VideoBeware of a coming talent war.
Incredible as it might seem, the job market is shaping up to be as tight—or even tighter—than it was during the tech boom of the late '90s.
Despite a rising unemployment rate and scores of corporate layoffs, it turns out that there will likely be a shortage of available labor as the economy picks up. According to analysis conducted by consultancy Watson Wyatt, the amount of "surplus labor" available as the economy recovers is at the lowest level it has ever been during the past 10 recessions (dating back to 1949).
The consulting firm defines surplus labor as the number of unemployed workers above a 4 percent unemployment rate (generally considered the "full employment" mark), plus new entrants to the workforce (such as recent college graduates) available in the 24 months following the low point of a recession.
The unemployment rate above the 4 percent full-employment mark was just 2 percent in February 2002, compared with 2.8 percent in 1990 and 6.8 percent in 1982.
In addition, about 2.9 million Americans were unemployed in February 2002, which Watson Wyatt assumed to be the low point of the current economic downturn.
That number is well below the number of unemployed during recent recessions. For example, 7.5 million were unemployed at the low point of the 1982 recession, and 3.5 million were unemployed in the 1990 downturn.
In fact, the current number of unemployed looks even more modest relative to the overall size of the workforce, given that the size of the workforce has grown steadily over the years, notes Watson Wyatt.
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The gap grew even wider when Watson Wyatt factored in potential new entrants into the workforce in the 24 months following the low point of each downturn. Looked at this way, the amount of surplus labor stands at just 3.7 percent this time around, compared with 4.7 percent in 1990 and 9.6 percent in 1982.
"Any way you look at things, we are facing extremely tight job markets once the economy picks up steam," said Sylvester Schieber, director of research at Watson Wyatt, in a statement. "There is very little slack in the system. When the economy heats up, that slack will be taken up quickly, and we will be right back to tight labor markets."
IBM's Hefty Pension Boost
Big Blue plans to inject enough green by year-end to restore its pension plan.
IBM said it will fully fund its pension plan through a contribution of cash and/or stock to make up an estimated difference of $3 billion between the plan's assets and projections of benefit obligations on an accumulated benefit obligation, or ABO, basis.
The exact amount and structure of the contribution will be determined by year-end 2002.
This is a major step, given that the company recently said it would contribute up to $1.5 billion a year to the U.S. pension fund through 2005, figuring the plan was underfunded by about $4.5 billion.
"Since then, the equity markets have improved and the status of our pension fund has also improved," said John Joyce, IBM's senior vice president and chief financial officer, in a statement. Assuming that the capital markets and interest rates do not deteriorate significantly between now and year-end, Joyce said the company plans to restore the plan to fully funded status this year.
"Although we are not required to fund the U.S. pension plan at this time, we want to deal with the pension gap now," he added. "We believe that funding the pension plan achieves the right balance among the interests and needs of IBM employees, retirees and shareholders."
IBM said it has not contributed to the pension plan since 1995.
Joyce also stressed the contribution to the pension plan would not come at the expense of operating budgets or strategic initiatives.
"We will continue to invest approximately $5 billion in research and development and $5 billion in capital expenditures, and we will continue to look for external investments that support our e-business on demand strategy," he said.
The company acknowledged that some of the non-U.S. pension plans will be overfunded at year's end, and added it will continue to fund the non-U.S. underfunded plans over time.
(How low can Big Blue's DOEHIC go? See for yourself where IBM stands now.)
Mickey Mouse Club
More revelations from the Magic Kingdom.
As CFO.com reported yesterday, the Securities and Exchange Commission has apparently launched an investigation into how Disney disclosed that relatives of several outside directors were employed by the entertainment giant.
On Wednesday the embattled media giant revealed in great detail additional arrangements involving board members' relatives.
For example:
- During fiscal 2002, Jennifer Gold, a daughter of director Stanley Gold, was employed by a company subsidiary as a senior marketing manager. Jennifer Gold was paid a salary of $86,033.
- Director Ray Watson's son David Watson worked as executive director for new media for a company subsidiary during the year, receiving a salary of $155,917.
Disney added that Jennifer Gold and David Watson are also eligible for an annual bonus.
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