Consumer expectations will hold down salaries as the economy improves and firms begin to hire.
The November University of Michigan consumer sentiment survey dropped to 66.
0 in November from 70.
6 October and bodes a poor holiday shopping season.
Particularly, the economic outlook piece fell to 63.
7 in November from 68.
6 in October.
Even with US government stimulus packages in the system, the survey suggests the consumer is still hunkering down.
The sentiment indicates folks feel a little better off from a year ago but the consumer is our economic engine and we are not rushing to open our wallets.
The largest generation, the Baby Boomers have lowered their expectations and holiday sales numbers will impact hiring decisions into 2010.
David Rosenberg with Gluskin Sheff, a contrarian economist now, observed in mid-November that household credit remains in freefall in the range of 60 to 70% debt to disposable income versus 140% at its peak in 2007.
The debt to disposable income ratio needs to stabilize or start growing to indicate the consumer is out of the blocks.
If you strip out new car purchases for September, sales were down 0.
3% from August and 13.
1% from September 2008.
Inventories were trending down too, off 0.
4% from August and 13.
4% from September 2008.
Inventories are not being drawn down by increased sales.
The business inventory to sales ratio measured by the Department of Commerce stopped improving in September.
This is another sign that the consumer is holding back.
So, the survey says folks are holding back, people are using less credit or cannot get credit; inventories are not being drawn down by increasing sales; and the stock market taking off again.
Go figure! It is more reasonable to expect the recovery from the recession to be slow with ups and downs and still a risk of a significant fall in GDP.
If recent improvements in earnings are from cost-cutting, not top line growth, then the good news is that there are many talented people in the market for a new job.
The trend is been to flatten upper management and to begin hiring less experienced managers, expecting the slow recovery to give them time to gain learn their jobs.
I have several close friends, very talented at maximizing gross and profit margins, who were let go.
Their skill working with customers and with suppliers came from years in the trenches.
The cost cutting buzz has been to reshape the workforce towards less expensive managers and to squeeze more productivity out of the folks who remain.
That makes perfect economic sense.
But there's a catch, the ability to grow as sales do pick up 2010 will require rehiring some of those skilled managers let go.
If you are in that group, there will be some tough choices to make.
The downward pressure on salaries and bonuses being imposed on the banking sector will move into most other sectors.
CEOs and HR salary experts will cap the pay for the returning managers in line with expected revenue growth.
A return to early 2000s returns on investment of 20 to 23% are in the distant future.
More reasonable expectations of superb ROIs are GDP plus 10 or 11%.
So initial salary and benefits will be lower and grow more slowly in line with revenue growth.
New hires over 40 will also need to lower their expectations, exactly what has happened to consumers.
To compete for a job, against folks entering the market from the MBA mills, the more experienced executive will need to retool back to basics as well as emphasize their years in the trenches.
Retool because the new MBA has the classroom experience.
Salary expectations must emphasize cash flow with less access to credit until retirement and the likelihood that there will be two or three more jobs.
None of us want to be caught off guard again, to let overconfidence upset years of planning and savings to support your family.
The irony is that these lowered expectations will keep the recovery slow as we consumers scale back.