While the economy appears to be recovering, and the stock market has hit new highs, there is still one area of the economy that has not improved much since the recession, and that is unemployment. The number of unemployed still remains stubbornly high. It is a marked difference from other recoveries, when economic recovery also led to increased employement.
Some attribute the jobless problem to a mismatch between the skills people have and the skills companies are looking for. But others have pretty much disproved that theory by noting that the unemployment rate was much lower before the recession, and the skills mismatch could not have developed that quickly. Jobs have not changed so much over the past few years that they require an entirely new skill set.
The lack of hiring is due more to the way companies are now operating, says business analyst Peter Cappelli. Companies became more profitable in part by really clamping down on expenses, and a lot of that involved labor costs. So, companies are not spending as much on recruiting and hiring as in the past, which makes it a lot more difficult to find the right people for the job.
Moreover, managers, ever vigilant about profit margins, are reluctant to hire because of the increased costs involved. They take action only when overworked employees really push for some help. And when they do decide to hire, they take a long time to do it. Because there are so many unemployed, managers feel they can afford to be particular about whom they hire. As a result, they put candidates through a long process of interviews.
What exacerbates the situation is the fact that companies have cut back on recruiters as well, traditionally the voice of reason when managers become too idealistic in their search for candidates. So, there is no one there as in the past to ask the managers whether they really need someone with a graduate degree for a particular job, or whether they really expect to find the kind of qualifications they are looking for at the salary they are willing to pay.
The situation usually changes when the market adjusts, Cappelli says, when employers realize they need to raise their salary for the qualifications they want, or lower their expectations to get the workers. But this adjustment process is taking longer this time around because the people who are catalysts in this process, the recruiters, the ones who are on the front lines of the hiring process and the first to realize what adjustments need to be made, are no longer much of a factor.