Next shoe to drop for U.S. job seekers: lower wages

NEW YORK (Reuters) - With “no end in sight” for U.S. job losses amid a recession that could stretch into 2010, American workers will soon have to contend with another blow to their confidence: stagnant, or even falling wages.

Job seekers -- already coping with the highest unemployment rate in a quarter century, their savings mugged by a plunging stock market -- can also expect lower pay once they land a new job, labor market experts say, because the current downturn shows no signs of turning around anytime soon.

“There’s no end in sight,” said Tig Gilliam, chief executive of Adecco Group North America, the third-largest U.S. employer behind Wal-Mart Stores and the postal service.

“March is going to be the same, and I don’t see anything that will make April better.”

Lower wages, in turn, could further erode the outlook for the U.S. economy by hurting consumers’ spending power.

The government’s February employment report showed 651,000 jobs eliminated outside the farm sector, while losses in the previous two months were revised upward. The unemployment rate jumped to 8.1 percent, highest since 1983.

Job losses in professional services categories are accelerating, and temporary payrolls -- typically a leading indicator -- show no signs of improving, Gilliam said.

The temp sector, where losses preceded the decline in the wider labor market by a year, must stabilize before any hint of a wider jobs recovery.

Temporary workers as a percentage of the total workforce are down to 1.42 percent, a level not seen since May 1994. The bottoming of this metric typically correlates with the end of recession, said BMO Capital Markets analyst Jeffrey Silber in a research note.

“Unfortunately, we’re not there yet,” Silber said.


Temp payrolls are down by a quarter from a year ago, and have declined for 26 months in a row. In the recession of the 1980s -- the one many economists say most compares to the current situation -- temp employment fell by a third from peak to trough.

To be sure, job openings still exist. Adecco cited engineering and technical job postings, as well as legal and finance positions, including in the mortgage business where a pickup in refinancing activity has spurred demand for sales and processing professionals.

But while job openings remain, employers are increasingly able to keep a lid on wages, further stretching consumers. The latest jobs report showed wage growth slowed in January and February from its pace at the end of last year.

According to Adecco, many clients are looking to hire people at lower rates than in the past, with the biggest wage pressure at the lower end of the pay scale, he said, among people earning around $10 or $12 per hour.

Small business salaries posted their biggest drop last month since December 2004, according to SurePayroll, which handles payroll for 25,000 small businesses.

“Declining salaries make it easier for businesses to survive in the short term, but decreased consumer purchasing power is a recipe for disaster over the long term,” said SurePayroll President Michael Alter. U.S. small business paychecks average $31,317, down about $1,300 over the past year.


“We’re going to see continued contraction, at least to the end of the year, and possibly the first quarter of next year,” said J.P. Donlon, editor of Chief Executive magazine, whose monthly survey finds CEO confidence at a record low. Seventy-seven percent of CEOs expect jobs to continue to deteriorate over the next quarter.

“They just don’t see any horizon at this stage,” Donlon said, adding that the monthly survey, which dates back to 2002, typically precedes GDP and employment trends by about six months.

The unemployment rate could easily reach double digits, and if it tops 9 percent, will suggest the Obama Administration stimulus package is not working, Adecco’s Gilliam said.

He cited a recent conversation with government procurement lawyers who expressed concern it could take nine months to dole out money to help the economy.

“You see the market voting on the reaction to the Obama policies already,” he said. “You’re not getting great confidence.”

Confidence in the stimulus among workers, by contrast, remains high, with nearly three-quarters telling an Adecco/Harris interactive survey they are optimistic the plan will boost jobs.

The outlook for job pay, however, is grim.

“Wages are going to take a hit,” said Chad Sowash, vice president of the Direct Employers Association, a nonprofit that represents the interests of senior recruiters.

Sowash met Friday with Fortune 500 employers in the healthcare, IT and defense sectors, who told him anyone looking for a job now should expect to earn 10 percent to 20 percent less, depending on the position and the industry.

“The days of springboarding a career into another $10,000 a year, this is just not the situation for that,” Sowash said.

Editing by Brian Moss