The ADP employment report was released today.  On the surface, the numbers appear to be trending in the right direction, but it’s important to put them in context.  In order for the US to maintain a break-even unemployment rate given current labor participation rates, the economy needs to add roughly 90,000 jobs per month.  The key phrase is in the preceding sentence is “current labor participation rates.”  In case you are unfamiliar with “Labor Participation Rate,” here is a succinct definition from Investopedia:

Labor Participation Rate
A measure of the active portion of an economy’s labor force. The participation rate refers to the number of people who are either employed or are actively looking for work. The number of people who are no longer actively searching for work would not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment, as a result, the participation rate decreases.

According to the Bureau of Labor Statistics, the current Labor Participation Rate is 64.2 percent. Based on the available workforce and historical participation rates, the Congressional Budget Office estimates that the current participation rate should be closer to 64.6 percent.  While it might not seem like much, a .4 percent increase in the participation rate means that the US would need to create 165,000 new jobs instead of 90,000 in order to keep the unemployment rate steady.  (As a side note, this also means that an improving economy may not be revealed through unemployment and job figures alone; we also need to consider labor participation rates. A flat unemployment number but increasing labor participation rate would mean that more discouraged workers are successfully reentering the workforce.)

To summarize then, a steady state for unemployment requires between 90,000 and 165,000 new jobs added to the economy each month depending on labor participation rates.  ADP’s estimates suggest that we’re tracking slightly ahead of this steady state range.  In order to meaningfully decrease the unemployment rate, however, we need much higher rates of job creation. According to an analysis by MarketWatch, “If we wanted to bring the jobless rate back down to 6% by the end of 2014, we’d need job growth about twice as strong as it’s been: 244,000 a month instead of 119,000.” Until we see that kind of job growth, we’re still just muddling along.

For some HR professionals, it might be tempting to think that in this steady state world, we don’t need to invest in talent management solutions.  That would be a mistake.  In September for example, there were 3,354,000 job openings with an average of 7.68 unemployed people per job (using the U-6 figures for unemployment).

If anything, it gets harder to find good candidates with this many people looking for work, a challenge which is further complicated when so many people also need to change careers or come back to work from lengthy periods of unemployment or underemployment.

In this scenario, it’s more important than ever to screen well and screen efficiently. And by screen well, I don’t just mean eliminate folks who don’t have a decade of experience in a given role (which seems to be the path for many companies), but also to accurately evaluate potential, particularly in candidates who may be coming from different backgrounds and career paths.

In an economy as large as ours, even “steady state” means a large volume of HR and talent related activity. How large?  According to BLS: “Over the 12 months ending in September 2011, hires totaled 48.3 million and separations totaled 47.0 million.”  All of that stuff needs to get processed somewhere.  Talent solutions that streamline and automate processes enable you to not only handle these talent transactions, but do so in a more cost effective and strategic way.  And of course with the holidays upon us, efficiency in hiring seasonal talent is certainly on the minds of many employers.

Speaking of seasonal workers, for the sake of our collective “consumer confidence index,” let’s not look too closely at where the big spike in hiring came from in November.  For now, neither the ADP nor the Department of Labor numbers distinguish between full-time, part-time, or temporary jobs.  All we need to know is that there were more jobs added to the economy, and it’s enough for now to keep unemployment from inching upward.  While not exactly a holiday gift, it’s not a lump of coal either.  Now if only we can forestall a sovereign liquidity crisis in Europe until our own economy is on more solid ground…

For more on the deep challenges facing the economy, you can read “What’s Really Going On with Unemployment.”