From a mainstream economic perspective, it should be renamed Leisure Day, as unemployment is interpreted as an individual choice of leisure over paid labor effort. Of course, only a tenured professor could be expected to come up with such a conclusion. As it stands, it is currently estimated there is one job opening for every six people looking for work.

Since employment is a lagging indicator of economic activity, we learned over the years to dig deeper than the headline figure to get a read on where labor market conditions may be going. One of the more useful, but often ignored, parts of the employment report tells us about the percent of private industries that are net offering jobs. Even when payrolls are shrinking in total, some industries are still net hiring – and, indeed, this is part of how markets facilitate the reallocation of productive resources during a recession, which, as the Austrian approach reminds us, is crucial to long term-growth prospects.

This measure is called a diffusion index, and we prefer to look at the average in this series over the past three months to avoid too many miscues. As it stands, the breadth of private industries net hiring, though still at a lower level than the last recession, has consistently climbed from the March lows. The pace of broadening is even a bit stronger than what we observed in the last exit from a recession, which, as you may recall, was followed by a jobless recovery. If the slower pace of layoffs is all a sugar high from extreme policy measures, or if a double dip is about to open up before investor eyes, this is one of the places it should show up first. So far, this diffusion index is more consistent with an unemployment rate that peaks near year-end around 10% and begins to show some improvement in Q1 2010. We would also note while survey results still report perceptions of a very difficult job market, these measures have stabilized in recent months.

When firms start shedding labor more aggressively than their production activity is contracting, labor productivity (output produced per hour of work) tends to reaccelerate as the pressure on the remaining work force intensifies. In fact, productivity growth has begun to rebound, and we believe it has a good shot at pushing through 4% year-over-year growth by year-end, from the current 2% pace in the nonfarm sector. At the same time, businesses struggling to stay alive have pressured labor compensation growth. Hourly compensation (wages and benefits) growth has been on a disinflation (that is, decelerating inflation) path through the entire recession. We suspect it will be flirting with deflation near year-end, which is something we have not seen since Q4 in 1949.

If we put these two developments together – labor compensation growth approaching deflation, while labor productivity growth reaccelerates – we get deflation in unit labor costs. Companies that can hold the line on pricing while unit labor costs are falling will tend to experience rising profit margins, and rising profit margins are generally a signal to expand production. Improving cost conditions are one benefit of recessions, and if final demand can stabilize or improve from sources other than the household sector – say, fiscal policy or an improvement in the trade balance or the onset of some replacement capital spending – then this can be a route back to economic recovery. We will have more to say about this in the next monthly letter, but for the moment, it does look like firms are successfully compressing cost conditions.

This matters because with the release of Q3 S&P 500 earnings in October, we suspect strong operating leverage will become apparent to equity investors. Earnings improvement through Q2 has been all cost cutting related in a flat or falling revenue environment for most companies. If Q3 begins to show top-line revenue improvement, as we suspect it will, then earnings will be fed by both revenue and profit margin gains. After the seasonal September jitters, the exposure of the operating leverage available to firms that have cut to the bone could very well capture the imagination of investors, leading to the next leg in the advance of US equity indexes since early March.

According to supply managers in the manufacturing sector, goods sector production has been on the rise since June, and new orders are through the roof. By way of reference, the new orders index was scraping a new historical low back in December, rivaled only by the 1980 lows following Fed credit controls. Never before in the six decades of Institute for Supply Management (ISM) records have new orders surged so dramatically in any eight-month span. Never before has the ISM new order and production indexes recorded these levels without marking an escape from recession. No doubt the “cash for clunkers” sugar high has something to do with this, but we doubt it explains away all of the dramatic reversal in supply manager perceptions, as the export indicator in this report has also improved remarkably since the December 2008 lows.

These ISM results are usually good for a three-four month lead time on government reports for industrial production, shipments and new orders. We can anticipate the rebound depicted above will now reverberate in the monthly reports from here to year-end, at a minimum. In particular, the ISM production index has provided a reasonably good guide to year-over-year momentum in manufacturing production.

The sharpest monthly contractions in industrial production began in September of last year as the credit markets went into cardiac arrest, and all parts of the economy went into a cash grab/cash conservation mode so that prior cash commitments could be met. This included dramatically reducing production and liquidating existing inventory stocks. In other words, the comparisons against year ago are about to get ridiculously easy, and a healthy 5% year-over-year manufacturing production growth rate is certainly within reach by year-end 2009.

As summer slips away into the flaming leaf show of fall, we conclude the labor market is still a mess, but we can find some broadening of hiring activity even though total payrolls are still contracting. That means the necessary reallocation of productive resources, which is part of the function of recessions, is under way. More importantly, unit labor costs are falling as the pace of layoffs has overshot the contraction in output, and labor productivity is improving as a consequence, which is a second growth encouraging outcome of recessions.

The question remains what lies ahead after the massive quantitative easing operations of the Federal Reserve have lapsed and the bulk of the fiscal stimulus is behind us. In the very near term, we can surely expect auto sales to wilt following the end of the cash for clunkers program, but we remain impressed by what supply managers in the most cyclical part of the economy, namely manufacturing, have to say about new orders, production and export conditions. Policymakers panicked and adopted a “whatever it takes” stance, one that has proven to be the most radical outside of major wartime conditions. Looks like something took – and not surprisingly, gold is taking out the $1,000 per ounce mark at the same time.

Regards,

Rob Parenteau

Source: Unlabor Day

Existing home sales rose 7.2% to a 5.24 million annual rate in July, the most since August 2007 and the fourth straight month the figure increased, the National Association of Realtors (NAR) said Friday. Year-over-year sales grew 5%, the increase since September 2007, just before the markets came crashing down the following month.

“The housing market has decisively turned for the better,” said NAR chief economist Lawrence Yun. “A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.”

Rising sales numbers in the past few months may have triggered previously discouraged sellers to re-list their homes, according to Yun.

Total housing inventory at the end of July grew 7.3% to 4.09 million existing homes available for sale, representing a 9.4-month supply at the current sales pace. However, the raw inventory totals are 10.6% lower than they were last year.

Sellers are responding to rising inventories accordingly: The national median existing home price was $178,400 in July, 15.1% lower than a year ago. But the fact that buyers are dipping their toes back into the murky depths of the housing market doesn’t necessarily mean the sector is trending toward a full-blown recovery.

Turn of the Year Makes for Uncertain Future

One in three homes sales last month came from first-time buyers who benefited from the Obama administration’s $8,000 tax credit, which ends after November. First-timers accounted for almost the same amount in June with 29%. That means there could be a significant drop in purchases when that program expires.

The real estate industry is lobbying Congress to extend the first-time buyer tax credit, and Nevada Democratic Senate Majority Leader Harry Reid told reporters earlier this month an extension is “something we can get done.”

With or without a tax break, consumers in this economy are looking for a bargain much like they are with retail sales and auto sales. The bulk of the first-time tax credit sales have come from lower-priced homes, and NAR data supports that. Sales of homes that cost less than $250,000 were up almost 17.8% year-over-year through June. Meanwhile, sales decreased 13.3% in the $250,000-$500,000 bracket, 18.6% in the $500,000-$1 million range, and 32.7% in the $1 million – $4 million range.

Lost pricing power in the more expensive homes wasn’t lost on Pulte Homes Inc. (NYSE: PHM), which last Tuesday finished its acquisition of value-priced homebuilder Centex Corp.(NYSE: CTX), making Pulte the largest homebuilder in the United States.

“I’m not seeing a tremendous amount of good news on the job or economic front, so I do think it’s important that the [tax] credit get extended,” Pulte Chief Executive Officer Richard Dugas told The Associated Press.

The turn of the year isn’t likely to yield much good news on the job front. Most economists are expecting the unemployment rate to top out around 10%, and although July’s rate dipped one-tenth of a percentage point, the latest weekly initial unemployment insurance claims were discouraging, rising 15,000 to 576,000 for the week ended August 15.

“The improvement in the labor market has stalled,” Scotia Capital Inc. economist Derek Holt told Bloomberg News following the latest jobless claim figures. “Consumer spending will be pushed back on its heels for a longer time than markets are expecting.”

When the bleeding of jobs does peak, an upturn in employment could take some time as the United States experiences a jobless recovery. With an unemployment rate at or around 10%, home inventory levels could creep back in to 2008 territory.

“[The unemployment rate projection] indicates that the level of labor market slack would be higher by the end of 2009 than experienced at any other time in the post-World War II period, implying a longer and slower recovery path for the unemployment rate,” Fed economists wrote.  “This suggests that, more than in previous recessions, when the economy rebounds, employers will tap into their existing work forces rather than hire new workers. This could substantially slow the recovery of the outflow rate and put upward pressure on future unemployment rates.”

Source: Home Sales Will Struggle to Rebound Without Tax Credit Extension

But the news – released in a government report Friday – isn’t all good: Unemployment is likely to remain high in the months to come as some of these encouraging indicators of new economic growth evolve into a painful jobless recovery.

Friday’s jobs report and other recent data “reinforce our view that the U.S. recession ended in June, and we have raised our third-quarter 2009 growth forecast to 3.5%,” Christian Broda, a Barclays Capital (NYSE ADR: BCS) economist in New York, wrote in a research report yesterday.

Alan Krueger, the U.S. Treasury Department’s top economist, said he thought forecasts that growth would resume this year were “plausible” but expressed concern about long-term unemployment, which remains as a nagging problem.

“The administration is constantly looking at how to get people back to work, how to lessen the pain of the recession,” Krueger said in a news briefing.

In the government report released yesterday, the U.S. Labor Department said that U.S. payrolls fell by 247,000 after tumbling by 443,000 in June.

Factory payrolls fell by 52,000, their smallest decline in a year. Builders shed 76,000 jobs, an improvement over June’s decline of 86,000, and service-sector payrolls fell by 119,000 last month after dropping 220,000 in June.

Monthly job losses peaked at 741,000 in January.

While optimistic about the figures, analysts warned that the unemployment rate remains high and said that American consumers are likely to feel considerable strain for months to come.

Retail sales likely dropped for the eleventh consecutive month in July. And the two leading indicators of U.S. consumer sentiment – the Reuters/University of Michigan index of consumer sentiment and the Conference Board’s confidence index – continue to show weakness.

The Reuters/UM index dropped to 66 in June from 70.8 the month before, and a preliminary report for July shows further erosion to 64.6. The Conference Board’s index fell to 46.6 in July, down from June’s 49.3.

“We have in motion a turnaround in the labor market,” James O’Sullivan, a senior economist at UBS Securities LLC (NYSE: UBS) told Bloomberg News. “For a sustained pickup in consumption, we need a sustained improvement in the job market, and hopefully that’s in process now.”

Also, the official 9.4% rate doesn’t reflect the complete unemployment picture, because it doesn’t include people who were unable to find jobs and subsequently left the work force.

The rate of unemployment was actually 10.1% in June and 10.2% in July, according to the Bureau of Labor Statistics (BLS), which includes discouraged workers in its analysis.

The jobless have also been unemployed for longer stretches of time. The number of long-term unemployed – those jobless for 27 weeks or more – jumped to 4.9 million from 4.4 million in June. That means 32.5% of the all those who are unemployed had been looking for work for longer than half a year, a statistic that was up from 28.9% in June.

That problem is particularly severe as jobless benefits for many unemployed Americans are beginning to run out. Unemployment benefits generally are offered for a period of 26 weeks.

About 540,000 people nationwide will run out of benefits by the end of September, with the clock running out on an additional million by the end of the year, according to the National Employment Law Project.

“You have this desperate situation with long-term unemployment, and now folks are running out in big numbers of unemployment benefits,” Maurice Emsellem, policy co-director of the National Employment Law Project, told the Los Angeles Times.

Long-term unemployment will also keep many young, first-time jobseekers on the sidelines as more experienced unemployed workers file back into the workforce.

“Long-term unemployment is debilitating for people trying to find jobs in the first place,” University of Texas Prof. James K. Galbraith told TIME magazine. “Even if things stabilize and start to improve, bringing the unemployment rate down below 9% is going to be a struggle.”

Source: Joblessness Continues to Plague the Economy

U.S. gross domestic product (GDP) shrank 1% in the second quarter, following the first quarter’s 6.4% drop. The $787 billion Obama stimulus package, smaller decreases in business spending and slowing erosion of the housing market all helped to slow GDP contraction, according to the Bureau of Economic Analysis. A poll of 78 economists surveyed byBloomberg News showed a median estimate of a 1.5% decline in GDP.

“The recession is slowing but we still need to get households and businesses to start spending again,” said Joel Naroff, president of Naroff Economic Advisors, Inc.

With such a dramatic drop in the rate of contraction, the third quarter could sport the first expansion in more than a year. The last time the GDP grew was the second quarter of last year, thanks in large part to the $112.4 billion in stimulus payments to taxpayers.

Despite rising unemployment and a looming jobless recovery, Naroff is optimistic about consumer spending.

“Vehicle sales were actually up from the first quarter and are likely to be even better this quarter, so consumer weakness should not be a major concern,” Naroff said, adding that he’s optimistic that strong growth isn’t far off. “[GDP growth] could be either the third or fourth quarter and could approach 5%.”

Still, until there is real growth in consumer spending, any recovery will be difficult to sustain.

“We’ll get more support from government programs in the second half, but if you want a strong recovery, you need a strong consumer, and we are not seeing that,” Nigel Gault, chief U.S. economist at IHS Global Insight Inc. told Bloomberg.

A recovery may have to rely on business and government spending. Business investments, while still falling, slowed to a rate of 8.9% in the second quarter, a far cry from the first quarter’s 40% drop. The decline equipment and software purchases also slowed, falling a modest 9% compared to 36.4% in the previous quarter.

On the government side, federal officials – including U.S. President Barack Obama – say less than a quarter of the stimulus package has been spent so far.

“You just can’t push [funding] out that quickly, partly, not just because the federal government has to process applications but also because states and local governments have to gear up to get these projects going,” President Obama said in an interview with Fox News earlier this month.

Without consumer spending, which makes up more than two-thirds of the economy, any recovery will likely be agonizingly slow.

“We’re going from recession to recovery, but at least early on, it’s not going to feel like one,” said the chief economist at Moody’s Economy.com, Mark Zandi in an interview with The New York Times. “For economists, this is a seminal part in the business cycle, but for most Americans, it won’t mean much.”

Indeed, the unemployed or the underemployed struggling to make ends meet it’s hard to be optimistic, even as the markets, corporate profits and other economic data show improvement.

“At some point it becomes Obama’s economy, not Bush’s economy anymore,” said Dean Baker, co-director of the liberal research group Center for Economic and Policy Research told The Times. “He made a big mistake in overselling the first stimulus, and then in celebrating all the ‘green shoots.’ That just opens the door for people to say, ‘Where are my green shoots? I still don’t have a job.’ ”

Source: U.S. GDP Contraction Slows, but the Road to Recovery Will Be Rocky

When the U.S. Commerce Department on Friday said the U.S. economy contracted at a 1% annual pace in the second quarter, the report was actually seen as good news: It was a slower decline than in each of the two prior quarters, and economists had expected a contraction of 1.5%.

“This is good news,” Nariman Behravesh, an economist with IHS Global Insight Inc. (NYSE: IHS), told The San Francisco Chronicle.

But here’s the wild card: Although government spending did increase during the April-to-June quarter, only about 7.7% – $60.4 billion – of U.S. President Barack Obama’s stimulus package had actually made its way into the U.S. economy by June 30, the quarter’s official conclusion. Of that total, the largest component went to U.S. states to help defray the jump in Medicaid costs, CNNMoney.com reported.

Much of the $43 billion in stimulus tax relief – including the “Making Work Pay” tax credit for individual workers – also took effect during the second quarter, CNNMoney said.

At this point, it’s really difficult to “see how the effect of stimulus has been very large,” Edward Lazear, an economics professor at Stanford’s Graduate School of Business – who served as an advisor to former U.S. President George W. Bush – told CNN. “Very little has gone out.”
And that’s the problem.

In short, it looks like we’re already experiencing an economic rebound – without the Obama stimulus having really even kicked in … yet. In fact, the impatience over the continued U.S. malaise, the slowness of the economic turnaround and the fact that when growth does return we’re almost assured of a “jobless recovery” actually has some Washington legislators already pushing for a second stimulus.

That means the economy will be in rebound mode when nearly three-quarters of a trillion dollars in stimulus money starts to flow in. Dumping all that money into an already-growing economy won’t just serve as a simple tailwind that gives the economy a gentle push; it will be more like the head-snapping start followed by the thunderous charge down the quarter mile that we see from one of the supercharged Top Fuel Funny Cars driven by National Hot Rod Association (NHRA) star John Force. (From a standing start, Top Fuel Funny Cars cover a quarter mile in less than five seconds at speeds well in excess of 325 miles per hour).

And there’s only one outcome from that scenario – rampant inflation. In fact, U.S. consumers are probably headed for the worst bout of inflationsince the 1980s. And that makes the so-called “exit strategy” of U.S. Federal Reserve Chairman Ben S. Bernanke all the more important.
To be sure, the Obama stimulus has given the economy a bit of a boost. So far:

• The states have deployed what stimulus money they have received, which helped fuel the biggest surge in state and local spending since 2007.
• Some early pieces of the stimulus – such as the $25 increase in unemployment benefits – have allowed consumers to spend more.
• And one economist – Economic Policy Institute’s Josh Bivens – said Obama stimulus money may have boosted growth by as much as three percentage points during the second quarter.

But other economists say that – given the environment – the second-quarter GDP numbers were much too strong. After all, business spending dropped 8.9% and hours worked fell 7%. Somehow that doesn’t translate into a mere 1% drop in GDP. That latter figure will most certainly be revised downward in the future.

Unless or until that happens, look for the third quarter GDP statistics to give us a better picture of the U.S. economy’s health. Complaints that the promised stimulus money isn’t getting where it needs to be have Obama’s economic team working overtime to iron out the problems that keep cropping up.

Mark Thoma, an economics professor at the University of Oregon, toldCNNMoney that “the third quarter will be a critical time period for assessing the stimulus package.”

And for assessing the inflation threat – which Money Morning has repeatedly warned is a very real threat. Gold, commodities, and other hard assets will be key holdings. The same is true for dividend-paying stocks. And make sure to go global – the best growth prospects will continue to be overseas.

Market Matters

A report by the New York Attorney General’s Office claims the initial nine institutions that received Troubled Asset Relief Program (TARP) money paid out $33 billion in bonuses in 2008.  Of particular note, Citigroup Inc. (NYSE: C) and Bank of America (NYSE: BAC) rewarded a combined 900 employees (combined) with bonuses of at least $1 million, despite having received $45 billion each in government aid (and that doesn’t count the $3.6 billion Merrill Lynch & Co. Inc. employees received).  Imagine how much they would have made if the companies were actually doing well?

While President Obama continued his road trip across America to promote health care reform, a group of conservative Democrats (Blue Dogs) came up with their version of a bill, but offered no timetable for completion.

Meanwhile, regulators pushed forward with proposed rules aimed at reducing speculation in the marketplace and focused on so-called “naked” short selling and on lpacing strict limits on commodities contracts.

In corporate news, deals were the theme of the week.  Microsoft Corp. (Nasdaq: MSFT) made amends with Yahoo! Inc. (Nasdaq: YHOO) and forged a 10-year partnership to cut into Google Inc.’s (Nasdaq:GOOG) share of the Internet search business. And International Business Machines Inc. (NYSE: IBM) is expanding its software empire with the purchase of SPSS Inc. (Nasdaq: SPSS) for $1.2 billion.

On the earnings front, energy companies highlighted the week’s reports and the results were not pretty (though were expected).  On a positive note, Motorola Inc. (NYSE: MOT) surprised analysts by reporting an unexpected profit, while offering a promising outlook, and Deutsche Bank AG (NYSE: DB) continued the favorable trend among (previously depressed) financials by posting strong earnings on solid investment banking operations.

Investors digested the mixed earnings news and chose to focus more on the positives.  Despite a temporary setback in China (5% index decline before encouraging comments by its central bank), the Dow Jones Industrial Average moved higher late in the week after General Electric Co. (NYSE: GE) was upgraded to a “Buy” by a major analyst, a sign of an improving climate.  The Nasdaq Composite Index even flirted with 2,000 for the first time since October 2008, and theStandard & Poor’s 500 Index edged closer to 1,000, a level not seen since last November.

The Dow ended July with its best monthly performance since October 2002.  Japanese stocks moved to their highest levels in about 10 months and European equities soared to nine-month highs.  Bond investors breathed sighs of relief as a record $115 billion Treasury auctions came to a close and foreign bankers emerged as buyers on the final day.

Economically Speaking

Has Fed Chairman Bernanke suddenly become Mr. Optimist these days? Early in the week, he proclaimed that the financial debacle ultimately would produce favorable results as “not only will we will be back on track, but the economy will be stronger than it had been before this started.”  He also urged Congress to move forward with a regulatory reform package to ensure that such dire times will not be repeated.

The Fed’s Beige Book showed that the economy remained weak, though signs of stabilization and improvements in manufacturing, housing, and even labor are occurring across several regions of the country.  Some districts reported enhanced corporate hiring, particularly within the healthcare and technology sectors.

The afore-mentioned second-quarter GDP report was better than expected, giving yet another indication that the recession is drawing closer to an end.

Still, it’s a much deeper recession than most realized: For the first time since records have been kept (1947), economic activity has declined for four consecutive quarters.  New homes sales skyrocketed in June by 11%, the fourth increase in the last six months, and home prices even climbed on a month-over-month basis for the first time since July 2006 according to the S&P Case-Shiller index.

Durable good orders fell in June, though once the volatile transportation category was removed from the statistic, orders actually increased.  Consumer confidence fell in June, as ongoing pressures on the labor markets brought continued concerns and many Americans are refraining from major purchases (now and for the foreseeable future).

On the other hand, jobless claims rose in the most recent week, though analysts pointed to discrepancies from the auto industry.   Looking at the four-week moving average as a better gauge, claims for unemployment benefits actually fell to the lowest level since January and continuous claims unexpectedly declined, as well.

Weekly Economic Calendar

Source: Why the Obama Stimulus Has Us on a Collision Course with Inflation

But don’t expect that to last. A slump in consumer spending and soaring unemployment could both pose a significant threat to retailers going into the 2009 holiday season.

The U.S. unemployment rate hit 9.5% in June and could eclipse 10% by the end of the year, sending the economy into a “jobless recovery.”

In a speech to Congress on May 9, Federal Reserve Chairman Ben Bernanke cited a lack of consumer spending could serve as a constraint on hiring. This could create a paradoxical effect as employment obviously plays a key role in consumers’ spending habits.

Even for the employed, the lessons learned from the worst economic downturn since the Great Depression will resonate with consumers. That has already been evidenced by the U.S. savings rate, which has climbed above 4% for the first time in more than a decade.

In addition to taking money out of the hands of potential customers, soaring unemployment could lead to higher lending standards. As unemployment rises, so too will credit defaults and the cost of credit will increase accordingly.

In the past, consumers have counted on attractive financing promotions for the purchase of big-ticket items such as high-definition televisions and kitchen appliances. But that won’t be the case with tighter credit

“Consumers were also able to spend more because of the easy availability of credit, most notably through mortgage equity withdrawal and they responded by buying more items,” said Deloitte Strategic Advisor Richard Hyman.  “These conditions underpinned retail growth for the past 10 years but have now disappeared. However, it’s worse than that. They will clearly not return once the recession is over.”

Of course, tighter credit isn’t just a problem for consumers.

A Brick & Mortar Inventory Crunch for the Holidays?

The potential bankruptcy of commercial lender CIT Group Inc. (NYSE:CIT) could be a major tipping point for businesses that rely heavily on credit. Vendors for retail giants such as Wal-Mart Stores Inc. (NYSE:WMT) and Target Corp. (NYSE: TGT) rely on CIT for factoring – an old form of finance in which the lender pays the vendor for its accounts receivable. If the retailer fails to pay for the goods, the lender assumes the responsibility to pay the vendor.

“Right now our industry is preparing for the fall and winter season,” Kevin M. Burke, president and chief executive of the American Apparel and Footwear Association told The New York Times. “A lot of these orders are going to come to a grinding halt if there is no capital.”
A CIT bankruptcy would be a “double whammy” to stores whose suppliers have already cut the amount of merchandise they are making to better align inventory with the drop in consumer spending, said Burke. If those suppliers lose their sole source of capital, what little merchandise retailers originally ordered might never arrive.
The timing of CIT’s woes is “terrible,” Al Ferrara, a partner in retail and consumer products business of consulting firm BDO Seidman LLC said in a Reuters interview. “Retailers now are basically gearing up for the back-to-school and the fall season.”
An inventory crunch at brick & mortar retailers would give a competitive advantage to online retailers, which have more flexibility and already account for about a third of holiday retail sales.

For brick & mortar retail businesses, managing inventories during the holiday season is a delicate balancing act in which managers must walk a fine line between over- and under-ordering stock.

If retailers overstock, they will be forced to offer even steeper post-holiday discounts than they would like in a desperate bid to unload inventory. But if they don’t stock enough merchandise to meet demand they risk not only missing out on sales, but driving potential customers to online retailers, such as Amazon.com Inc. (Nasdaq: AMZN) whose warehouses are not restricted by the display racks and checkout counters found in brick & mortar stores.

This doesn’t mean brick & mortar retailers will sit idly by this holiday season as Amazon siphons off customers via the Internet. All of the nation’s biggest retail players have their own websites too, but the gap between Amazon and the No. 2 online retailer, Staples Inc. (Nasdaq:SPLS) is huge: Amazon generated $19.2 billion in online revenue in 2008, while Staples generated less than half of that in the same year: $7.7 billion.

While half of the top 10 online revenue generators came from traditional stores, notably absent were brick & mortar discount giants Wal-Mart and Target.

And even Best Buy Co. Inc. (NYSE: BBY), which displays in-store signage promoting an “expanded assortment” of products online for consumers who did not find what they were looking for in the store, came in at just No. 10 on the list.

Shopping for a Silver Lining

While a continued slump in consumer spending would benefit no one, certain retailers are better positioned than others, and could ultimately use adverse economic conditions to turn a profit.

For instance, the aforementioned Amazon.com, which is the world’s largest online retailer, could see a sizeable boost in its web traffic as consumers comb the Internet for bargains.

Companies that have a consumer-friendly economical brand, such as Wal-Mart, will also benefit.

Wal-Mart’s “Save Money, Live Better” slogan is already resonating with consumers, and The No. 1 retailer in the world has gone to great lengths to cement its reputation as the affordable choice for shoppers.

The company has set up a “Save Money, Live Better” website (complete with testimonials of what people are doing with the money they save by shopping at Wal-Mart) and a “Live Better Index,” which includes an interactive map of the United States to show how much money people have saved in each state by shopping at Wal-Mart.

The result of Wal-Mart’s efforts? Holiday sales grew 7% last year, according to the Advertising Research Foundation.

Similarly, same-store sales are consistently rising at discount houses such as Family Dollar Stores Inc. (NYSE: FDO), and Ross Stores Inc. (Nasdaq: ROST), the latter of which has the “Dress for Less” sloganright under its name at every store. On the flip side, stores like Macy’s Inc. (NYSE: M) and Saks Inc. (NYSE: SKS) have reported consistent declines in same-store sales over the past few quarters.

“Needs-driven spending will gravitate towards retailers able to tick the most important consumer boxes like price and convenience,” said Deloitte’s Hyman. “Although it will remain the engine of retail growth, wants-driven spending will slow and consumers will be much more choosy.”

Source: Retail Sector Faces Uphill Climb in 2009

These days, we’re all facing unemployment, whether or not we’re working. That’s because as unemployment rises, as layoffs continue and as prospects for a “jobless recovery” escalate, losing a job is top-of-the mind, if not all-consuming and all-encompassing.

Even the top workplace performers see the statistics and government reports. Since the current U.S. recession began in December 2007, almost seven million jobs have been lost, more than 1.4 million of them among professionals. The Labor Department says total employment is now at its lowest level since August 2004.

All this leads to the question: What can I do to make my job more secure? What skills, attitudes, and attributes should I have to make it less likely that my name will be on my company’s next list of those to lay off?

Some of these survival tactics consist of so-called “soft” skills – attitudes and relationships – while some skills involve more-measurable tasks. Some of these soft skills may sound obvious, but for many workers, developing them will lead to real, meaningful personal change. The long-time worker who gets through the day with his head down and nose to the grindstone, just like the colleague who gets through the day with a constant stream of humor and jokes, will learn that they need to add new tactics to their personal skill-set arsenal.

That’s because a vital key to keeping your job in these down times is visibility – but only positive visibility, and especially positive visibility that has a tangible connection with measurable results.

Boosting Your Value By Boosting Your Profile

Raise your profile within the company by doing things you haven’t done, things that may seem peripheral to the business but are key to the office. Remember, the office is a social community that’s within the business, and it works, or doesn’t work, just like any other social grouping. It may not be fair, but the odd man – the worker who goes straight home rather than socializing with co-workers – may end up being the odd man out.

Because the office is a social entity, you’ll have to develop a unique standing within it to increase your chances of survival as the entity shrinks through layoffs. This entails building what experts are referring to as a “personal brand,” creating an array of strengths and attributes that are unique to you. This doesn’t mean that you should be the only one to wear a bow-tie or that you should wear a yellow dress every day; it does mean that you have enough to offer the bosses that you will be remembered when the time comes.

Workers can raise their profiles when they make the effort to join special committees or even help organize a company-wide social engagement. This can consist of doing something as simple as getting your department co-workers to all go out to lunch together to actually intramural athletic events.

“Conventional wisdom may say that you should keep your head down, especially during an economic downturn,” says Meredith Haberfeld, an executive coach who operates out of New York.

However, the reality is that visibility is all-important, she said. But only good visibility. The worst form of visibility – complaining and criticizing – is all but a guarantee of a bad personal outcome, Haberfeld said. Avoid gallows humor (quipping “you want fries with that?” to an executive), or out-loud cynicism (asking, tongue-in-cheek, “hey, boss, you here to fire me?”).

Almost any form of gossiping is poison, and the high-maintenance employee is the endangered employee, says employment counselorSusan Heathfield.

Author and career coach Alexandra Levit told Money magazine that you should avoid guilt by association, just as you should seek approval by association: Don’t hang out with the down crowd  (the “Debbie Downers,” she calls them), and do hang out with the people the bosses (genuinely) like.

The next step toward visibility is upward, rather than outward – making sure that your bosses actually know what you’re doing for the company. This, according to Haberfield, comes down – very simply – to blowing your own horn. After all, if you don’t do it, chances are that no one else will, and chances are very good that someone else will try and take credit for your successes.

If you had a successful sales campaign, let the bosses know. If you’ve been able to show how work now being done by expensive consultants could be done in-house – and for a lot less money – let them know.

“My suggestion is that you work your tail off to be visible about the results you’re producing” says Haberfeld.

And don’t just assume that the numbers speak for themselves. If you’ve developed a new technique in your last sales campaign, tell the bosses. And tell them in writing: a casual remark in the elevator really won’t do. The ‘invisible guy’ is the first guy to go, says Stephen Viscusi, author of‘Bulletproof Your Job: Four Simple Strategies to Ride Out the Rough Times and Come Out on Top at Work.’

Stepping across boundaries rather than building them is the right approach. If you’re in public relations, but you have a sales lead, share it with sales – and make sure they don’t take credit for it. If there’s a big project that you’ve managed to avoid every time it comes up, change that. Write this year’s annual “Year in Review,” even if you are certain that no one reads it.

Needed New Skills to Seek Out

Being the invaluable, irreplaceable employee no longer means hoarding expertise in just one area. Indeed, that’s just won’t work in today’s environment.

What will work is new skills. Here are some ways to develop them:

• Mentor Your Way to Success: Seek a mentor within your organization. Or, better yet, be one. If you’re low down on the totem pole, seek the advice and counsel of someone higher up; and vice versa, Ana Dutra, chief executive officer of Korn/Ferry International’s (NYSE: KFY) Leadership Development Group, recently told The Harvard Business Review. Getting a mentor is an effective way to gain new skills – while also boosting your visibility to higher-ups: “How do I do this in Power Point?” soon leads to “Teach me how to do that neat thing you do, that Dreamweaver thing.” And that leads to a new skill set. All of these techniques come close to bootlicking; it all depends on how you do it. Some experts such as Viscusi advocate taking this a step farther by sharing your personal travails with the boss. This may seem like a risky strategy, and would depend on the personalities involved. But if you’re learning new skills from a company elder, you’re doing good for them as well as for yourself.

• Embrace ‘Social Media’: Many companies have been slow to embrace the tools and services of MySpace.com, Facebook Inc.,LinkedIn Corp., and the like, while their employees have jumped in. Become your company’s “go-to” for new media; even if it’s an unofficial position, it’ll increase your perceived importance within your organization, and if you handle it correctly it will also build your network of allies. (One key point: Whatever you do, don’t spend your office time on Facebook unless it’s officially sanctioned and everyone knows it!).

• Stay Ahead of the Pack: Keep up with developments in your field. This is different than acquiring new skills; this is going to professional societies and finding out what will be happening in the next few months or years – and being ready for these new trends. In fact, you can even position yourself as the “informed source” inside your group by letting folks know just what’s beyond the horizon in your business – again, creating for yourself a position of perceived value.

• Volunteering: Some experts recommend volunteering outside of the workplace as a job-preservation skill. It can expose you to new ways to use your skills. For instance, an executive from a communications firm volunteers and finds a new type of audience to write for and helps her firm expand into seeking non-profit clients. Volunteering can also be a way to increase public awareness of the company’s name and brand.

• Seek Certifications: There are other technical skills that can (and should) be acquired formally, through a professional certification. Remember, you don’t need to go through a lengthy, costly certification process to learn important job skills such as becoming an Excel pro. You can learn through a mentor but you can also learn through expert user groups that meet regularly; you can even take a course at the local community college. Look, too, at low-cost seminars that many professional groups hold.

[Editor’s Note: In future installments in this series, Money Morningwill look at such jobless recovery topics as executing the perfect job interview, managing your finances, planning for retirement, and the most promising sectors for the future. The first installment outlined an entire career-survival plan for those who’ve lost their jobs. And a sidebar to this story, which appears elsewhere in today’s issue of Money Morning, talks about how employees can use new certifications to bolster their value. To read that story,please click here.

Source: How to Keep Your Job in a Jobless Recovery ]]> http://www.contrarianprofits.com/articles/how-to-keep-your-job-in-a-jobless-recovery/19103/feed 0 http://www.contrarianprofits.com/articles/where-to-find-jobs-in-a-jobless-recovery/18473 http://www.contrarianprofits.com/articles/where-to-find-jobs-in-a-jobless-recovery/18473#comments Mon, 29 Jun 2009 18:30:52 +0000 Jason Simpkins http://www.contrarianprofits.com/?p=18473

There’s no question that the U.S. job market is tough across the board right now. But not all pain is created equal: There are regions of the country – and sectors of the U.S. economy – that haven’t been hit quite as hard as others.

Indeed, some regions – and some sectors – that are proving quite resilient.

So, if you’re in the market for a job, it might be a good idea to target those areas and sectors that have demonstrated flexibility over several decades and are best able adapt to 21st century trends.

For job-seekers, it all comes down to this: You have to know what’s hot – and what’s not.

The three graphs below – based on data from the Federal Reserve Bank…

After all, just consider that:

• The U.S. unemployment rate just spiked to 9.4% for May, up from 8.6% in April, meaning the nation’s jobless rate is now at its highest level in more than 25 years.
• Throw in the fact that the current jobless rate does not include people who have taken part-time jobs below their skill levels to make ends meet (a little-referred-to situation calledunderemployment), and the “real” unemployment rate soars to a staggering 16.4%.
• More than 6 million workers have lost their jobs since the recession started in December 2007, meaning one in 20 jobs has disappeared – many of them forever.
• A total of 14.5 million Americans are now unemployed. The number of long-term unemployed (those without jobs for 27 weeks or more) recently increased by 268,000 to 3.9 million and has tripled since the start of the recession.

But that’s not the worst of it. Experts are projecting an economic rebound that will take hold late this year – early next year at the latest. At the same time, however, economists are starting to whisper about a “jobless recovery,” an upturn in which the economy and corporate profits advance, but virtually no new jobs are created to overcome the years of layoffs that preceded the rebound. In fact, the U.S. Federal Reserve said the U.S. economy might not return to its “normalized” unemployment rate of roughly 5% until 2013, Argus Research Chief Economist Richard Yamarone wrote in a recent report.

So while there appears to be some light at the end of the tunnel for the economy in general, the outlook is somewhat more challenging for those who are unemployed, underemployed, or who are currently working but who still harbor dreams of “career advancement.” As bleak as this all may sound, jobseekers (both employed and unemployed) shouldn’t be deterred: With a sound strategy, and four simple secrets, it’s still possible to survive – and even thrive – in a jobless recovery. We’ve labeled them as the “Four P’s” – Plan, Pinpoint, Pounce and Persevere.

Planning to Win

It’s a well-worn adage, but it’s also a truism: Those who fail to plan are essentially just planning to fail. Have a plan to keep your life on track while you see that new career opportunity.

When “joblessness” strikes, it usually does so in one of two ways.  It either catches you completely off guard – often with a hastily called series of employee meetings, or that Friday afternoon summons to the boss’ office – or you’ve seen the handwriting on the wall (or in your company’s financial statements), and so you knew it was only a matter of time. Either way, if you let the search for a new job consume 100% of your life, you may end up losing more than just a regular paycheck.

By far, the largest consequence when you lose a job is the loss of regular income. Having a plan to deal with this change is just as important as getting a new job.

To create this plan, start by asking this question:  Do you have enough cash on hand, or can you access the needed funds, to pay all your bills, while you’re looking for a job?

If your answer is “yes,” congratulations.  You’re much better off than the majority of people losing jobs right now.  For the purposes of this article, go ahead and skip to the second “P” – Pinpoint.

But if you’re like most unemployed Americans, you depend on a regular paycheck to meet your financial needs.  Once that income stops, you’re going to have to make some difficult choices based on your financial situation.  Waste no time in taking the steps to address these issues head-on by:

• Contact your creditors:  With such liabilities as a credit card, credit line, or outstanding medical bills, if the creditor in question doesn’t have a program in place to suspend your account for a couple of months while you track down that new job, then they likely have a program to reduce the interest rate and modify your payments.  Believe it or not, they’ll work with you, especially right now.  The last thing they want is for you to default on the loan.  The earlier you contact them, the better off you’ll be – especially in the long run.

• Micro-budget yourself:  Figure out what you can and cannot do without.  The longer your job search lasts, the easier it becomes to do without cable television, dry-cleaned clothes, making that weekly sojourn to your local restaurant, or stopping every day for that morning muffin and coffee. Scrutinize your bank statement. Consumers are often surprised how often they’ve accumulated automated payments or account debits – which they’ve forgotten about. Look closely: If you’re still making regular payments to magazines, dating services, TV-based services, or even mutual funds, look at those you can stop.  You’ll be surprised at what you can eliminate from your monthly expenses once you know what’s actually being paid for.

• Seek Alternative Income: Do this immediately. Access other income sources as soon as you can.  If you’re eligible, apply for Unemployment Compensation; sometimes it can take weeks for this to kick in, so the sooner you apply, the sooner you can begin to collect an income.  If needed, find another source of income – you’ll be surprised how many opportunities are out there for people who are willing to take on shifts outside of the 9 to 5 norm.

As you work through these necessary tasks, make time to jumpstart your job-hunt, as well. Unless you’re forced to take the first real offer that comes your way, don’t be afraid to make the most out of this situation by including your dream job in process. The worst that can happen is that you don’t land that particular job.

But you just might do it.

Just as with the “Plan” phase of your job search, you’ll create the best chance for success in the job-hunting phase if you “Pinpoint” exactly what you’re looking for.

Pinpointing Success

By pinpointing your objectives, you have to understand just where you want to be. But you also need to pinpoint just how you intend to get there, and to be realistic about what you’re up against. It’s the last of those three that’s often the toughest to see and understand. So let’s take a closer look.

Understanding the Challenges: As we noted just moments ago, it’s not too difficult these days to get a pretty good idea of the overall unemployment scene: The official unemployment rate was last this high in 1983, and it’s going to get higher before it hits its apex and heads lower. But you also need to understand just what the hiring situation is in the specific industry you wish to work in – as well as the specific geographic market where you hope to work.

On an industry-wide level, The U.S. Bureau of Labor Statistics Web Site (www.bls.gov) is a good place to start.  By checking out their monthly Economic Statistics reports, you can get a clear picture of industry-specific performance in the U.S.

For example, in the Employment Situation Summary for May 2009, we can see that both the education/health services and leisure/hospitalitysubsets of the service-providing industry added jobs last month: 44,000 and 3,000 jobs, respectively.

Whereas, the goods-producing, manufacturing, and service- providing sectors were down 225,000, 156,000 and 120,000 jobs for the month, respectively.
By combining industry-wide knowledge with more specific resources available for your cities and states on Web sites provided by local newspapers (in my local area, that would be The Baltimore Sun or The Washington Post, for example), social media networks (like Craig’s List or Facebook) and jobs sites (such as Monster.com orCareerbuilder.com), you’ll gain a much better idea of the job market available to you right now.

Define Your Goal: This is the point most people start at when job hunting because they think it’s the easiest to knock out.  Well, in part, they’re right.  There’s no better authority than you when it comes to knowing what you can do or want to do.

But there’s a mistake most jobseekers make – a mistake you need to avoid at all costs: Don’t sell yourself short, and don’t “pigeon-hole” yourself by thinking that your skills will only allow you to do a very narrowly defined job. Granted, for certain specific trades – such asHVAC installation and service, plumbing, or auto repair – you may be looking for highly specialized work.

In Corporate America, however, people who’ve worked in the divisions or departments essential to business – such as marketing, sales, human resources, logistics, or operations – jobseekers often don’t see those additional possibilities. If someone has spent the last 11 years working in HR for an accounting firm, they may not realize that they have the skills or experience needed to do a similar job within a school system, a hospital or health-care center, or a startup technology firm. And they could end up missing out on some good-paying and career-rejuvenating opportunities in the process.

That’s when the marriage between knowing what you’re up against and know what you want to do becomes critical.  Once you’ve identified which industries are the go-to segments for employment, you just have to look for the companies within that industry that offer positions in which you’ve had all of that experience.  Sometimes, though, you may need to persuade the decision-maker for the position in question that your experience in one industry lends itself to the other.

And finally, understanding of the challenges you face may also give you an entrée into the industry that houses your dream job.

Of course, you need to be somewhat realistic, even as you act with enthusiasm and aggressiveness. For example, if you always wanted to be a major league relief pitcher, but are now 34 years old with eight years of accounting experience to your credit, the chances are pretty good that the New York Yankees aren’t going to be phoning you to offer a mound tryout. However, the Bronx Bombers – like any other business – do have an accounting division, and your experience may be a perfect fit for what they’re looking for.

Remember that your sudden joblessness may give you the opportunity to get into an industry that you’ve always wanted to be in.  Now, though, you have the requisite experience within one of the departments common to every company, that makes you a much more attractive candidate for that position.

Now, you just have to be able to seize an opportunity, once you’ve identified it.  And that brings us to the third “P” – Pounce.

Pounce on That Possibility

Too many job seekers begin their search in an all-out desperation mode – thinking they have to find a job as soon as possible.  Even if that’s true in your case, if you’re not prepared to make the most out of every job-seeking situation you enter, you may end up blowing the best chance – at the best job – that you’ll ever see.

So, take a page from the Boy Scouts: Be prepared – to pounce.  That is, prepare for the best possible scenario, as if you’re going to hit the job-seeking jackpot.  For example, what happens if the first company you contact asks you to send your resume and references right away, so the chief executive and the head of HR can look them over this morning and then have you in that afternoon? If you aren’t prepared, you can’t pounce on the prospects that may come your way.

Well, if your answer to that request is “I can e-mail whatever you’d like right now.  What time this afternoon would you like to meet?” you’re on your way.  But if the last time you looked at your resume was six years ago, during your last job search, or you last spoke to your best prospective reference three years ago (and don’t even know where they’re working today), chances are you’ll still be job hunting long after someone else is happily seated (and working) behind the desk that should have been yours.

So even before making that first call or typing in that first word for an online search, make sure that you have the following information updated, available, and ready to be sent at the drop of a hat:

1. Resume: More than just having it updated, make sure that you know it backwards and forewords.  Be able to explain gaps in your employment history, or why you’ve recently jumped from job to job.  The best plan: Have a general template that you can individualize or customize in order to pounce on a specific job opening.
2. Cover Letter: In many cases, the cover letter is just as important as your resume.  It should be your Sports Centerhighlight reel, but it should also be concise. Like you have with your resume, prepare a cover letter template, so that you can customize information for different openings, catering your comments to specific requirements or requests.
3. References: At a minimum, you should have the names and contact information (phone and e-mail) for three business and personal references.  For businesspeople, include their titles and company names.
4. Samples of work: For positions in such “creative” fields as copywriting, graphic arts, architecture, or industrial design, to name a few, you’ll be asked to submit samples of your work.  Make hardcopies and electronic files of whatever you can, so that you can submit them in multiple formats.  Never give away originals, thinking that they’ll be returned – chances are, you’ll never see them again.

In addition to having the documents and materials above ready to go with a moment’s notice, you should also have the following information and materials readily available:

1. Your schedule for the week:  If you’re asked when you’re free later in the week, you need to be able to answer that question immediately.  The worst thing you can do tell someone that you’re meeting with at that moment, or that you’re talking with on the phone, that you’ll get back to them with that information.  You may not be able to connect later, for a variety of reasons.  Then when you do re-connect, you window of opportunity may have closed.
2. Clothes for an interview: Some laugh at this suggestion as oh-so-obvious, but you’d be surprised how many times people will tell us that they were called in for an interview – only to realize that their best suit was still rumpled from their last interview, three weeks ago. You don’t have to go out and purchase a new suit for every interview opportunity, but if you’re asked to come in to talk that day, and you don’t have time to wash, iron or otherwise clean appropriate clothing, you run the risk of making a bad impression – and losing the job.

Don’t Give Up

It goes without saying that this is one of the toughest and most-challenging periods U.S. job seekers have faced. But it also goes without saying that you can’t give up. That’s why the fourth of our four insights – the “Four P’s” is perseverance. Hope for the best, but don’t be discouraged if no job offer is immediately forthcoming. Prepare for the long haul by following the game plan we’ve identified, and use that as a survival kit that will get you through to the long run, where those who persevere usually win.

Source: The Four Secrets to Career Success in a Jobless Recovery

[Editor's Note: The first in an occasional series that looks at unique strategies for navigating the jobless recovery.]