Structural Changes Transforming Labor Force Requirements
Recently, there has been much discussion regarding U.S. labor markets. The latest release from the Bureau of Labor Statistics showing that the growth in nonfarm payroll employment has slowed significantly and the unemployment rate edging higher to 8.2% will intensify the debate. In addition to persistently high unemployment and sluggish hiring, much of the discussion has centered on labor force participation—the percentage of the civilian population age 16 or over with or actively seeking employment. Prior to a 0.2% uptick to 63.8% in May, the labor force participation rate had fallen to its lowest level since September 1981. It remains significantly below a prerecession level in the neighborhood of 66.0%. Why has participation in the labor force shrunk?
Part of the drop can be attributed to retirement among “baby boomers,” whether voluntarily or involuntarily. With job prospects difficult at best, some are opting to retire rather than subject themselves to the increasing riggers of a job search. Others attribute a shrinking labor force to a lower demand for labor in general. Forced to cut costs during the downturn, companies are continuing to strive to boost productivity and to become more efficient. As indicated in responses to this year’s NAPL State of the Industry Survey, a key lesson learned from the Great Recession: We can do more with less. This lesson learned was cited by 45.0% of the printers we survey, and, no doubt, transcends the printing industry. An explanation for the lower participation rate likely consists of a combination of various factors. Besides individuals choosing to retire, reduced demand for labor is resulting in discouraged job seekers dropping out of the labor force altogether, or college graduates choosing to continue their education, etc. But whatever the underlying reasons, there are implications going forward.
One likely implication is that employment growth will be more subdued than we we’ve been accustomed to. The overall demand for labor is reflected in the Bureau of Labor Statistics (BLS) employment/population ratio. Employment as a percent of the population 16 years old and over stood at 58.4 in April, compared to an average of 63.0 in 2007—the year prior to the recession. After falling sharply during the economic downturn, the ratio has since stabilized, but has yet to show any upward turn. Thus, during the recovery, demand for labor is growing enough to offset the growth in the population, but not much more than that—certainly not enough to put a meaningful dent in number of unemployed (12.5 million), underemployed (7.9 million), and those that are out of the labor force but still want a job (6.4 million). While the demand for labor is, in part, reflecting a subpar economy—GDP adjusted for inflation grew by an annual rate of only 1.9% in the first quarter—there are other issues at work—structural issues. As a consequence, companies are not only striving to do more with less, they’re also transforming their business models.
As we’ve been highlighting for some time now and will continue to do so, print is no stranger to structural changes. In fact, structural changes are redefining every aspect of the commercial printing industry—from the competition we face to staffing requirements. Total employment in the commercial printing industry continues to decline. At 423,800, it was down 4.1% in the first quarter from a year earlier. This contraction is not a recent phenomenon, as employment in the industry actually peeked in mid-1998 at 751,800. Thus, commercial printing industry employment is down nearly 45.0% from its high. Sales over this period, however, are down 19.0%. The gap can partly be explained by productivity improvements. But also impacting this gap is a changing revenue mix. According to NAPL estimates, at $47.2 million, lithography accounted for 60.4% of commercial printing industry sales (from all sources, not just print) in 2010. This is down from $78.1 million or 85.6% in 2000. During this period, the share for digital/value added has increased from 14.2% to 35.2%. This ongoing change has clearly altered staffing requirements within the industry both in terms of numbers and, more importantly, in terms of positions and skills. These changes highlight another lesson learned among State of the Industry participants: Always be looking for fresh ideas and new talent.
Andrew Paparozzi Joseph Vincenzino