Lies, damn lies, and employment statistics

by Vault Consulting Editors | July 22, 2009

  • My Vault

Ever get that nagging feeling that something's wrong, but you can't quite put your finger on what it is? I've had one ever since writing here a couple of days ago about a New York Times report that showed the management/technology consulting industry had actually gained employees—2 percent—since the onset of the recession.

While the data initially seemed like good news for those in the industry, something about it didn't ring quite true. How is it possible that the consulting industry is growing its workforce, given everything that's happened in the economy over the last year and a half? And while exact hiring/firing figures are hard to come by in the consulting industry, it’s hard to imagine that consulting ranks are swelling while most of their client industries are imploding.

Here's what I do know, though: we're in the midst of a drastic recession. And, traditionally, the performance of the consulting industry tends to serve as something of a trailing indicator as to the performance of the economy in general: when the economy's strong, the industry is up; when there's less capital available, the industry suffers as companies rein in spending. Given that background, then, and the fact that consulting firms are supposed to be staffed and run by people who excel in reading and responding to the bigger picture, how could it be that they're taking on more people when almost every other industry segment out there is taking a beating, and millions of jobs are disappearing from the wider economy? Surely it can't all be explained by a surge in corporate turnaround work.

To try and understand it, I went back to the Bureau of Labor Statistics (from whence the New York Times got its figures) and came across a piece of information that the Times' nifty graphic doesn't have any room for: 21 percent of people in the Management/Technical consulting field are self-employed—or were when the last survey of the field was conducted in 2006. That set a bell ringing: I am personally acquainted with at least two people who have lost their regular full-time (and non-consulting-related) positions as a result of the economy. However, both still work for the companies that down-sized them, reporting in a couple of times a month to provide advice in a "consulting" capacity. Result: a swelling of the ranks among those calling themselves "consultants" at a time when the industry is showing signs of contraction. (Kennedy Information has suggested that the market could shrink by as much as 10 percent in 2009, and a further 4 to 5 percent in 2010.)

Meanwhile, as if to confirm those suspicions, the Wall Street Journal published this piece yesterday, detailing the life of a former PwC consultant now eking out a living as a freelancer. While her case isn't  going to affect the numbers in the field, it does add further fuel to the fire: namely, that people who can't find full-time work in the current environment are keeping busy by taking whatever "consulting" gigs they can find. And, as the comments field on the article suggests, many are doing so for free, in the hope that they'll get taken on on a full-time basis once they've proved themselves. (The phenomenon even has a name: "pre-lancing.")

I'm willing to bet that if the BLS did a survey of the Management/Technical consulting market tomorrow, they'd find that the ratio of self-employed consultants to those employed by bona fide consulting firms has shifted from where it was in 2006 to slant more heavily towards the self-employed. That would explain how the industry has managed to add workers while revenues fall. Even more interesting would be an analysis of how many of those self-employed workers were managing to make ends meet, or finding as many contracts/hours as they were prior to the recession.  



--Posted by Phil Stott

Filed Under: Consulting

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