According to Fortune Magazine, the giant consulting firm Accenture plans to hire 50,000 people this year.
They are not alone. We've heard from executives at a wide range of companies because of recession driven job cuts - and a lack of hiring over the last 2 years - they are painfully understaffed. We're also hearing these firms have started, or are going to start, hiring again.
Although our hiring data is anecdotal, we believe the U.S. labor market will likely see a surge in job creation later this year and into 2011 due to a bullwhip effect.
The bullwhip effect is a term used by economists to describe inventory swings caused by changes in final demand. It is called a bullwhip because even small changes in demand can cause a big "snap" in the amount of parts and materials needed.
While the term is not used to describe labor markets, we're seeing a lot evidence that companies are running extremely lean and will need to add staff to meet the demands of even a modest recovery.
Economic data shows that job creation over the last two years has been at its lowest point since the depression. A recent Heritage Foundation study states that "The main factor driving the unemployment rate so high during this recession was, and continues to be, the sharp drop in creation of new jobs."
The chart below, from the Heritage study, shows that job losses during the current recession are lower than job losses during the relatively mild 2001-2003 recession.
An analysis by the Federal Reserve Bank of Atlanta also highlights the job creation problem.
The response to the beginning of the Great Recession was quick and strong. Even healthy firms quit hiring out of fear of the future. Instead of adding employees, companies turned to automation and business process improvements to squeeze out additional productivity.
As the economy recovers, we believe companies will not be able to meet additional demand through productivity gains alone. They will need to add staff, and this could lead to a positive surprise in job growth over next year.