Economic Recover Starts

Key Point: The economy is starting to recover now. Expect to see positive economic growth in the 3rd quarter.

The recent release of leading economic indicators from the Conference Board suggests that the current economic recession is approaching a bottom. In the August 2009 press release, Ken Goldstein, Economist at The Conference Board, is quoted saying “The indicators suggest that the recession is bottoming out, and that economic activity will likely begin recovering soon. The Coincident Economic Index (CEI) was flat in July – the first time it did not register a decline since October 2008. The Leading Economic Index, which has increased for four consecutive months, suggests that the CEI will turn positive soon.”  The index of Leading Economic Indicators (LEI) has increased monthly since March (see Chart 1).

Voluntary Turnover Linked to Consumer Confidence

Key Point: Expect to see employees' perceptions of the current business and employment situation, as well as voluntary turnover, increase as the recovery takes hold later this year.

Additionally, the Conference Board reported their Consumer Confidence Index (CCI) has also increased from March levels – posting significant gains in April and May, while retreating slightly in June and July.

A component of the CCI, the Present Situation Index (PSI), measures respondents’ appraisal of current business and employment conditions. The PSI is highly correlated to voluntary turnover (# of voluntary quits), as measured by the Bureau of Labor Statistics. The correlation ratio of the data series is about 0.91. Chart 2 demonstrates the close movement of the PSI and the Quit Level.

The Present Situation Index is starting to bottom out and the perception of current business and employment conditions is likely to increase as more evidence of the economic recovery is released in the next several months.

Intent to Look For A New Job With A Different Employer Increased In 2009

Key Point: A growing number of employees intend to look for new employment in the next 24 months.

The Work Institute’s study on employees’ intent to look for a new job finds that more employees intend to look for a new job in the next 24 months than in 2008. The percentage expressing intent to voluntarily leave their job in the next 24 months rose from 8% in 2008, to 12% in 2009 – a 50% increase.

Reasons for Intent to Leave Current Employer in the Next 12 Months Shifted During 2009

Key Point: Employees’ intent to leave is increasingly influenced by negative work environment, negative supervisor relationships and concern about the future of the company.

The Work Institute’s Intent to Leave Study demonstrated that the reasons behind employees' intent to leave have shifted in 2009. Chart 4 presents the top five reasons for employee intent to leave for 2008 and 2009. Negative perception about the work environment is the most common reason given for intent to leave, posting an increase of almost 70% in 2009. Negative supervisor relationship posted a significant increase, rising almost 180%. Employee responses indicating they are unsatisfied with pay, bonus, or benefits increased 100% in 2009. Employee concerns about the future of the company increased the most in 2009, rising 200% from 2008 levels – this is not unexpected as many companies have undergone strenuous cost reduction efforts.

Summary

The economy is on the verge of a recovery, and voluntary turnover should be expected to begin rising in the 4th quarter as employee perception of current employment conditions improve. Now is the time for employers to quickly prepare for a flight of talent commencing in the 4th quarter of 2009 and accelerating into 2010.

Key Points
• The economy is starting to recover now. Expect to see positive economic growth in the 3rd quarter.
• Expect to see employees' perceptions of the current business and employment situation, as well as voluntary turnover, increase as the recovery takes hold later this year. 
• A growing number of employees intend to look for new employment in the next 24 months.
• Employees’ intent to leave is increasingly influenced by negative work environment, negative supervisor relationships and concern about the future of the company.

Companies must focus on employees now, rather than cost containment measures, to avoid costly turnover in the very near future.

Recommended Immediate Actions
• Communicate with your current employees your intent to make improvements in the employee/employer relationship
• Review your recent employee research to identify areas and issues that need immediate attention
• Develop action plans and gain management support – the facts presented in this article identify the presence of an impending turnover crisis

The current economic climate has exposed many of your employees to significant job stress and accelerated workplace change. Now is the time to get ready for the recovery and avoid unnecessary turnover expense.

Contact your account manager at 615-777-6400 for assistance with your action plans.