April 2011

The Leyendecker View

April 2011

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Welcome to The Leyendecker View from Leyendecker & Associates. Our relationship with you - our client community - is very important. To show our appreciation, we want this newsletter to provide you with unique, insightful and valuable perspectives on the economy, the employment market, and leadership and management theory. We welcome your thoughts and feedback. Many thanks for your relationship.  

General Economic Perspectives
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If you include the 2011 projections from the Congressional Budget Office, the increase in our national debt over the last four years, added to the Federal Reserve's purchases of mortgage backed and Treasury securities, all total around $8T...that's Trillion...in "shock and awe" stimulus that has been shoved into our economy since 2008. Comparable stimulus has been injected in Europe, Japan and China.  


It's no wonder we've seen a substantial rise in the stock market and a significant rise in commodity prices. Stock market investors have saved their balance sheets. Retirees on a fixed income are earning pennies in their savings accounts, causing many to take more risk with their capital. And now low income and emerging market citizens are facing an ever-higher cost of living.  


General business seems to have rebounded and some version of a growth cycle began about 12 months ago; yet the only factor reducing unemployment seems to be people giving up looking for jobs. Generally, overall employment is still lagging, but employment in Wall Street-oriented activity has strongly rebounded.   


Can the U.S. economy find an organic growth path without massive stimulus? We will likely learn the answer over the course of this year.

Managing the Modern Day
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Leyendecker & Associates is a 30 year-old search firm. To its founder, Doug Leyendecker, this seems odd: "I still feel 25! How did all those years go by so quickly?" Those three decades as a headhunter and business owner have provided Doug with considerable experience and with that, lessons learned not just about business, but also life in general.


Maybe one of the most meaningful and enduring lessons learned is that experience is what you get when you didn't get what you expected. From Doug's perspective, when you get what you expected, well that's exactly what you got...what you expected. But when you don't get what you expected, then you certainly get a little bit of experience. And with a fair amount of experience, maybe we're able to gather up some wisdom.


Experience is also what seems to replace our free spirit, the youthful perspective that life is simple and easy so long as we go with the flow. This of course does not hold true over a 40-year career. But replacing the carefree with wisdom seems like a worthy trade. For Doug, it pays to keep in mind that...


Life is a 162-game season. The goal is to be in first place at the end of the season. Strive to improve every day. Be patient and persistent. Do good things.

Employment Analyses
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National Employment & GDP

The following chart looks at the relationship between GDP and overall employment. Over the last decade, GDP has continued to rise (thank you $8T stimulus) while employment has remained relatively flat, signaling the continued growth of productivity - the same or greater output with lower labor input.


Source: Bureau of Economic Analysis and Bureau of Labor Statistics. Data retrieved March 21, 2011.

Macro Employment

This chart takes a closer look at how our employment has changed since 1970. From our perspective, the economy can be broken into three distinct economic areas: productive activity, maintenance activity and leisure activity. Since it would seem productive activity should be the primary economic driver, for this analysis we group together maintenance and leisure. As you can see, we have been rapidly moving away from productive activity employment and towards more maintenance and leisure activity employment.


Productive Activity Employment includes: Goods Producing; Mining & logging; Construction; and Manufacturing.


Maintenance & Leisure Activity Employment includes: Trade, transportation and utilities; Information; Financial activities; Professional and business services; Education and health services; Leisure and hospitality; Other services; and Government.

Source: Bureau of Labor Statistics. Data retrieved March 21, 2011.


Super Sector Employment

This chart shows the total number of people employed from 1970 in the 11 Bureau of Labor Statistics Super Sectors. The dramatic decline in Manufacturing jobs against the steep increase in Government and Education & Health Services jobs is stark. Also unsettling is that Leisure & Hospitality jobs now outnumber Manufacturing jobs. Notice that in 1970, Manufacturing was the #1 super sector but has now dropped to #6. Trade, Transportation & Utilities is now #1. From where has most of that sector's job growth come? Ostensibly, the growth of consumerism has pushed up retail jobs (one of the three sub-sectors of Trade, Transportation & Utilities) and therefore that entire super sector to the top.  


For additional insight into super sector and macro employment trends, please see this recent Wall Street Journal editorial: "We've Become a Nation of Takers, Not Makers." 

Source:Bureau of Labor Statistics. Data retrieved March 23, 2011.


Financial Services Employment

Our Financial Services Employment Analysis looks at financial industry employment since 2000. The following chart shows the number of people employed in our primary Leyendecker Market, which we generally define as Corporate Finance (all Bureau of Labor Statistics-defined Financial Activities industries except for real estate, rental and leasing services), compared to total nonfarm employment. The comparison reveals how the Corporate Finance employment market has fared against the total employment market since the recession. It is telling that Corporate Finance employment is still higher than it was in 2000 while total employment has dipped below the 2000 level.

Source: Bureau of Labor Statistics. Data retrieved March 21, 2011.

News You Can Use
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From the Fed

Churchill, Baruch, Lindsay Lohan, Congress and the Fed, Richard W. Fisher 

Inspired by a famous Churchill quote, Richard Fisher, President & CEO of the Federal Reserve Bank of Dallas, asserts that since the 2008 crash, America has once again been at its most magnificent and tormented. Fisher believes that the Fed successfully saved the banks and prevented further collapse. But he wonders if the Fed overstepped its mandate with QE II, and discuses the complicated relationship between policy and the Fed's mandate, and its significance to the future of our economy.


The Role of 'Financial Myths' in Financial Crises 

Eric S. Rosengren, president and CEO of the Federal Reserve Bank of Boston, discusses how financial myths can contribute to financial crises. Rosengren argues that the financial industry must be more cognizant of different possible unlikely events in an effort to mitigate or avoid the disruptive effects and unintended consequences of financial myths.

The Economy

Warren Buffet Shareholder Letter, Berkshire Hathaway, Inc. 

View Warren Buffet's year-end 2010 Shareholder Letter, as well as the full archives.


Skunked, Bill Gross, PIMCO Founder 

Is it possible to avoid default if we don't tackle entitlement spending? Bill Gross argues that it's not, and that we can expect default to play out in atypical, stealth ways, akin to the federal government pickpocketing from its citizens. For this reason, PIMCO, the world's largest fixed income manager, has eliminated US Treasuries from their Total Return Fund.


Alan Mulally on Leadership 

Former Boeing and current Ford Motor CEO Alan Mullaly shares his thoughts on the importance and value of creating an environment where employees feel safe admitting and facing issues and problems. The result, according to his experience, means that issues can be solved, and ideas and solutions can flow more freely.


HBR Ideacast: Who Do You Blame When Things Go Wrong 

Ben Dattner, author of The Blame Game, discusses the different ways people cope with failures and consequent blame, from blaming others or oneself excessively. He posits that successful people can benefit from tailoring their blame and credit style per context. Dattner also touches on how successful people and great leaders are more inclined to create opportunities from failure and are more likely to share credit with others.

Management & Hiring

Harvard Business Review: Should You Hire an Overqualified Candidate? 

Conventional wisdom tells us never to hire overqualified candidates. But in an economy where many of us are frequently met with overqualified candidates, it could be time to update wisdom for the post-recession job market. Research shows the risks of hiring those who appear overqualified may be greatly overstated. This HBR article suggests there are benefits to hiring an overqualified candidate, and lists tactics for managing expectations and ensuring their success.


Peter Drucker on What Managers Need Most 

The Father of Modern Management speaks about the importance of finding and capitalizing on people's strengths, as opposed to dwelling on weaknesses, to drive individual and company-wide success.

Thanks for reading The Leyendecker View. We hope you find these perspectives unique, insightful and valuable.

We at Leyendecker & Associates are committed to the highest standards of value creation. 
Doug Leyendecker Jim Ford David Prodoehl Kelly Griego