In This Economy, Productivity Comes Without Hiring

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As hundreds of corporate leaders from across the country gather in the Buckeye State for the 2011 National Middle Market Summit, the public pressure for job creation has reached a fever pitch.

In the past week, Federal Reserve Chairman Ben Bernanke warned that the economic recovery is "close to faltering," Goldman Sachs predicted unemployment to push past 9.1 percent in 2012, and the Occupy Wall Street protests against job cuts and underemployment are gaining national attention.

Yet, despite this pressure, 'middle market' firms say they can't fix the problem right now.

"There's a permanent reduction in the workforce, due to productivity gains. There will be no short term reduction in unemployment," says Jeffery Weiner, Managing Partner at the public accounting and advisory services firm for Marcum LLP.

In a fiercely competitive sector, productivity and revenue among mid-sized companies are making headcount a secondary consideration, because a lower headcount hasn't meant a lower bottom line, he said.

"Worker productivity is at an all time high. People have figured out how to do more with fewer people. We could do even 20 percent more revenue with our current workforce. I think there are a lot of companies that could pull in more revenue with the current workforce they have," adds Weiner.

The ability to get 'lean and mean', and survive the recession, is actually considered a mark of accomplishment in this corporate circle. And it's no secret; the current international ad campaign from consulting firm Accenture is "How do you get more out of the same resources?"

This message runs contrary to the jobs problem economic policy makers are working to solve. And the problem is dire. According to the Bureau of Labor Statistics, BLS, 58.8 percent of unemployed people in the US labor force have been unemployed for longer than 15 weeks — longer than in previous recessions.

Mid-size companies say they're trying to do their part. Some are opting to reduce hours, rather than resorting to layoffs. "Employees are willing to work 32 hours. They'll work four day weeks with benefits because they want to stay employed. We hope that when the economy comes back, we'll be able to ramp up pretty quickly because they're still staff," says Nicholas Cavalaris, General Counsel to MS Consultants, Inc.

A private engineering company, MS Consultants has around 375 employees and operates in five US states. Seventy percent of their budget is devoted to public infrastructure projects. When state budgets collapse, it directly impacts their headcount.

Executives say time and time again that they wish they could hire. One argues that the US needs to take a hard look at its shortage of technically skilled workers.

"We've had more than 20 vacancies for the last six months. It's a problem. There's a shortage of trained technicians in the US. In our business, we sell technicians' time, so there is little if any demand to hire back office employees. That's the sad part," says Alwyn Smith, President of the US division of the multinational capital equipment dealer, Barloworld Handling LLC.  

What will it take to start hiring?

"Until the economy can expand year on year, you won't see broad based hiring," adds Weiner.

Indeed, Real GDP in the second quarter of this year came in at 1.3 percent, which economists say is much too low to boost hiring.