Weak Demand for Companies’ Core Products and Services Contributes to Slow Jobs Growth
Tag Archives: Recession
Executives have become notably more optimistic about their companies’ and their countries’ economic prospects since mid-April—but the outlook was so poor then that optimism must be tempered.
Over the past six weeks, executives have become markedly more optimistic about current economic conditions and prospects for their national economies, a new McKinsey survey shows. Expectations started out so gloomy, however, that even now, fewer than a third expect an economic upturn this year, and two-thirds expect their nations’ GDPs to decrease in 2009.
Similarly, at the company level, more executives still expect to shed workers than to hire, but the share expecting to decrease the workforce has fallen below half for the first time since January. And a full third of respondents now expect profits to increase in 2009, up 8 percent in six weeks. Furthermore, even though respondents see fallout from the crisis in a variety of financial and nonfinancial measures such as employee morale and the pace of innovation, strong majorities expect those effects to be short-lived.
Indeed.com has released their February trends graph for job openings by industry. The news is bleak which is to be expected on the back of all of the layoffs that occured in February. Nonetheless it is a great tool for understanding where to point your job search.
“The steady drumbeat of weak economic and financial market data has made business economists decidedly more pessimistic on the economic outlook for the next several quarters. Credit conditions remain tight and declines in equity markets and home values, combined with significant job losses, are causing consumers to rein in discretionary spending. While a few reports offer some glimmer of hope, a meaningful recovery is not expected to take hold until next year. Further pronounced weakening in housing and deteriorating labor markets underscore the risks for 2009,” said NABE President Chris Varvares, president, Macroeconomic Advisers. “Following a sharp 5.0% (annual rate) contraction in the first quarter of this year and another 1.7% drop in the second quarter, NABE forecasters expect real GDP to rise at a sub-par 1.6% rate in the second half. This leaves a decline of 0.9% in 2009, on the heels of a 0.2% decline in 2008. The unemployment rate is forecast to rise to 9.0% by year-end and inflation is expected to moderate, as economic slack builds and as oil prices are forecast to remain relatively depressed. The good news is that economic activity is expected to turn up in the second half of the year and 2010 is expected to see modestly above-trend growth of 3.1%.”
Among the key forecasts of the February 2009 survey:
• The current downturn will most resemble that of 1973-75.
• Real government spending will advance 2.8% in 2009.
• The consumer price index will decline 0.8% in 2009, as already large
commodity price declines pass through to consumer prices.
• The jobless rate will peak at 9.0% by the end of the year. House
prices will decline 5% during 2009, though the S&P 500 index is
expected to rise a solid 8% by December 31, 2009.
Seniors graduating from college this year will get diplomas, but they may not get jobs. Employers expect to hire 22 percent fewer new graduates from the college class of 2009 than they hired from the class of 2008, according to a new study by the National Association of Colleges and Employers.
The latest numbers also differ significantly from the fall, when employers’ hiring projections looked flat.
“Earlier, employers indicated that they expected to keep their new college graduate hiring levels even with last year,” Marilyn Mackes, the association’s executive director, said in a statement. “Our current survey shows that college hiring is as affected by the economy as other types of hiring.”
The drop in anticipated college hiring is part of an overall slack labor market, which has worsened rapidly amid the recession.
The expected decline in new-grad hires was prompted by the deteriorating economic situation, said the association, a professional group that forecasts trends in the job market.
“More than two-thirds of employers said the economic situation forced them to re-evaluate their college hiring plans, and nearly all of those said they have decreased their planned number of hires,” Mackes said.
The projected drop is likely to mean a sharp decline in employer activity on campuses this spring as well, with 66 percent of employers responding to the survey reporting plans to lower or eliminate spring hiring.
The latest association study also ends a string of positive hiring reports for new college graduates dating back to 2004. Students graduating in the early part of the millennium experienced major drops at the hands of the dot-com bust and the terrorist attacks of September 11, 2001. Hiring decreased 36 percent for the class of 2002 but steadied for the class of 2003 before rebounding in 2004.
Employers also seem cautious about the near future. More than 46 percent said they are unsure about their hiring plans for fall 2009, and 17 percent are already reporting that they expect to trim their college hiring further.
Executives view their economies as bad but, in a change from recent months, do not see them getting much worse. Government actions have helped, many say. Companies are hanging on, and many are taking long-term actions to cope with economic turmoil.
Executives’ economic expectations, though gloomy, don’t appear to have worsened notably over the past six weeks, according to a McKinsey Quarterly survey in the field from January 27, 2009, to February 2, 2009, during another round of significant layoffs and falling stock prices. Many respondents say government action has made the economic situation better than it would have been otherwise. Looking ahead, more executives say government help should focus on fostering innovation than on helping existing companies or industries. Most companies, respondents indicate, are still coping with the crisis by cutting costs, and many are also making more use of long-term tactics (such as restructuring) suggesting that they see the global economic turmoil as the new normal.