Executive demand joins slide towards recession

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Executive demand joins slide towards recession

The demand for executives in Australia has fallen again indicating there could soon be softening in general employment, according to the E.L Executive Index.

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The demand for executives in Australia has fallen again indicating there could soon be softening in general employment, according to the E.L Executive Index.

The Index, which has been an accurate indicator of economic trends in the past, shows executive demand in Australia is back near its lowest levels this year, with another fall in June.

Grant Montgomery, managing director of the executive search firm E.L Consult, which researches and publishes the E.L Index, said the continuing decline (flagged over nine months ago by the Index) is now joined by a host of other bearish economic indicators.

Fewer positive signs

‘There are fewer positive signs on the horizon and the E.L Index is predicting the tougher times are going to be around for some time,’ Montgomery said.
 
‘As a leading indicator the E.L Index is predictive of trends that will emerge in the general economy and, from this point of view, there is no sign of a turnaround for at least two quarters.’
 
The E.L Index fell 4% in June compared with the prior month, with the only gains coming from the resources-rich
States of Queensland and Western Australia.

More executives can’t find work

The Index is now below the corresponding month in 2007, which, given natural growth in the executive population, means there are more executives unable to find work than a year ago.
 
’We will most likely see a softening in general employment despite the skills shortage, with unemployment rising over the coming months,’ Montgomery said.  

‘The only good news is that the decline in the E.L Index has been so moderate that the employment of skilled and semi-skilled workers will not drop suddenly and the fallout will be mild.’
 
Montgomery said that if it were possible to remove the powerful effect of the resources sector from the economy and leave fuel prices out of the inflation equation, ‘we would now be seeing a very different Australia’.

Edge of recession

‘Because without these it’s very likely our economy would be like much of the developed world - on the edge of recession,’ he said.  
 
‘It is going to be very interesting to see what happens to Australian inflation figures once fuel prices stop rising.
'

Dilemma for policy makers

‘The dilemma for the policy makers right now is the real risk of destroying traditional businesses in responding to petrol price rises and a booming resource sector,’ said Mr Montgomery
  
‘By way of example the New South Wales and Victoria
- the biggest employer States - are lagging behind average Australian economic growth.'  

‘According to the Australian Bureau of Statistics, in 2006–07 economic growth in New South Wales (1.8% to $321.3 billion), as measured by Gross State Product (GSP), was the second lowest annual growth amongst all States and Territories.’

The Bureau also reports that since 2000–01, NSW GSP growth has been lower than national GDP growth by between 0.2% and 1.9%, ‘in part due to the resource boom strongly driving Western Australian and Queensland growth while the benefits for N
ew South Wales have been more limited’.
 
Marketing positions up
 
Montgomery said the one bright light was an increase in the demand for sales and marketing executives with a 4% increase in June.  
 
‘It is not unusual that this should happen,’ he said.
 
‘A manager has the choice to try to increase revenue or reduce costs when bracing business for tougher times.
'  

‘In the initial stages, increasing revenue is the preferred option and only later when this strategy doesn’t work are they forced into cutting costs, which mean jobs.‘


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