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Changing Work Patterns – Is the Unemployment Rate Really That Bad?

Business Insider featured a chart this morning that showed that the economic recovery still isn’t providing enough jobs, and that the employment part of the recovery is lagging far behind other post-recession periods in the past.

The information comes from Calculated Risk, which has been tracking economic statistics for a long time.

EmployRecDec2012

This shows that a lot of people have not gone back to work after the recession, no matter what anyone has said.

Another chart from Calculated Risk also shows a similar trend. These charts are valuable, because they cover information over a long period of time. The job loss chart compares recessions and recoveries going back to World War II.

 

 

 

EmployPopDec2012

This chart shows how many people as a percentage of the population are part of the labor force (i.e. employed people and those who are able to work). These charts don’t count people who are disabled, or who are over age 65 (or children).

Fewer people are working now as a percentage of the population who are able to work than in a long time. The last time the ratio of employed people dipped below 59% was January, 1982.

Looking way back into the 1960s on the chart, the participation level was also far below 59%. Most people know why that was so. There were many more married couples at that time, and many more stay-at-home moms. The sharp upward swing in the employment-population ratio (the black line) is all the women going to work.

Now, who has lost jobs in the most recent recession, and who has gone back to work?

First, there are a lot of long-term unemployed people out there. Calculated Risk also tracks how many people have been unemployed for more than 26 weeks (6 months) over time.

Unemployed26Dec2012 This shows that there really are a lot more people who have lost their jobs, and who haven’t found new ones, than in any of the previous recessionary periods. Even if this chart was adjusted to reflect these numbers as a percentage of the population, there would still be a lot more people unemployed for a lot longer period of time after this recession than after previous recession periods.

There are other signs of some type of recovery, however. First, the ISM (Institute for Supply Management) Index, which tracks non-manufacturing orders for goods and services, was up sharply in December, to a rate that indicates an expanding economy, not a shrinking one.

Second, Trulia, the online real estate data service, showed that asking prices for homes had increased by 5% in December, a big increase over the 4.3% drop that occurred in December, 2011.

If you are starting a business and looking to hire people, this is good news. It means there’s a “buyer’s market” out there for good employees. However, it may be difficult to attract people who have steady jobs. People are still reluctant to take risks and want to make sure they hold on to their jobs. If people have been out of work, however, they are ready, willing and able to get back to work. They are likely to work harder and be more committed to their jobs.

Most of all, these numbers show a great deal of change, and a big shift in who works, and how our economy works. I already know that many of my students are eager to work at good jobs, and that many of them work in part-time food service and retail jobs. These jobs are a start in the working life for just about everybody, and they have been for decades. As people mature, however, they are ready for more responsibility, and are able to handle full-time work and develop careers.

As you really get started with your business, these statistics are important in terms of marketing and understanding your place in the market. The U.S. Census Bureau has a fantastic resource in its Business Dynamics Statistics database. This is a cooperative, collaborative program that includes state, local, and private information about business start-ups and operation, as well as a wealth of other business-related statistics, such as labor force information and economic growth. Just one of their excellent reports covers the role that start-up businesses played in helping more people stay on the job during the recession, and afterward. The economy in the United States has 6 million establishments that employ at least one person. In 2010, 394,000 new businesses created 2.3 million new jobs. Unfortunately, closures and layoffs meant that during the same period, established businesses eliminated over 4 million jobs, resulting in a loss of 1.8 million jobs over the year.

Part of these trends include people retiring; for example, business owners who are selling and closing their businesses. Another part is larger companies who closed locations and consolidated divisions, across all industries. Yet another part is the devastation in the real estate market that will take a long time to sort out. Smart entrepreneurs will look for opportunities in these changes and shifts. As people retire, they will leave the market for big purchases typically associated with growing families, but will enter the market for smaller ones, especially ones associated with leisure and recreation. What things will retirees enjoy? The “Baby Boomers” who retired last year are living longer, and are healthier and more active, than ever before. I’ve done a number of business plans for long term health care-related businesses, and I know the healthcare needs of the older population in the U.S. and Canada fairly well.

But what about the other needs and interests of people who are retiring? Some may want to establish small businesses that fulfill lifelong interests and dreams. Others may want to spend time traveling or pursuing interests like Tamae Watanabe, age 76, who became the oldest woman to climb Mount Everest this past May.

Retired Coors marketing manager Cinde J. Dolphin launched Marketing for Mavericks, which produces unique online marketing content and helps businesses like wineries reach their markets through social media. I think Cinde gets to visit awesome wineries and make videos for them, then helps them build social networks to develop customer loyalty. I can deal with that job.

If you’re retired and going “stir crazy,” I highly recommend the SBA resources for 50+ entrepreneurs. These are free and will give you  lots of inspiration and guidance. If your pre-retirement career was very focused, and you didn’t work with payroll, receivables and payables, and possibly didn’t fire or hire, or, if you were accustomed to managing budgets — but not doing everything start-to-finish, these SBA programs are fantastic. Once you are ready to get going, contact Pacific Human Capital. We can get you started quickly and put everything into focus.

 

Wal-Mart Vs. Costco: Which Business Does Better for Employees and Customers?

Have you seen one of the charts analyzing how much better Costco pays and treats its employees than Wal-Mart? The charts use information from 2005 or earlier. An update presents a slightly different picture, but not much.

Costco vs. Wal-Mart 2012

Costco vs. Wal-Mart 2012

Costco is a great place to shop, as all 61 million Costco members know. It’s also a good place to work, as shoppers can tell when they visit one of the company’s busy warehouses. Not only does Costco pay its associates more on average than Wal-Mart, it also pays more than Target, JC Penney, Sears and a number of other retailers.

As of November, 2012, Costco was #24 on the Fortune 500 list of America’s 500 largest corporations, which is ranked exclusively by gross revenue. Wal-Mart Stores is #2 on the list, behind Exxon Mobil. Oil giants Chevron and ConocoPhillips, and General Motors, round out the top five. At number six is GE, and number 7, Warren Buffett’s Berkshire Hathaway. Number 8 is Fannie Mae, the quasi-public entity that backs nearly all US home loans, and Ford, the only auto manufacturer that did not take any type of “bailout” money in 2009, is 10th on the list. Costco is the third-largest general retailer on the list, right behind grocery giant Kroger.

Anyone who’s familiar with the retail industry, particularly grocers, knows that a 3% net profit margin is highly competitive in the industry. Gross revenue or sales has nothing to do with how much the company earns at the end of the reporting period. Walmart had a 3.5% profit margin as of the end of 2011, exclusively due to the excellent performance of its international stores. US store profit declined by 4.6%.

Costco, on the other hand, reported net profits as percentage of revenue of 1.6% in 2011. This does not mean that it is “losing money.” The company also paid $1 billion in taxes earlier this year.

The tale of the updated comparisons between Costco and Wal-Mart show that the world’s largest retailer is struggling. Although it has made a number of improvements in employee pay, benefits and retention since the mid-2000s, it still struggles to keep associates on the job. Wal-Mart employees just received notices that their share of health care costs would increase between $5 and $24 per paycheck, causing some associates to drop coverage altogether.

The average annual wage of a Costco employee works out to a little over $35,000 a year. People can add $13,000 to $15,000 to that right off the top to cover employer payroll tax liabilities, direct, and indirect benefits. Welcome to the world of business planning.

Wal-Mart full-time employees are currently making a little over $26,000 a year on average. We can add about $10,000 to $12,000 to that amount for their cost.

As most who have shopped at both stores know, a different type of person typically works at Costco. Most Costco associates are more physically fit than many Wal-Mart employees and their jobs are more physical. Costco is a warehouse store, and associates have jobs that involve lifting large, bulk packages and other items.

People not familiar with business planning could see a difference in the chart in that Wal-Mart’s labor and overhead costs are 19.5%, while Costco’s are very low, only 9.6%. Many Wal-Marts are open 24 hours, while Costco has limited hours. Costco is a warehouse store which keeps overhead low. Wal-Mart isn’t the fanciest store in the world, but its costs in stocking, maintenance and inventory management have to be much higher than Costco’s.

Part of this savings has been reinvested in the Costco employee, which further strengthens the retailer, leading to their increased Fortune 500 rankings (increased revenue) between 2010 and 2011. Costco has also received a lot of favorable press for its good treatment of employees and its profitable business model. Wal-Mart, of course, has tried to emulate Costco’s approach in its Sams Club membership warehouses, which pay somewhat better than ordinary Wal-Mart stores. Sams Clubs are far from unsuccessful, but it is Costco that dominates the warehouse store landscape.

Costco is simply a well-run company with a clear vision of what it wants to sell, how it wants to sell it, and what it needs to do to operate successfully and profitably. The company long-ago realized that what one might term “reasonable” operations are the key to its success.

Costco’s vision is: “Our business is to give the customer the best value we can.” The company also has a clear code of ethics that applies to daily operations, employment relations, and above all, to customers. Costco was guided by Jim Sinegal up until last year, when Sinegal handed over the reins to Craig Jelinek, who has worked for the company since 1986. Another key figure from the Wal-Mart/Costco comparison chart is executive compensation.

Mr. Jelinek’s final compensation was $548,400, including a nearly $200,000 bonus, which had to have been tied to company performance, which was outstanding during his final year. Wal-Mart CEO Mike Duke received $1,265,775 in compensation in 2011, according to Hoovers.

I’m writing this from the perspective of a business planner who is committed to shared value and sustainable business practices. Clearly, Costco has gone a long way toward successful, sustainable operations, and maintained growth even during the serious economic downturn years of 2009 and 2010. Clearly, the company has what I would call a reasonable and responsible approach to operations.

Wal-Mart is too large a multinational corporation to begin to evaluate in a brief article. The company has made positive progress in providing associates with improved pay and benefits in recent years, and is aware of the problems it faces in terms of maintaining profitability and the serious issue of employee retention. With 2.1 million employees, they have a completely different workforce situation than Costco, with 160,000 employees. The situation is not that Wal-Mart is an exceptionally bad company. It’s that Costco is an excellent one.

Information in this article was compiled from Hoovers/D&B, Forbes, Businessweek, Google Finance, and the New York Times, as well as corporate websites and shareholder information, and covers the 2011 fiscal reporting year for both companies.

If you find this article in-depth and beneficial, and are starting or expanding your own business, contact Pacific Human Capital today.