#YourCareer : We’re Seeing Wage Deflation, White-Collar Layoffs And Pay Cuts. A MUst REad for ALL!
The U.S. Department of Labor reported 1.5 million people filed for unemployment benefits last week. This was the 13th consecutive week that the U.S. witnessed over one million in new claims. Roughly 45.7 million people have now filed for unemployment since mid-March.
“wave of more higher-end unemployment” hitting white-collar workers making more than $100,000 per year, as employers increasingly question the value these employees bring“
Unfortunately, the frighteningly large numbers, along with other data, show that we’re still going through tough times. The first wave of Covid-19, entering into a new unknown phase, looks like we’ll face continued white-collar layoffs, pressure on middle management, pay cuts and wage deflation.
The figures from this and prior weeks illustrate persistent job losses with insufficient new hiring to compensate for the massive amount of unemployment. Daniel Zhao, senior economist at Glassdoor, wrote, “As we distance ourselves further from the historically high initial claims seen this spring, the tens of millions that remain unemployed are an increasingly important signal of labor market weakness.” Zhao added, “The flattening of continuing claims indicates that there isn’t enough hiring to overcome these continuing layoffs.”
The first wave of layoffs were highly concentrated in sectors, including restaurants, travel, leisure, hotels, retail, gig-economy and low-wage jobs. Now, it seems white-collar jobs have been impacted too.
Guy Berger, Ph.D., the principal economist at LinkedIn, prepared the LinkedIn Hiring Rate (LHR), which offers a snapshot of the job market. Berger indicates that we haven’t seen a meaningful pickup in new U.S. job starts. He reports that hiring is still down more than 30% below last year. Many of the job gains are due to workers returning to their previous employers—rather than people starting newly created jobs. The economist contends, “It will take a long time before the labor market returns to pre-COVID levels.”
“Obviously, I think these people will take another job with a pay cut.” He continued, “If you’re making $100,000 and you’re staring at the abyss of no income and you have de minimus savings, especially if you have a family to feed, I think that $75,000 similar job would look pretty attractive even as an interim step.”
According to Jed Kolko, chief economist at the Indeed Hiring Lab (which is part of Indeed.com, the large job aggregation site), his study concluded that the current trend in job postings was 34% lower than in 2019. This was an improvement compared to when new listings turned down about 45% from the same time last year. White-collar roles, such as software development postings, are 36.3% below last year’s trend. Banking and financing job postings are down 51.3%.
The recent monthly jobs reports have been dreadful. The May jobs report looked surprisingly strong. However, when a glaring, misleading error in the may jobs report was noticed, it showed that the U.S. may actually be at 20% unemployment. Delving into the footnotes of the numbers, the jobs report has been inaccurate for the last two months. The Bureau of Labor Statistics admitted that its household survey takers mistakenly counted about 4.9 million people as employed, although they were unemployed. Had the mistake been corrected, the unemployment rate would have risen to 16.1% in May. The corrected April figure would have been more than 19.5% rather than 14.7%.
Investment management DoubleLine CEO and billionaire Jeffrey Gundlach warned of white-collar layoffs saying, “COVID-19 reveals who’s ‘swimming naked.’” This relates to a famous Warren Buffet adage, “When the tide goes out, you find out who is swimming naked.”
In this instance, Gundlich contends that as people worked from home, he got a sense of what his employees were really doing. Gundlich particularly paid attention to who in his organization consistently responded the quickest. They were the workers below middle management. He believes that they are the ones who are doing the actual work.
Gundlach was pleasantly surprised that junior workers rose to the occasion and was disturbed by the disappearance of mid-level management. He complained, “I wonder where they’ve gone. I’m starting to wonder if I really need them.” Gundlach said that he checked with peers who felt the same way.
This test led Gundlach to predict that there will be a “wave of more higher-end unemployment” hitting white-collar workers making more than $100,000 per year, as employers increasingly question the value these employees bring. We’ve already witnessed the “juniorization” of the workplace—a movement by senior executives to carve out middle management in cost-saving measures. In cost-cutting measures, middle-manager roles were eliminated in reorganizations. The managers’ more junior staff then reports directly to a higher-level executive, thereby saving the company money.
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What Skill Sets Do You have to be ‘Sharpened’ ?
Article continued …
Matthew Klein of Barron’s points out that the latest jobs report for May is showing signs of the virus’ impact hitting higher-end jobs—calling it a white-collar recession. It was reported that employment has dropped 5% in professional services, management, finance, insurance, real estate, media and tech. People working in advertising, radio, television and newspapers saw a decline of about 10%.
Many jobs were saved that otherwise would have been lost due to a new growing trend. A large number of companies have elected to cut the pay of some—or all—of their workers instead of enacting massive layoffs and furloughs. These corporations run the gamut, spanning many different sizes and all across industry sectors, including HCA Healthcare, Aon, ESPN, Tesla, the Chicago Cubs, Vice Media, BuzzFeed and others. A recent study by the Conference Board found that 537 public companies cut their top manager’s pay from the start of the Covid-19 pandemic.
Jack Dorsey, the dual CEO of Twitter and Square, announced that he’d allow his employees to continue working from home “forever.” Facebook’s Mark Zuckerberg and other CEOs followed up with their own decisions to allow people to work remotely on a permanent basis.
While this sounds noble and magnanimous, there’s an underlying threat to workers. Here’s the Facebook catch: employees will have to tell their boss if they move to a different location. According to Zuckerberg, those who flee to lower-cost cities “may have their compensation adjusted based on their new locations.” He ominously added, “We’ll adjust salary to your location at that point. There’ll be severe ramifications for people who are not honest about this.”
Zuckerberg can now scout for talent all over the country and world. This could be the worst trend for workers, as CEOs arbitrage the best and cheapest job seekers globally. Facebook will source job applicants who possess all of the right skills and experience and live in lower-cost places and pay them less money than they’d receive working in San Francisco.
To make matters worse, we’ve seen a slew of layoffs. Just this week, HSBC and AT&T announced thousands of job cuts. Iconic American companies, such as Hertz, J.C. Penney, Pier 1, Neiman Marcus, J. Crew and others have filed for bankruptcy protection, which will cause more job losses.
These events will cause a “short-term deflationary” impact on white-collar workers. Gundlach said, “If a $100,000 white-collar worker gets laid off, I think that they just stare in the mirror in the morning, with just fear in their eyes, looking at their own eyes because what are you going to do?” he said. “A lot of people don’t have any savings, not enough savings. If a certain swath of the employment population has a significant layoff in the echo of the pandemic, which I think is coming, then they’re probably going to be looking for a job and there won’t be many openings relative to the unemployment pool with that type of a skillset.”
Gundlach added, “Obviously, I think these people will take another job with a pay cut.” He continued, “If you’re making $100,000 and you’re staring at the abyss of no income and you have de minimus savings, especially if you have a family to feed, I think that $75,000 similar job would look pretty attractive even as an interim step.”
Sadly, all of the evidence points toward wage deflation and middle-management, white-collar layoffs and pay cuts.
Forbes.com | June 18, 2020 | Careers I write actionable interview, career and salary advice.