Is our economy recovering?

I'd like to think yes, but after viewing the most recent December Job Report, I'm not quite so sure. In the United States we had 85,000 new people file for unemployment benefits this last month. My concern for the economy and our reported recovery is three fold.

November and December are historically the most profitable months for retail companies who look for consumers to spend their hard earned money in the form of presents and gifts during the holidays. Retailers historically hire millions of temporary workers to serve as cashiers, sales clerks, and inventory personnel to help with the increased foot traffic and sales during the holidays, and still our job loss report released January 8th was 85,000 with more than 15 million Americans still out of work.

Looking back at job loss numbers for December 2008 and 2007 were very different with December 2008 at 524,00o and unemployment remaining at 10% for a second straight month. While at the start of the recession in December 2007, the number of unemployed persons was 7.7 million and the unemployment rate was 5.0%.

But even if retails companies might be hiring (they were down 10%) but unemployed eligible workers also weren't buying. Take the average middle class worker who makes $50,000 salary a year. If they reside in Oklahoma, the average weekly unemployment benefit is $392 which equates to an hourly rate of $9.80 an hour for a 40 hour work week. This amount is well-above the average cashier's hourly wage in my experience. If the only companies who are hiring are temporary holiday positions, I'd much rather save the cost of day care, gas, and work dress clothes and wait out the recession collecting my meager unemployment benefits.

Companies also historically lessen their financial obligations in the form of human capital not only at the end of quarter (which happens to be December for many) but also at the fiscal year end which for many companies and businesses was December 31st. Interestingly enough most retail companies fiscal year end is Februar28th and for government is June 30th.

State budgets are being cut. Sales tax revenues are less than expected. Government hiring is slowing. In Oklahoma, the state that I call home, just announced a 10% cut in spending for 2010. Not exactly the ideal situation for an economic recovery.

On the flip side, temporary and contract hiring is expected to increase this year. Companies are not yet ready to commit to hiring and re-hiring staff until they see some measurable growth in their market. Even if a company has the funds and means to hire and grow, they are reluctant to do so instead opting to employ a "dry powder theory." By hiring temporary and contract workers, they can keep their investments liquid eliminating overhead costs like benefits, social security, and other government taxes and expenses associated with human capital management. Personally, the dry powder theory sounds more like dating without the marriage commitment.

...In Part II of "It's a Dry Powder Job Market" I'll discuss tactics for employees, candidates, and the unemployed to consider and employ in the Dry Power Job Market.

Photo Credits Phil's Stock World & InvestorCentric

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