Employment…Rising or Falling? Nov 2009

In August 2009 Kevin Green, Chief Exec of the REC, commented on recruitment records for August:

  “For the first time in 17 months, this month’s report shows signs that the UK jobs market is improving.  It seems that employers are becoming more confident in their hiring decisions with an increase in permanent recruitment and growth in temporary placements for the first time in over a year”

 The media then used these comments in such a way as to suggest that the UK was on the way back toward healthy employment

In November 2009 the Head of the IMF commented:

“Unemployment in Britain is set to climb well into next year, despite the world economy being on the cusp of recovery.”

What is the truth of these statements and what are we to make of it?

Media hype, political sound bites and these conflicting reports add to confusion, uncertainty and worry for accountants who have been made redundant or who are under threat of redundancy. Experience in accountancy recruitment during the last recession has taught me that the apparent conflict will be reconciled and understood when both aspects are placed in context. I would also suggest that understanding the job market is essential for sound decision-making on job offers, and for developing personal strategies to ride out the economic storm.

The August report was correct but the optimistic conclusion drawn from it possibly misplaced. I suggest that what had been evidenced was a ‘spike’: the effect of pent-up demand. (Companies hold off from recruiting over a period of time to the point of damaging their businesses. As a consequence, they decide there is no option but to recruit. A number of businesses reach the same point and happen to enter the recruitment market at the same time). I would also suggest that such ‘spikes’ are unpredictable, irregular and repeated intermittently. As the market strengthens, the traditional recruitment cycle will return and such ‘spikes’ will disappear. This was certainly the pattern in the last recession.

Rising unemployment, as reported by the Head of the IMF, will happen. There are studies that demonstrate that, following a recession, unemployment will continue to rise after an economic upturn and usually for up to 12 months. It is rather like a large seagoing tanker – it takes a while for it to respond to a change in direction. It won’t turn immediately, but will continue for several ship lengths before responding.

The two reports are reconcilable when placed in the following context:

Over the same period of time that unemployment rises, there will be intermittent ‘spikes’ of pent-up demand for accountants. These can be seen as oases of opportunities in a desert of rising unemployment and should be taken advantage of in the best way possible. What this means is: be ready to react quickly during a spike; remain flexible in your expectations; and don’t dismiss opportunities and offers out of hand. If you are moving from a permanent position to an apparently sound role and business as part of a career move, apply rigorous ‘due diligence’. Identify the security of both before making your decision.

The good news is that recruitment doesn’t stop completely during recession, it only slows down and even then there are intermittent surges of opportunities.