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Economy Drives Employment Economic Overview Trends in Employment/Recruitment
September 2012 Robert Johnson, CFA Director of Economic Analysis Vishnu Lekraj Senior Equity Analyst
Why Should I Care?
× Economy Drives Employment/Recruitment Levels × State of Labor Market Determines Employer Pickiness × More Outsourcing Means Less U.S. Employment × Stagnant Economy Makes Relocation Difficult × Nature of Recovery Determines Hot Sectors
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U.S. Economic Forecast
× 2012 Outlook: A Slow Start Before an Acceleration
× Real U.S. GDP Growth of 2.0%-2.5%
× Inflation Slows to 2.0%-2.5% Due to Falling Commodities
× Employment Growth Accelerates to 195,000 Per Month × Unemployment Rate Drops to 8.0% or Lower
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Economic Drivers
× Consumer Spending
× Housing and Construction
× Lower Inflation × Autos
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Risks to Economic Growth
× Drought Could Cause Food Inflation
× Consumer Spending Outpacing Incomes
× Geopolitical Issues
× European Sovereign Debt × Slowing Manufacturing Economy Outside the United States
Where Are We Now? Muddling Through
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This Recovery Has Grown at Half the Normal Rate
Year After Bottom, 33-Month GDP Growth Rate
Prior GDP Contraction
1982 15.8% -2.7%
1960 15.6% -1.0%
1970 15.3% -1.1%
1975 13.7% -3.2%
1954 12.1% -2.6%
1958 11.2% -3.7%
1991 8.7% -1.4%
2001 6.7% -0.3%
1980 5.2% -2.2%
Average 11.6% -2.0%
2009 6.7% -5.1%
Sources: BEA, Morningstar calculations.
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Consumer Takes the Stage, Represents 71% of the Economy
Source: The Gleaner.
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Watching the Consumer Is Key
Reasons for Consumer Optimism
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Private Sector Employment Continues to Grow
Source: Bureau of Labor Statistics, updated Aug. 3, 2012.
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Initial Claims Point to a Stronger Job Market
Source: Bureau of Labor Statistics, updated Aug. 23, 2012.
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Inflation Falling Back, Key to Continued Recovery
Source: Bureau of Labor Statistics, updated Aug. 15, 2012.
Bars Are Recessions, Line Is Recession Danger Point
Home Prices Stabilizing at Last
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Source: St Louis Federal Reserve, updated Aug. 28, 2012.
The Consumer Is Far From Worry Free
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Drought Could Drive Food Prices Skyward
Source: http://i2.cdn.turner.com/cnn/dam/assets/120716054700-midwest-drought-06-horizontal-gallery.jpg
Consumer Income Growth Is Stagnant
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Source: Bureau of Economic Analysis, Morningstar Est. for June, updated July 31, 2012.
The Stages of Consumer Confidence
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Retail Sales Continue to Chug Along—Short-Term Confidence
Source: International Council of Shopping Centers, updated Aug. 28, 2012.
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Auto Sales Could Jump in 2012—Intermediate-Term Confidence
Source: Automotive News, updated Jan. 4, 2012 and April 10, 2012.
U.S. Auto Sales Year Millions of Units 2009 10.4 2010 11.6 2011 12.8 2012E 13.6 (Rev. Est. 14.5)
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Improved Consumer Confidence Means More Auto Sales …
Interpretation: January 2012 sales were 81% of 2005 levels. Sources: BEA, Bureau of Labor Statistics; Morningstar, Updated Aug. 1, 2012.
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… but Not Enough to Help the Housing Market —Long-Term Confidence
Sources: Census Bureau; Morningstar, updated Aug. 16, 2012.
Red bar represents average natural demand, Morningstar estimate
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Future Dynamics for the Recruiting Industry a
Factors and Trends Affecting HR Specialists
• Structural Change in Economy
• Service Sectors Will Drive Growth
• Contingent Labor Will Play a Larger Role
• More HR Back-Office Automation
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Structural Change to Economy = Structural Change to HR Services Sectors Expected to Produce Robust Employment Growth
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Top 17 Occupations for Employment Growth Forecast by the BLS from 2010 through 2020 (Thousands)
Sources: BLS, Morningstar.
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Structural Change to Economy = Structural Change to HR Services Contingent Labor Will Play a Larger Role
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5%
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25%
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40%
90s 00s Recent
Contingent Labor as a % of Job Adds 36 Months Post Recession
Sources: BLS, Morningstar.
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Structural Change to Economy = Structural Change to HR Services Automation and Outsourced Services Will Play a Larger Role