Report predicts continued job losses
By Kevin Smith, Staff Writer© Pasadena Star-News, February 28, 2010
No aspect of this recession has been more devastating or persistent than job losses.
Like a tornado, the economic downturn has carved a broad swath, leaving an estimated 8.4 million people without jobs and scores of others fearing they'll be next.
"I've never seen this level of malaise," said Gary Kaplan, president of Gary Kaplan & Associates, a Pasadena-based executive search firm. "The one part of the economy that's not improving is the job market, at least not substantially. We've been through a number of recessions - including the one in the late 80's and early 90's and again in 2001 through 2003 - but nothing has had the impact of this one."
Since the beginning of the recession in December 2007, the nation's jobless rate has risen from 5 percent to a peak of 10.1 percent in October before beginning a gradual decline that brought it down to 9.7 percent in January.
"We're calling for a measured recovery, but we think small-to-medium-sized businesses will continue to be cautious about hiring," said Jack Kyser, founding economist for the Los Angeles County Economic Development Corporation. (LAEDC). "The problem is accessing banks with lending."
Recovery will be slow
The Federal Reserve predicts unemployment will remain high over the next two years because recession-scarred Americans are likely to stay cautious, making for only a moderate-paced economic recovery.
Businesses also are concerned with potential costs that would be associated with the passage of a health care reform bill and with additional environmental regulations, Kyser said. "Besides education and health care, we're starting to see recovery in employment-help services, the temporary staffing services," he said. "Businesses are not certain about the outlook, but they need to get orders out the door so they will hire temp workers. And in California, manufacturers are adding back to their work force. We're also starting to see more overtime hours."
Patrick Joyce, a spokesman for the state Employment Development Department, said temporary staffing agencies throughout California have experienced an uptick in hiring. "California had 345,100 temporary employment workers in August of 2009, and it's grown steadily since then," he said. "In December we reached 361,400."
Stimulus or savings plan?
On February 17th, President Barack Obama touted his administration's year-old economic stimulus plan as a tool that staved off another Great Depression and kept up to 2 million people on the job.
The nonpartisan Congressional Budget Office offered an alternative take, saying the stimulus package created or saved anywhere from 800,000 to 2.4 million jobs.
The LAEDC's 2010-11 Economic Forecast & Industry Outlook predicts that total non-farm employment in Los Angeles County will edge down by 0.5 percent, or 20,000 jobs, this year. That will come after a drop of 3.8 percent, or 154,000 jobs, in 2009.
The largest employment losses in 2010 will come in retail trade (16,600 jobs), manufacturing (14,700 jobs), and construction (8,300 jobs), the report said. But there is some good news. The information sector, which includes the film industry, will gain 4,600 jobs. Health services will add 4,300 jobs, administration and support services will increase by 4,200 jobs, and private education will add 3,700 new jobs, according to the report.
Incentives tied to cuts
Kaplan said there's been a shift in the way executives are compensated - and that shift doesn't bode well for the rank-and-file workers below them. "It used to be that there was a correlation between the number of people they managed and the compensation they received," he said. "But now companies are more focused on profitability and cost savings. So their incentives are more tied to short-term profit performance. And if that's the case... then managers are incentivized to slash labor costs.
Kaplan also noted that base-compensation raises have been declining over time. Employees are lucky to get a 1 to 3 percent cost-of-living increase," he said. "Now the bonus structure is tied to the profitability of the organization. ‘If we have a good year we'll toss in extra dollars.' There's been a migration away from individuals being able to receive a substantial compensation just for doing a good job."
The LAEDC report said unemployment rates in Los Angeles County "will continue at painfully high levels" during the forecast period, although they are expected to gradually decline.
Southern California's five metropolitan areas also will be in recovery mode this year, Kyser said. Like the nation and state, it will be "a measured recovery with more job losses and high unemployment rates in 2010," he said.
