Executive Careers Blog

Threat of Jobless Recovery Undermines Market Optimism


Much of the economic news lately has been positive. July was a great month for the stock market, the best since 2002. Second quarter results for a number of major banks were quite good and many top corporations beat estimates. Finally, several key indicators, including the latest on GDP, suggest that the Recession may be easing or even ending.

Unemployment Line

Is it time for managers and executives like us to break out the champagne? I think not. Some of the recent revelry clearly falls in the category of wishful thinking (I mean, how many months in a row can a spoiled nation stay depressed?). Some of the banking gains have more to do with accounting (mark to market rules changes) than actual performance. And for many companies, the improved results of late have more to do with cost-cutting than sales growth, since consumption and production remain weak.

As an exec, and as a human being, a very telling economic indicator will be released at the end of this week: the July Unemployment report. Official U.S. unemployment will approach 10%, but that’s only part of the story. If one adds in those who consider themselves under-employed (part-timers who’d prefer full-time) and those who have given up searching, the national unemployment rate soars into the mid or high teens.

This recession’s wave of job cuts (more than 6 million served) isn’t like past recessions.

Many of the jobs cut in the past year are not coming back, ever.

The cuts reflect fundamental change in a number of key industries ranging from automobiles to energy, from finance to technology.

Many of the positions eliminated are not coming back.

For those of us still running companies and operations, this presents two different problems.

One—many of us will have to continue to search for efficiencies as production demands remain high (or higher) while resources stay restricted. Ownership, starved for higher earnings, will push to keep costs low even as revenues increase. Secondly—lagging unemployment could boomerang on the economy with bad debt and lousy consumer sentiment dragging down sales for an economy dependent on consumers. Combined, these factors could drive a nasty little “feedback loop” which would make our challenging jobs even more challenging.

My company, which conducts research on jobs and careers, has noted continuing announcements and reports of job cuts, even in July as the stock market has expressed some new-found optimism. Let’s hope this Friday’s unemployment report doesn’t call into question the rationality of exuberance.

Erik Sorenson is CEO of Vault, the Web’s most comprehensive resource for career management and job search intelligence. Vault provides top talent with the insider information they need to make critical career decisions. An Emmy award-winning media industry veteran, Erik served as president of the MSNBC cable news channel through 2004. His experience spans radio, local and network broadcast television, cable and syndicated TV, and the Web.

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