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Companies Get Leaner — Labor Market Gets Meaner

What exactly is going on in the U.S. job market? The AP recently ran an interesting story on the trials and tribulations of those looking for work in the current economic environment:

AP

"They're [job seekers] running into a trend that took root during the recession. Companies became more productive by doing more with fewer workers."

"Some asked staffers to take on a broader array of duties — duties that used to be spread among multiple jobs."

"Now, someone who hopes to get those jobs must meet the new requirements. As a result, some database administrators now have to manage network security."

So the constant pressure on managers to "do more with less" seems to be translating into actual shifts in hiring policies and practices. And that not only has a negative effect on those seeking jobs, but also on companies that are finding it more difficult to fill the open jobs they already have. The article continues:

"The broader responsibilities mean it's harder to fill many of the jobs that are open these days. It helps explain why many companies complain they can't find qualified people for certain jobs, even with 4.6 unemployed Americans, on average, competing for each opening."

"By contrast, only 1.8 people, on average, were vying for each job opening before the recession. The total number of job openings does remain historically low: 3.2 million, down from 4.4 million before the recession."

"But the number of openings has surged 37 percent in the past year. And yet the unemployment rate has actually risen during that time."

The consolidation of job roles provides an interesting overlay against stories of rising corporate profitability. Last week, The Wall Street Journal ran a piece on corporate profitsnearing record highs.

According to the Journal:

"An analysis by The Wall Street Journal found that companies in the Standard & Poor's 500-stock index posted second-quarter profits of $189 billion, up 38% from a year earlier and their sixth-highest quarterly total ever, without adjustment for inflation."

"As companies begin reporting results for the third quarter, just ended, the strong growth is expected to continue, albeit at a slower pace, S&P said. Earnings for brokerages are forecast to fall. "

"For all U.S. companies, the Commerce Department estimates second-quarter after-tax profits rose to an annual rate of $1.208 trillion, up 3.9% from the first quarter and up 26.5% from a year earlier."

"That annual rate is the highest on record, though it doesn't account for inflation. As a percentage of national income, after-tax profits were the third-highest since 1947, surpassed only by two quarters in 2006, near the peak of the last economic expansion."

It makes you wonder about the costs.

According to a September report by the Bureau of Labor Statistics, non-farm payroll unemployment remained unchanged at 9.6 percent. (A recent Gallup poll finds unemployment topping 10 percent.)

And perhaps more disturbing still is the underemployment rate, reported by Gallup to currently stand at 18.4 percent.

And what does all of this consolidation say about the long-term competitiveness of American business writ large?

Consolidating job roles may create a short term drop in costs, and a corresponding increase in earnings — but you don't need to be a high-priced McKinsey consultant to game out the potential operational downside on this one.

Take the simple example cited in the AP story above: the database administrator who is serving double duty as a security manager. What do you suspect is going to happen after the first major post-consolidation security breach arises? The DBA, if he's a good one, will calmly explain to his boss that the problem could likely have been prevented — if only he'd had a dedicated security manager to focus exclusively on security-related issues. Doing more with less often translates into more problems — with fewer resources to manage them.

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