Of the approximately eight million jobs that were lost in the "big one" recession of 2008 and 2009, only about one million jobs have been recovered so far, a pitiful labor market recovery by virtually any standard.  Many economists today are predicting that it will take at least three to five more years before we recover these lost jobs and just get back to 2007 employment levels.

While the labor market as a whole continues to struggle, the the labor market for technology professionals exists in a parallel universe of high demand and short supply. In the Seattle area, for instance, technology employment surpassed its previous peak (of mid 2008) in the first half of 2011, while hiring remains brisk (see graphic below), and rates of unemployment are trending to near to zero percent for experienced technology professionals with current skill sets.  In the past couple of years, Google, Facebook, Zynga and several other technology stalwarts have built new (or expanded their existing) workforces in the Puget Sound region, while Microsoft, Amazon and other technology firms headquartered here continue to expand their labor forces.

Hiring for experienced technology professionals in the Puget Sound and Silicon Valley regions in particular has been quite brisk over the past year, prompting several calls and anecdotal reports from our contacts in the industry reporting of recruiting difficulties, wage compression issues (having to hire new employees at rates in excess of rates for similar employees already employed) and general stresses to hiring, payroll, and equity allocation budgets.

It's quite paradoxical that in this weak economy, while most areas of the economy is struggling, demand for technology professionals is reaching near "bubble" levels, with wage rates rising at a pace well in excess of the approximately 3% rate reported in most recently-published salary budget surveys.

The situation has become so acute that recently we issued a "special market update" to companies that we work with to help them understand and address these issues.  If you would like a copy of our recent client communications concerning these issues, please contact me at doug@appliedHRstrategies.com.

Join us for our 2011 annual "Reward Trends and Salary Planning" workshop at the Seattle Harbor Club.  Due to the issues described above, we are adding a special section to our fall program concerning dealing with the current high-demand/low-supply  environment for experienced technical professionals. See here for more information.

With the underfunded salary budgets of recent years, a promotion may have been the only way many employees could earn pay raises. Yet even those are fewer and smaller in today's labor market, according to the "Promotional Guidelines" survey recently released by WorldatWork. The survey of 720 U.S. organizations in late 2010 found that overall, respondents report an average of 8.1% of the employee population receive promotions in a typical year down to 7% in the most recent survey.

The average size of promotion has declined as well, though the executive group is feeling the pinch a bit more. While all employee groups — nonexempt, exempt,  and executives  saw declines in their average promotional increases, executives saw the biggest decline, from 11.4% in 2005 to 9.5% in 2010.

The most influential factors in determining the amount of the promotional increase are the pay range of the new position (66%), the rates paid to other employees in similar positions (60%) and external pay data (36%).

"A perceived lack of opportunity for career advancement and promotion can be demoralizing, especially to top performers," said Kerry Chou, CCP, CBP, GRP, a senior practice leader with WorldatWork. "Our study shows that organizations continue to plan for promotions and many even proactively budget for it separately from other pay increase budgets. Organizations ought to communicate and raise the visibility of promotions as one of the key elements of their total rewards packages."

As the economy picks up steam in 2011, it's likely that promotion will increase in frequency, and be more rewarding to those who receive them.  The WorldatWork study shows how pervasive the recession impacted the workforce.  Not only were hiring activities, workforce levels and salary budgets dramatically impacted during the recession, but so were our highest performers, the group that is most likely to get promoted and most likely to have the opportunity to move on to "greener pastures" during the recovery.

PS - Our 2011 StrategicPay Series training calendar has been released.  Click on the link to get more information!

2010 is now in the rear-view mirror, so let's take a look at where we believe we're going in 2011 and beyond, and how these changes will impact HR and compensation/rewards professionals. 

2010 was supposed to be a year of solid economic recovery from the biggest recession in a generation or more, but it turned out to be a year of glacial growth on the economic front. Yes, the economy was technically in recovery, but the growth was so slow that it felt like an on-going recession for many. Fortunately, 2011 looks a bit better than 2010, but only time will tell...

As we get back to work for the new year, here are our 2011 predictions for HR and reward professionals:

1. The economy will improve modestly (or better) in 2011.  The tax package that President Obama signed shortly before year-end 2010 will increase the pace of the economic recovery, which was already starting to show a bit more spunk before 2010 closed out.  Due to the tax package and other recent improvements, the predicted slow growth in 2011 (most pre-December projections were for 2.0% to 3.0% GDP growth in 2011) will likely accelerate somewhat and range from 2.5% to 4.0% for the full year.  That's good news for businesses, employees, the labor market, and just about everyone else.
2. Healthcare reform keeps employers busy, while employees continue to experience increased out-of-pocket costs in the form of increased premium-sharing, increased co-pays, deductibles and co-insurance. Healthcare reform was the big news in 2010, but less talked about is that employee out-of-pocket healthcare costs have more than doubled since early in the decade, and this trend will continue. I know, this isn't exactly a "surprise" prediction, but one that all reward professionals need to keep in mind as they plan, since increased healthcare cost are impacting nearly everyone, and this trend will continue for the foreseeable future.
3. Salary budgets will for 2011 will end up around 2.8% to 3.0% for the year.  These increases are significantly above 2009 (at about 1.5%), and modestly above 2010 (about 2.5%), but still at very low levels historically.  We will also see some significant industry variation, as the recovery will continue to be uneven.
4. The labor market will finally start to show some life, and 2011 will be a year of job growth improvement.  Persons filing for first time unemployment benefits have been in a slow but steady decline for some time, but until recently there hasn't been much to indicate hiring is about to perk up.  A recent report by the Wall Street Journal shows that online job postings have increased significantly in the past year, possibly portending the first major upswing in hiring since the recession officially ended in mid-2009.  The Conference Board's Employment Trends Index (ETI) also just reported its third straight monthly improvement for December. Still, job growth will be too slow to generate a dramatic reduction in unemployment rates, which will still likely be above 8.5% by year-end 2011.  An increase of about 150,000 jobs a month are needed just to keep up with persons entering the labor market, so it will take more growth than that to generate any meaningful drop in the unemployment rate.
5. Longer-term reward trends toward modest pay increase budgets, but increased variable pay budgets will continue.  As the economy improves, pay increase budgets will expand, but only very modestly.  The days of 4% t0 5% merit budgets are over, barring an explosion of economic activity or inflation. Some top performers will receive these types of base pay increases, but it will likely be many years before we see 4%+ merit budgets again in most industries.  At the same time, employers will continue to fund healthy and modestly increasing variable pay budgets, at least in performance-driven companies. 
6. Forward-thinking leaders will increasingly realize that employee engagement is the "new" retention, and a significant contributor towards improved employee performance.  We will be spending more time on this important trend in upcoming posts, and on our training calendar in 2011. 
7. "Qualitative" rewards will increase in importance, as wage growth remains quite low. Qualitative rewards are non-dollar oriented rewards focused on enhancing the developmental, psychological and cultural aspects of employment.  Employers focused on building and maintaining morale, engagement and retention will increasingly look towards reward elements that are not oriented toward "buying" loyalty in the form of spendable compensation, as budgets for additional payroll dollars will remain tight. Examples of qualitative rewards include enhanced recognition and employee appreciation programs, career and educational development opportunities, offering work-life balance/fit and flexibility options, etc.
8. Industry and job family wage growth will be uneven, so you'll need to stay on top of pay trends and your competitive position in the market. While general pay trends are widely researched and published, wage growth in certain industries and job families can and will vary significantly from the general trends. Currently we are seeing better than average strength in several industries, including technology and biotechnology, energy, consulting and healthcare.  Many job families are showing above average wage growth, such as IT and technology professionals and engineers, life science researchers and professionals, petroleum engineers, and several types of healthcare professionals, etc.  If you haven't formally checked your market competitiveness in more than a year, it's time to dust off your spreadsheets and take another look.
9. Social networking/media isn't going away, so deal with it. Many employers have already figured out their stance with regard to corporate and employee use of social media, but many have not.  If not, it's time to stop ignoring the elephant in the room. One of the more interesting and useful social media approaches/policies are IBM's Social Computing Guidelines.  Employer approaches range widely, from tight censorship/control to to total lassie-fare (i.e., Zappos), so there is no "best" practice.
10. As trends and practices change, you'll need to expand your own skills toolkit. Keeping in mind some of the trends discussed above, are you prepared to use and engage in new and/or creative approaches to address some of the many challenges faced by HR and rewards professionals today?  It's time to continue your own development, so you can be as effective as possible in helping your organization move forward in a positive manner.  To your ongoing growth and development!
11. You will have a happy new year.  We're off and running in the new year, fresh with new challenges and opportunities, so we are predicting and wishing for a happy one for you!

Doug Sayed is the founder of Applied HR Strategies, and the StrategicPay Series. He can be reached at doug@appliedHRstrategies.com.

The future isn't looking too good for the typical wage earner in America these days. Not surprisingly, wage growth is quite slow right now, but there is also no foreseeable impetus to increase that growth any time soon, unless you're lucky enough to be in a few selected high demand roles (such as for skilled health-care workers and selected technical professionals).

Not only is the labor market in the worst shape in decades, we likely haven't hit bottom yet.  In addition, nearly all economists are predicting a painfully slow jobs recovery over the next few years.  Of the millions of jobs lost in this recession, the concern among many labor market pundits is that a good chunk of these jobs may never come back (i.e., many of the manufacturing job losses), and of the ones that do, the recovery will be several years in the making.

Back to wage growth though, here's the current situation relative to the pre-recession period: in the first half of 2007, wages were growing at a healthy 3.7% annualized rate. In the first half of 2009, wages increased at a 1.3% annualized rate, and that may well go down as the labor market continues to deteriorate (labor market conditions generally lag overall economic trends, so even though we've hit bottom overall, according to most economists, the labor market probably hasn't yet).

The current (August) national unemployment is at 9.7%, and is expected to bottom in the 10%+ range sometime early next year.  That's the good news. IHS Global Insight is predicting that in 2014, the unemployment rate will average 7.6%, which is still well above the unemployment rate before the recession started in late 2007.  The predicted molasses-paced recovery will have a major impact on wage growth in the U.S. for the next few years at the least.

Labor market dynamics are a complex brew of many factors, but at its core is the same "supply and demand" that you learned in Econ 101. With labor current market supply quite high and demand very low (and expected to stay weak for the next few years, due to the slow economic growth being projected), the the case for a strong rebound in wages is not in the cards, barring a much more robust recovery than expected.

It is likely that wage growth could be stuck in the 1.5% to 2.5% range for years, or roughly one-half to two-thirds of historical wage growth.

If this predicted scenario plays out, the implications for the typical American wage earner will be profound. It will also have a large impact on employers, who rely on economic growth to fund their pay-for-performance programs.  For some ideas on how to address these issues, see fellow Compensation Cafe' blogger Margaret O'Hanlon's recent post on dealing with "tiny" merit budgets, and my earlier post on using your  professional creativity in these lean times.

Doug Sayed, SPHR, CCP is founder of Applied HR Strategies Inc., a Seattle area strategic compensation consultancy, and lead author of the StrategicPay Series "Base Pay Toolkit."

Is the technology sector about ready to turnaround, or has it at least hit bottom?

The Department of Labor says that technology related-employment actually rose by 7,400 in July, after several months of declines. Granted, 7,400 jobs isn't a lot for the entire country, but that sure beats the 247,000 jobs that were lost overall, and one of the first really positive bottoming-out signs seen yet, at least in the employment arena, which tends to be a lagging economic indicator.

To date, most of the euphoria about the economy bottoming has been about things getting less bad, as opposed to seeing actual positive numbers (like increased retail sales or increased hiring). So, to see the technology sector actually increasing employment is a huge plus.

Of course, one month does not make a trend, but this at least indicates that a bottom is near or here, at least in technology.

If you work in the technology sector, have you seen any positive changes? Leave a comment about what you're seeing in your crystal ball.

In today's hyper-paced, cost-conscience world, jobs can disappear in a flash, as we've seen in the past year.

An article on the MS-NBC's site from yesterday, subtitled "In the modern economy, industries vanish and it takes time to replace them" captures todays' world of work well. 

Labor market dynamics have changed dramatically in the past two decades.  In previous generations, mutual employer/employee loyalty helped to fuse together years of long-term employment at a single employer.  That world has gone virtually extinct in today's new short-term thinking, combined with today's economic challenges.  In today's world, productivity, performance, and the immediate economic landscape rule the day.

Today, "Most forecasts predict that Americans are in for a long, painful slog as they try to get back to work. Some forecasts don't have the unemployment rate getting back to "normal" levels of around 5 percent until 2014." We concur with this assessment.

That's not a pretty picture, but one that we have to anticipate as we consider two major forces: a fundamental change in employee/employer dynamics, and a very weak economic landscape.

While the employment rate actually dropped 0.1% in July, don't be fooled; that was just a statistical artifact of people dropping out of the labor force, not the beginning of a labor market resurgence.  The labor market always lags the overall recovery, so don't expect a sustainable improvement until the economy starts recovering and employers feels safe enough to start hiring again.

"Part-Time Workers Mask Unemployment Woes"

Reads the headline in the NY Times.  We all know the labor market has done a serious nose-dive in the past year, but its actually worse than the primary government statistics on unemployment indicate. 

That's because the "official" rate that's published doesn't include "discouraged" workers who have dropped out of the labor force (stopped looking for work), and especially the "under-employed," such as persons working part-time instead of full-time, or working in full-time jobs they wouldn't even consider in better times.

June's "official" unemployment rate of 9.5% pales in comparison to the the U.S. Department of Labor's broadest measure (which include the part-time workers described above). For instance, in Michigan, California and Rhode Island, and Oregon, the rate exceeds 20%, or one in five workers in these states (and several other states aren't too far behind this 20% mark).

Most of the hardest hit states are more reliant on manufacturing, housing construction and other infrastructure-related industries.

Since the labor market tends to be a lagging indicator, which often continues to worsen even after the economy officially bottoms, nearly all economists agree that we won't see any significant improvements this year, even if the economy bounces off the bottom in the second half of 2009, as many are predicting today.

Please checkout the article if you're one of those twisted soles (like me!) who enjoys economics. There's a lot of good information in it.

An article in today's Wall Street Journal points out just how weak the labor market picture is, based on the most recent batch of monthly state reports.  Not more than two week's ago (see earlier post) it was predicted that in the third quarter, the employment outlook would be stable, according to the Manpower Employment Outlook Survey (MEOS).  It that's true, than the most recent set of employment reports must be the storm before the calm.

Here's a few examples of how bad things have gotten recently:

• May 2009 state employment reports showed only two states did not report increased unemployment rates (congrats to Nebraska and Vermont!) for the month.
• Eight states reported all-time record unemployment rates (since accurate records have been kept - the 30s would certainly have been worse, but that's not much solace today). Here's a quick sampling of a few of the records: 14.1% in Michigan, Oregon at 12.4%, and California at 11.5%.
• Payrolls were lower in 48 states, compared to the year before.  The largest decline was a 7.4% drop in Arizona, which has been devastated by a crushing real-estate led recession.

Suddenly, the MEOS-predicted 3rd quarter stability is looking pretty shaky, especially since the labor market tends to lag overall economic trends.  Many economists are predicting further labor market weakness in the second half of this year, even if the economy levels out and starts to recover, which many expect will happen sometime in the 3rd or 4th quarter of this year.  Let's hope they are right, at least about the recovery part.

The 3rd Quarter U.S. Employment Outlook is Stable (not down, and that's a good thing!).  Labor market trends have been quite negative for over a year now, so "stability," if it occurs, would be a vast improvement.

The Manpower Employment Outlook Survey (MEOS), which just published its latest results last week,  shows that the employment outlook over is stable for the 3rd quarter vs. the 2nd quarter of 2009.  Not exactly growth, but as one of my colleagues said recently, "flat is the new growth." For now at least, no further deterioration is the new "up."

"When we account for ongoing calibration of the data, employer attitudes about hiring remain essentially unchanged compared to the previous quarter," said Jeffrey Joerres, chairman and CEO of Manpower Inc. "While the numbers may not be as optimistic as we would like, it is positive to see no further deterioration."

The survey of over 28,000 employers found that 15% anticipate an increase in their staffing levels,  while 13% expect a decrease in their payrolls. Two-thirds (67%) expect no change in their July-September hiring plans and 5% said they were undecided about their hiring intentions.

"The data shows continued hesitancy among employers," said Jonas Prising, president of the Americas for Manpower Inc. "They are treading slowly and watching with guarded optimism, hoping a few quarters of stability will be the precursor to the recovery."

The survey results show employers in seven of the 13 sectors studied expect hiring to remain stable in third quarter compared to second quarter. The survey shows that employers in construction as well as wholesale and retail trade anticipate moderate increases; non-durable goods manufacturing and leisure and hospitality employers expect a slight increase in hiring activity compared to second quarter.

Slight decreases are expected in education and health services and government (these have been among the strongest sectors over the past year). Employers in the following sectors said they will keep hiring levels relatively stable for third quarter: durable goods manufacturing, transportation and utilities, information, financial activities, professional and business services, and other services.

Regionally, the West has a weaker outlook for third quarter compared to second quarter;  all regions have a weaker outlook compared to this time last year.

Let's hope that the anticipated stability in the 3rd quarter leads to improvement in the 4th quarter!