Small Business

The Labor Market's New Math Is Hard to Figure


You might think that a slowing economy, some yearend layoffs in the insurance, auto, and retail industries, and a growing legion of refugees from failed or foundering dot-coms would finally make it easier for businesses to find employees. But labor-market math isn't that simple, according to some small businesses and the staffing agencies that find help for them.

Even large layoffs -- 50,000 at dot-coms last year and some 30,000 early this year at Montgomery Ward alone -- don't make much of a dent in the labor market. Part of it is long-term demographics: The number of Gen-X and Gen-Y workers available for the spots being vacated by retiring Baby Boomers this decade will fall about 7 million short. Another problem is that some laid-off workers are simply not a good fit for the current job openings.

"Are more people available, given the death of dot-coms? The short answer is yes," says Scott Dunklee, partner in Lancer Group executive recruiting firm, which is based in Menlo Park, Calif. "The longer answer is: These things are never a seamless transition. Some of these people...they went to college during the biggest boom time, they got these dot-com deals...they never pushed themselves that hard to get better. A lot of them are ill-equipped, to be frank."

SN.com, a Web development and Internet consulting company near Philadelphia, has added three people from failed Net companies in the last few months. Although layoffs have enlarged the pool of job candidates, "I wasn't finding the talent," says Diane Apa, vice-president for human resources at SN, which was founded in 1995 and has 30 employees. "We're definitely planning on hiring, but we're committed to our strategy of hiring slowly and smartly," she adds.

CYBER SHY. Many job seekers are equally leery of new companies. A recently laid-off project manager at a Seattle Internet company "is really skittish about working for any more dot-coms," says David Harbaugh, president of Staffing Company, a Seattle-based employment agency that caters to the computer sector. Because of Net-company layoffs, "If you're a new business, you'll find it even harder to recruit employees," he warns.

Much of the hiring at Internet companies today reflects not expansion, but reorganization. At Lancer Group, Dunklee's typical client is a company backed by venture capital and looking to hang on in rough waters, which often means a change in strategy. Many of last year's surviving business-to-consumer Web sites are trying to reinvent themselves as business-to-business sites. "All of a sudden, the sales force -- VP of sales, VP of marketing, sometimes the CEO -- needs to be changed." So a lot of companies are simply scrambling to poach each other's executives. "That's part of what is keeping my industry buoyant," admits Dunklee.

A recession, if it materializes, would be another story. "Nobody would really tell you honestly they are not concerned about it," he said, just a few days before the New Year. "That's why I'm here this week rather than on vacation."

In the Puget Sound area, "As much as I hear 'recession, recession, recession,' I don't see it loosening up," Harbaugh says. His company -- whose clients include startups as well as Old Economy giant Nordstrom and New Economy titan Amazon.com -- generally has at least 150 jobs waiting to be filled at any given time. Although that number hasn't diminished, the percentage of those jobs that were for temporary or contract employees rather than full-time ones, has grown in the last quarter. "A lot of the dot-coms can't afford the full-time overhead, but they need the people on a project-by-project basis."

FRUSTRATION OR DESPAIR? Nationwide, job growth has slowed to about 150,000 a month, vs. an average of 200,000 a month for the last few years, according to The Conference Board. Its Help-Wanted Advertising Index was 75 in November, down 4 points on October and 10 points from a year ago. Job creation has slowed for two reasons, the cooling economy and the fact that "employers can no longer find 200,000 people to hire on a monthly basis," says Ken Goldstein, an economist with the nonprofit Conference Board research organization, which is headquartered in New York City.

Among the small-business community, cutbacks in hiring plans seem to reflect despair rather than belt-tightening. In November, 35% of respondents to the National Federation of Independent Business monthly survey reported hard-to-fill job openings. At the same time, the number planning to expand their staffs was only 12% higher than those planning reductions. "The message...seemed to be, 'If we find a qualified employee, we'll hire 'em -- but we don't expect to actually accomplish this,'" federation economist William C. Dunkelberg wrote in his summary of the survey results. One in five respondents said the dearth of workers with appropriate skills was their No. 1 business problem.

In some industries, however, the labor market is loosening a bit. Ron Deabler, who owns two companies that supply workers to machinery manufacturers and the construction industry in and around Milwaukee, has seen a decrease in job orders. He supplies the small companies that feed the larger companies, such as auto makers and auto-parts manufacturers, which are cutting back production in the face of slowing sales. "The Monday following Thanksgiving, we had, for the first time in five to six years, a line at our front door of candidates looking for work," he says.

In an economic downturn, while companies might go light on clerical help, they won't skimp on management, sales, and marketing, says Frank Wyckoff, president of Snelling Personnel Services-Wyckoff Group, which has five offices and 40 recruiters, in Georgia and New Jersey.

ATTITUDE ADJUSTMENT. In New Jersey alone, 86% of his clients are planning to hire in 2001, says Wyckoff, who recruits employees for a broad range of businesses, from call centers to factories, clerical workers to executives. So far, the softening economy hasn't flooded his office with attractive job candidates, says Wyckoff, who gets work for about 5% of the people who walk through the door -- the few who survive his scrutiny do so on two fronts: What's your attitude? And what can you do?

Sometimes, the ratio of attitude to ability gets out of whack, say recruiters. "Even a few months after the March [Nasdaq] crash, it was super, super tight," said Dunklee. "You couldn't get anybody, and the people you could get thought they were worth far more than they were," he recalls, referring to a marketing vice-president he was trying to recruit. The job candidate wanted $20 million in equity in addition to a large salary. "All he was was a person with the right job title at the right time," Dunklee says. "I knew then that we were at the peak."

Labor-market math may not be simple, but at least it's no longer ludicrous. By Theresa Forsman in New York


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