Reflecting on a Job Market – Employee and Employer

To gain significant wealth in the US you have to take significant risk. Usually that means starting your own business or being on the ground floor with someone who is. The individuals who put their neck on the line deserve the spoils of that risk. The last three years proves the fittest survives in business.

We can somewhat reflect now. The once in a generation economy is behind us, so it’s time to see what the new world looks like. It’s lean and flexible. But a chasm is growing between the employer and the employees. Here are some stats from a Mercer survey I read about by Ben Rooney on CNNMoney called  Half of Workers Unhappy in their Jobs:

  • 32% of US workers are seriously considering leaving their job. Up from 23% in 2005.
  • Of the age group 25-34, 40% are seriously considering leaving. Within that number is 44% of employees who are 24 and younger. The cheap labor is ready to bolt.
  • And more alarming, 56% of senior managers are considering leaving. This compares to 34% of managers and 30% of non-managers. The experienced are also looking to jump to other opportunities.
  • A slightly different take, but 21% have disengaged from their employer, meaning they are not looking for a new job, but they are apathetic toward their current one. This could be burn out and it could mean the productivity gains via personnel has reached it’s limit.

Workers are getting disenfranchised by the circumstances of their employment. In addition to that, there are business owners who have moved away from the proper perspective. They’ve had leverage for over three years. Chances are they laid off some people. Those that remain should have a debt of gratitude. It could be worse.

The business owner who has survived is entitled to some fun, but they need to realize no one does it alone. I was out to dinner with a friend in the industrial fabrication and installation field of work. He had an exchange with his boss similar to the one in the movie below. I embellished it for effect, but much of this exchange is true, particularly the part about the water skis
http://www.xtranormal.com/watch/12155321/a-resignation-story

6.5 Graphs Outlining the US Economy

I’m in a room that’s 8 feet by 10 feet. It’s just me. There’s a small box playing loops of TV shows, but I’m ignoring it. The temperature is 95 degrees but its cold in here. And I have a lot to think about.

I know I’m going to pay for it. Situations like this require penance and it’s going to cost me. It’s part of life though and inevitably I’ll be back.

The bill was a shade under $200. Frankly it could have been a lot worse. My car hasn’t been serviced in a year; it needed an oil change, inspection, tire rotation, and the radiator hose had a hole in it. I paid for the car, but I got time to think.

This cycle of activity drove me to consider the business cycle. It normally looks like a sound wave with peaks (good times) and valleys (recessions).

Are we still in a recession? Are we in an initial recovery? Maybe even an early upswing? Chris Stuart wondered the same thing in his write up Why We’re At The Early Upswing Stage In The Business Cycle.

I predicted the recession after observing a lack of income appreciation and buying patterns changing in October 2007 and although this is a classic supply and demand cycle where aggregate demand is lacking it feels more structural. Structural means the skills needed in the employment arena are lacking in the environment, so a transitional period of training is required. Instead of a sudden shift in skills we have an elongated one. Globalization dramatically changed supply chains and created liquidity in the job market. Goods producing jobs like manufacturing are now feasible almost anywhere. And the education advantage of the US is no longer prevalent.

This is forcing the US to consider it’s jobs strategy, or at least create one in the first place. Many of the assumptions about the viability of the US worker are no longer true. And think about the US consumer. Will they always buy? Like an alarm clock introducing the morning, the US worker and US consumer realized better days are not guaranteed. People are starting to slowly de-leverage. It’s a huge adjustment in the way people live their lives and it will take time. The debt burden is simply too great.

So if this cycle is a classic supply and demand recession and the US consumer isn’t going to buy (low demand) then isn’t this going to take awhile? Yes, the rest of 2011 and 2012.

Here’s my outline of the timescale:

Jobs will be tepid but consistent for the rest of the year and next. Companies large and small are getting creative with their resources. Many are investing in equipment rather than people (you don’t need to buy health insurance for an industrial printer), but the gains will be positive. There is no double dip recession.

The best workers are beginning to jump to other opportunities. They’ve installed micro-innovations for their current employers, but since volume has been low these improvements haven’t knocked anyone’s socks off. But they will.

So after a period of discipline, brighter days are ahead.

——–

I wanted to pull together some graphs showing what’s happened since the beginning of 2008. Below are four time-scaled illustrations showing the situation with jobs.

  1. The first one is the overall jobs report. It shows how far we have to go to balance out the lost jobs.
  2. The second one is a growth rate of jobs for the private sector as they relate to Service Producing and Goods Producing industries. Goods Producing encapsulates manufacturing and construction, two of the harder hit industries. 
  3. Since the ratio of Service Providing jobs and Goods Producing jobs is 5 to 1, I wanted to show the relative impact and that is what the third graph depicts.
  4. The last one the Dow Jones during the same period. It’s the index that most people focus on as a reflection of the stock market.

Lastly, Wired did some research with Linkedin.com about what terms people were using in their titles after they changed jobs. The results below reflect a pool of 7 million linkedin users and a good indication of what jobs are in need in this day in age. But remember, people still need an oil change.

Working Thoughts 6/15/2010
We Respond To Cues Very Effectively

Working Thoughts 6/15/2009
Resilient Attitudes are Rare

When Ideas Come Together

I sit here and type. Sometimes I have inspiration and sometimes its a slog. I do it because I love when ideas come rushing in. It’s like the end of the Usual Suspects when everything comes together. Its powerful and rewarding.

Good mysteries are fulfilling because we have to hunt for clues. They are rarely obvious and they are as much a study of logic and circumstance as anything else. It’s in our DNA to problem solve this way.

For this reason I’m optimistic about the long term future. The connectedness of the world is bringing figurative detectives together, each with their own clues, to solve problems. Ideas have a better chance to grow. Incremental improvements are good, but we are after leaps forward.

Take this chart from CNNMoney.com about Cisco’s prediction on the expansion of the internet.

And check out these videos from Steven Johnson about where ideas come from. The first one is a short artistic explanation and the second is a TED Talk. I really enjoy the story at the end.

–>http://video.ted.com/assets/player/swf/EmbedPlayer.swf

Split Personalities – Tax Breadth and Tax Depth

We seem to have split personalities when it comes to the news and our politics. In the news we hear about natural disasters and the sour economy. In politics we hear about the failings of the President and the deficit. Why are these two voices talking about different subjects?

The truth is they are talking about the same problem, just different ends of it. The US is maturing. A large portion of the population is entering their retirement years. Every day, for the next 19 years, 10,000 baby boomers will turn 65. By 2030, 18% of the U.S. population will be over 65, compared with today’s 13%.

This is important for several reasons, but here are two:

  1. Federal tax collection is based on income. Those that are retired usually don’t make significant income, so the taxes they contribute are very low. A change or decrease of 5% is a huge impact to the revenue of the government. Or said another way, 10,000 people, who have a high average income, can drop out of the tax pool everyday.
  2. The baby boomers have been in leadership positions for two decades. The groups behind them, smaller in numbers, will need to fill the void.

The first reason is why you hear about Medicare and the budget. The second reason is why you hear about stimulus and silicon valley.

– When we talk about the deficit and paying down the debt we are talking about the inevitability of time. Our demographics show an aging population who will not be contributing to tax rolls. Less income means less spending. Tax Breadth.

– When we talk about innovation and stimulus spending we are pushing for investment and hopefully an improvement in future wealth and the standard of living. This would offset the loss of tax income from those no longer in the workforce. Tax Depth.

Both of these are concerns. I tend to be more transfixed with the latter. Many young professionals are either not entering the workforce or they are at compensation levels below the norm of 5 years ago. This lag in pay is not easily overcome and tends to persist for a career. Smaller income means smaller taxes paid. In addition to that, younger professionals are not moving into challenging roles as they would have in the past. Opportunities for learning experiences are reduced. Plus what they’ve been taught in school isn’t applicable e.g. China has changed dramatically since 2007, but the text books didn’t.

The 18% not in the workforce is unavoidable, but what should be asked is what’s to come of the under employed?

There will always be some number of the under employed, but we are currently looking at a devastating mix of long durations and loss of skills. The recession as it began in 2007 was a supply and demand recession, meaning nothing out of the ordinary occurred. But the last two years has led to a structural recession. This means that the skills and knowledge the US worker has isn’t quite matching up with what labor is needed. If this is more than a blip then high unemployment will continue for a few years as education and training requirements sort themselves out.

But I also feel like the 16-24 group, or more broadly the under 30 age group, is pioneering a new track. The way the view the world is much different than their older counterparts. As a consumer group they can influence the creation and offering of products and services. The next 24 months will be telling about the future of this country.

Using Data as a Predictor of Sports Success

There’s a huge celebration going on this week – a celebration of decision making. You see the NFL Draft starts Thursday (4/28/11) and runs through Saturday (4/30/11) and fans tune in to see who their team selects. No games are played, just people’s names being called.

Why do we care? The simple answer is hope. We’ve entrusted the future of our favorite teams to a room full of guys with spreadsheets. We want to believe they have the magic formula for selecting the players who succeed in the NFL. They’ve studied film, measured height, weight, speed, interviewed the candidates, and surveyed other experts. They’ve quantified all these inputs and ranked the candidates. Most of the time they tier them for purposes of trading up or down. Teams win Super Bowls because of these three days.

It’s a lot of data and yet every year mistakes are made. As a General Manager, the person ultimately making the decision, you need the hits to be proportionally more successful than your misses. And you need to learn from your data year over year to see which inputs pan out and which ones do not. From there you can use heuristics to simplify the ranking order and reduce the risk of missing on a selection.

Below are two videos. One is from the Sloan Sports Conference and it features Peter Tingling. I’m a fan of Mr. Tingling and his company, Octothorpe Software (this is not a paid endorsement). Peter provides a presentation about how how successful NHL drafts are.

The second video is from the most famous sixth round pick ever – Tom Brady. He is your classic case of not using the data correctly.

http://www.kaltura.com/index.php/kwidget/wid/_203822/uiconf_id/1898102/entry_id/1_bukfpvkn/

The March 2011 Silicon Valley Positive Outlook Update

The focus of my last post was on whether or not I believe Silicon Valley has inflated like a 1999 bubble. I don’t think it has, but the stock valuations are still pretty high. If I were to guess, I’d say the apparent investment upswing is a byproduct of cash sitting on the sidelines. Investors have it and big companies have it. Investors plant the seeds and companies like Google buy the fruit at the first sign of flowering.

Silicon Valley is an interesting place though. Many of the companies there don’t want to be viewed as uncool. Once that happens it means a particular culture has set in. Which of these companies seem more exciting: Facebook or Yahoo? Google or Microsoft? You get the picture.

Earlier this week there was an article on cnn.com in the Tech section about the hiring on Silicon Valley. Here are some quotes and stats from the article “Silicon Valley experiencing new hiring boom” by Dan Simon:

  • Silicon Valley: 10.6% unemployment rate
  • Last month’s (March 2011) national average was 8.8%
  • Silicon Valley produced 1,200 jobs last month and expected to add thousands more in 2011.
  • According to SimplyHired.com, a search engine for job listings:
    • nearly 40% of 130,000 open positions in Silicon Valley are for software engineers
    • Since July of 2009 there’s been a 245% increase in openings that have “Facebook” as a keyword
    • Over the same time period, a 421% increase in “Twitter” job postings
  • Innovations in social media, mobile and cloud computing are driving the growth, said Dion Lim, SimplyHired’s president.
  • LinkedIn, the social-networking site for professionals, hired nearly 500 workers last year — almost doubling its workforce.
  • “As we grow the company, we’re always on the lookout for top talent,” said Jeff Weiner, LinkedIn’s CEO.

Differentiating Using Strategy and Technology

The Academy Awards were a few weeks back and the popular movie The Social Network was nominated for Best Picture. It didn’t win the award, but it did elevate Facebook into a cultural phenomenon. It’s no longer another website – it’s Facebook. People care about it like their Nike running shoes, Apple iPod, and Starbucks coffee.

Each of these brands has used slight advantages in their products to become the dominate company in the space. How or why does this happen? Well, first I’ll mention luck. It always plays a role. In addition to luck, it’s the people.

Individuals and teams within these companies differentiate their offerings. They do so within a cost structure that maintains competitiveness and they do so with an eye toward value. Most people think of value as what Wal-Mart offers. One product 10 cents cheaper than a competitor and that is true in a commodities evaluation. Paper towels are paper towels. Value becomes much more abstract when the offering – product or service – has an association related to it. Starbucks originally pulled people in because the coffee was stronger. The association was that it woke up better than other options. And Apple combats technophobia because they create electronic devices that are easy to use.

This value is marginal at first, but then it snow balls. Getting it to snow ball is the key and then building on that is paramount. Facebook used exclusivity as the differentiator and then opened up the site to ride the network effect. Now it can exploit it’s pure numbers for monetary gain.

Earlier this year Goldman Sachs in a backroom deal valued Facebook at $50 billion dollars. Valuations like this have some to speculate that there is another tech bubble. Groupon, Google, Facebook, and others are the poster children.

In the world of the internet, small differences in your products can be the difference in sinking or swimming. Because of that Silicon Valley is leading the way in an escalating war for tech talent. Google is offering $20,000 more than average to the people they’ve targeted. Some firms are teaching their employees how to be entrepreneurs. In Silicon Valley it’s an inevitability, might as well make it a perk.

Do I think its a new tech bubble? I don’t. How engineers are using the internet now is very different than 15 years ago. Now it’s used to implement strategies that were inconceivable just three years ago. New approaches can separate and new technology can accelerate. What goes into the making of a Best Picture? It’s more than just film, it’s artistry.