NEWS RELEASE

CORESTAFF COMMENTARY:
AN ECONOMIC "SOFT PATCH"

By Steven Drexel,
CORESTAFF president and chief executive officer

This article is among a series of commentaries written by Steven Drexel discussing key issues and trends affecting today's labor market. Drexel is a member of the Bureau of Labor Statistics' Business Research Advisory Council. An archive of past commentaries may be found at www.corestaff.com/press. Please attribute information to Steven Drexel, president and chief executive officer of CORESTAFF Services if you adapt all or part of this piece for articles. If you are interested in connecting with Drexel or receiving more information about CORESTAFF, please contact Sally A. DeVito Jozwiak at 713-438-1567 or sally.jozwiak@corestaff.com.

May 2005 - Economists expected Gross Domestic Product (GDP) growth to be between 3.5 and 3.9 percent in the first quarter of this year. Currently, the estimate is 3.1 percent, which was much slower than the 2004 fourth quarter growth rate of 4.2 percent. Other key growth measurements also confirm a lower level of economic activity: for example, the March report on Orders for Durable Goods posted the third consecutive decline and the biggest drop in two years. Certainly, the high cost of oil with its adverse impact on both consumer spending and the trade deficit is dragging down general growth. If the economy is in a period described as a "soft patch", what are the implications for the labor markets?

Slow and Steady Growth
I predict continued steady -- but not spectacular -- employment growth. In the current 41-month economic expansion, employment growth has been muted, which suggests to me that there is some pent-up demand for workers to support the current level of production. It is unlikely that the cumulative, post-recession 12 percent productivity growth is sustainable; therefore, the need for workers is likely to persist. Indeed, first quarter productivity growth at 2.6 percent is about half the rate experienced during most of last year.

Furthermore, many of the employment-related statistics are increasingly positive, most notably, the lower level of initial unemployment claims. Current initial claims in the 320,000 range suggest continued employment growth. The continuing claim total trends steadily downward and is about 12 percent improved compared to last year. Another positive indication is the level of mass layoff events measured by the government and announced layoffs measured by a private firm. Both of these metrics improved compared to recent months and the prior year. Other measures of employment dynamics, notably job openings, hires and terminations, suggest improving conditions. Finally, the unemployment rate continues to fall, suggesting a greater need for employees.

Slow and Steady Wins the Race
On balance, an economic "soft patch" should not be enough to unsettle a labor market recovery that has been unexciting yet persistently improving. Gradual and less-robust employment growth, like the growth we see in the current recovery, is consistent with stability and sustainability.

Some may wish to see a more exciting growth bubble. The trouble with bubbles: they tend to burst.

About CORESTAFF Services

CORESTAFF Services is one of the largest national staffing firms in America, with offices in 21 states. CORESTAFF also operates as TeleSec CORESTAFF in the Washington, DC area and Leafstone Staffing Services in the New York City and northern New Jersey metropolitan areas and southern Connecticut. CORESTAFF is not affiliated with Core Staffing Services, Inc. which operates in the New York Metro Area. CORESTAFF is headquartered in Houston, Texas; 713-438-1400.

Visit CORESTAFF Services on the Web at: www.corestaff.com, www.it.corestaff.com, www.careertrust.com, www.techresources.coretaff.com, www.infocurrent.com and www.employmentzone.org.

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