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The New Labor Stats and Lessons for Leaders

Today’s slumping economy is haunting millions of Americans. Veterans of the workforce fear being let go and never finding a job again. Middle age employees worry about supporting their families and maintaining their careers. And students in both business and law schools are trying to understand what’s going on and adapt in order to find stable jobs upon graduation.

With these thoughts at the front of everyone’s mind at the turn of the New Year, the Labor Department (DOL) just reported yesterday that 85,000 jobs were lost in December. This came as a pretty big surprise to economists who, after analyzing the net gain of 5,000 jobs in November, suspected that December would repeat the trend. And what’s worse is that reported numbers also show that more than 660,000 Americans dropped out of the labor force last month, meaning that the actual unemployment rate closer to ~10.5% instead of ~10.0%.

Although this change in calculation increases the unemployment rate to a near all-time high percentage, the bigger issue might be the fact that people are starting to drop out of the workforce, suggesting higher levels of pessimism than in 2009 and lower levels of hope than ever before. But if you think about it, this certainly makes a lot of sense. Many people have been closing in on a year out of work. And for the past twelve months, I’ve consistently heard so many people say that they have never seen things as bad as they are now.

Under this bright spotlight, America’s leaders now have to juggle crisis management, media and investor relations, new firm strategy, and most difficult of all, the daunting task of communicating the situation to its people. Inherent in this task is the fact that the people are vulnerable.  Many people will become upset, others will react with anger, and most everyone will be uncertain.  So while public leadership is something that has always hard, today it has become a near impossible challenge.

To be successful, the ability to communicate effectively will be critical. Modern leadership will less about the actual result than it is about gaining the trust of your workers and building a more unified organization.  To do that, leaders will have to relate more closely to the issues of the people and also be able to deliver a compelling message. In times past, executives have overlooked this ability in favor of analyzing financial impact and making decisions more quickly.  But that method of leadership will not work today. Instead leaders will have to be more connected with people and be more conscious of how people feel and how decisions will impact their economic situations. And so the best leaders will be those who not only analyze issues but those who also understand that what matters more is how you make others feel in the process.

To quickly clarify, actions always speak louder than words and leaders will also have to focus on results.  After all, this is the only way any organization can survive. But in times of panic and adversity, focusing on your message and how you communicate it is often the best first step.  So today, the leaders that emerge will be those who are good storytellers.  They have a good understanding of the overall situation, and they will craft a compelling story, deliver that story effectively to the people, and then inspire them with hope for the future.

In the days to come President Obama (and CEOs of many companies) will embark on this ambiguous task. Though fiscal strategy and economic theory will be of critical importance in solving the issues, I hope that he reflects back to when he first became president and that he chooses talk more about his hope to rebuild the economy and create jobs than he does pure strategy.

And in the end, how he frames these issues will determine his success.

3 Comments to The New Labor Stats and Lessons for Leaders

Anonymous
January 9, 2010

Great post. I was actually watching NBC Nightly News yesterday and they estimate that 500K people have stopped looking for work. Unfortunately, I think the actual number of much higher.

"Although this change in calculation increases the unemployment rate to a near all-time high percentage, the bigger issue might be the fact that people are starting to drop out of the workforce, suggesting higher levels of pessimism than in 2009 and lower levels of hope than ever before. But if you think about it, this certainly makes a lot of sense. Many people have been closing in on a year out of work. And for the past twelve months, I've consistently heard so many people say that they have never seen things as bad as they are now." Try 3 years…with 3 kids and a mortgage, which I cant seem to get modified. BOA keeps asking me if my situation has changed. I snap: I tell you this every time I call: I have not worked in 3 years. In that period, I have had 4 job interviews. I have 2 advanced degrees and I am 2 classes and a dissertation from obtaining my Ed.D., yet I can't get a job as a sub, parapro, or even with a temporary agency." I really believe that the states' departments of labor are not reporting realistic unemployment figures. When I hear these stories on the news, I already know to double whatever figures they throw out there.

Jeremy
January 10, 2010

@Anonymous, thanks for checking out my blog and commenting on my new post. I agree that it is interesting to see such a disparity in the numbers from different resources, all which seem like they should be credible. I wonder exactly where the the news program you saw got its data from.

At the end of the day, the only "official" unemployment statistics come from the U.S. Bureau of Labor Statistics (BLS) Household Survey. The household survey is one of two different surveys conducted by the DOL (other is Payroll survey), and it calculates the monthly unemployment rates from a sampling of households. In my opinion, it seems like a pretty herculean task to have the job of determining the precise unemployment rate of 300MM people, especially given all the assumptions and uncertainties that come into play (traveling, not looking for work, school, marriage, unemployment compensation, etc). Given the little experience with actually performing these census calculations, I am by no means qualified to give you any reliable opinions or estimates about the data. But I suspect this is as close as we'll get for the time being. In all fairness, BLS does admit that it has a statistical degree of error but that usually is not big enough to make much of a difference. I suspect that the survey's annual numbers are quite a bit more accurate.

However, the one good thing about these and other types of statistical surveys is that consistency is equally as important as methodology. So as long as BLS is measuring its data the same way each month and each year, the metatrends being observed (increasing versus decreasing unemployment) are just about one hundred percent reliable, so long as they lie outside the standard deviation for error.

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