Peering into 2009: Is the Sky Falling or Was That Just My 401K?

As we wrap up December it's usually an appropriate time to grab a glass of something warm and fermented, sit by the fire and reminisce about the year gone by while reviewing the state of our investment portfolios, and plotting for new adventures in the year ahead.  This year of course it will all happen with a twist as we can also ponder where it all went wrong. 

It was a year that started with promise, though of course also with just a couple ominous clouds as well.  But of course those of us who have been around long enough know that some of the best growth can come in times when the clouds look dark.  Only problem is that this time consumer spending, which drives most of the US economy, took a direct hit. And then things, went from shaky, to bad to worse.

The new GDP figures from NBER say that GDP fell by .5% in Q3 of 2008 and the new consensus according to the Wall Street Journal survey of economists is that Q4 2008 will be down by more than 4%.  Tough times indeed. 

Want to know what 2009 will look like?  We've done some regression analysis on historical temp employment and GDP that suggests temp employment moves at about 5 times GDP growth, minus 8%.

So with 3% GDP growth, temp employment is likely to grow at 8%.  With 2% GDP growth temp employment will be about 1-2%.  For 2009 The Economist projects GDP will drop by 1% over the full year which suggest a decline in temp employment of 13% or so over the full year.  And that GDP forecast assumes a semblance of recovery in the second half of 2009, so during the first half things could appear even bleaker. 

Now I don't know if our analysis will work for such negative GDP numbers, and we don't know for sure if the economy will really be that bad, and past history certainly doesn't always predict future performance (or so my broker told me), and, and, and But any way you slice it 2009 doesn't look like it will be much fun for the staffing industry (with the possible exception of our funereal friends in Outplacement). 

So what's a self respecting staffing exec to do?  My advice is that now is the time to start planning to be one of the survivors and thrivers in the tough days ahead.  Lots of firms will be ducking for cover and many will shut their doors, but those who are in this for the long term will be investing in their people, building their strategies and positioning themselves for the upturn that will surely come just at the point when all the weaker organizations have given up. 

When things do turn around it will happen quickly; just as quickly, no doubt, as 2008 went bad.  Will you be ready when that day comes?


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