenge the most recent report at 335,000 claims is well below the statistically significant 400,000 level, suggesting the jobs can, and should, grow
While few indications point to an employment market as frothy as the pre-recession days of 2000, there is enough broad economic growth to generate new jobs, particularly given that the existing workers have been stretched to the limit of their capacity. The biggest risk to employment would be a political or energy related shock to the general economy.
Additional Observations:
- September Unemployment Number –
It will remain at 5.4 percent.
The trends point to a gradually improving unemployment picture. Given that the unemployment rate declined in August, I expect it to take one more month to move the unemployment rate down another tick.
- The unemployment picture and the elections
Both major candidates are very aware of the slow employment recovery, so until jobs return to pre-recession levels, neither party is likely to do anything adverse to the labor markets.
About CORESTAFF Services
CORESTAFF Services is one of the largest national staffing firms in America, with offices in 19 states. CORESTAFF also operates as
TeleSec CORESTAFF in the Washington, DC area and Leafstone Staffing Services in the New York City and northern New Jersey metropolitan
areas and southern Connecticut. CORESTAFF is not affiliated with Core Staffing Services, Inc. which operates in the New York Metro
Area. CORESTAFF is headquartered in Houston, Texas; 713-438-1400.
Visit CORESTAFF Services on the Web at: www.corestaff.com, www.it.corestaff.com,
www.careertrust.com, www.techresources.coretaff.com, www.infocurrent.com
and www.employmentzone.org.
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