Why Ernst & Young’s 10,000 new hires won’t save the economy
Ernst & Young is hiring 10,000 people this year. What does it mean for the economy?
If you’ve got six certifications, a degree in computer science, and an MBA, you’ll probably have an easy time finding a job. Last October, Mark Mendonca, 43, moved to Ernst & Young, the giant professional-services firm, from Merck after being recruited by a former colleague. With 22 years of experience, Mendonca didn’t take the new job because he had to. Instead, he took it because it offered him more opportunities to travel and his former colleague was able to sell him on the high quality of life for Ernst & Young employees. Mendonca, who has computer science and MBA degrees from Rutgers, is now a manager in the firm’s advisory practice.
His story is hardly novel. Ernst & Young is looking to make nearly 10,000 hires this upcoming year, and more than 4,000 of those will be experienced hires; the reset will be college students and recent graduates for entry-level posts. Ernst & Young, one of the “big four” auditing and advisory firms—along with KPMG, PricewaterhouseCoopers, and Deloitte—has always been one of the biggest recruiters on campus and has more than 150,000 employees. If you’re well-educated and have the relevant skills, then this labor market might not be so bad—especially if you’re doing client work.
A Bureau of Labor Statistics job category, “business and professional services” encompasses a wide range of professional occupations, from management consultants to lawyers to auditors. The “Professional, Scientific, and Technical Services” subsector covers “establishments that specialize in performing professional, scientific, and technical activities for others,” which means accountants and consultants and also specialized designers, architects, some engineers, and even lawyers. No matter how you count it, this sector of the economy, which draws almost exclusively from the well-educated and high-skilled, has recovered from the recession and then some.
The total number of payroll jobs in the U.S. is still 3.5 percent below its 2008 peak. However, employment in the professional and business services sector, which peaked in January 2008 at just over 18 million employees, is now back to just under 18 million. In other words, this sector accounts for a larger chunk of employment than it did before the bust.
In August, professional and business services saw a 28,000 job jump, the second-largest increase of any sector, behind only leisure and hospitality, which added 34,000 jobs. While this increase captures some services that are not the bedrock of audit and advisory firms like Ernst & Young, more than 10,000 of those new jobs were in either accounting, management consulting, or technical consulting.
Ernst & Young looks to be adding to its own payroll throughout the year by filling some 4,100 above-entry-level or management-level positions through referrals from its employees, from firm alumni, and even through Facebook and LinkedIn. So, while many of those looking for work are trawling Monster.com and Craigslist and sending out hundreds of résumés, Ernst & Young is getting its employees to recruit from their professional networks, according to Larry Nash, the firm’s Americas director of experienced and executive recruiting. The rest will be recruited from campus for entry-level positions. While Ernst & Young is just one of the big four, and even one of the larger constellation of firms that do consulting and advisory work, its bullishness on hiring is representative of how its sector has seen a real, sustained recovery.
In New York, where these big professional services firms are based or have a huge presence, business and professional services have been setting the pace in job growth, adding 52,000 jobs between July 2011 and July 2012. Ernst & Young, as part of its plan to hire 4,100 professionals, will hire 925 of them to work in the New York metro area, a more than 30 percent jump from the 700 hired last year. James P. Brown, an economist for the New York State Department of Labor, has specifically pointed to the gains in these professional service jobs to show exactly where New York’s recent economic and employment strength lies.
But while the economy is improving every-so-sluggishly, that’s not why Ernst & Young is hiring. Nash said that the firm is seeing “high demand for its services,” which is driving this new round of hiring. While many employers hire based on demand driven by economic growth—like manufacturers, homebuilders, or restaurateurs—the demand for professional services can sometimes be unrelated to the overall economy.
Nash noted that the firm’s advisory practice will absorb some 40 percent of the planned 4,100 experienced hires. He pointed specifically to the need for advice on how to deal with cyber-security threats, the health-care reform law, and the coming implementation of the Dodd-Frank financial-reform law as sources of demand.
The firm’s auditing practice, which made up some $10.6 billion of the firm’s total $22.9 billion in revenues in 2011, is only linked to the strength of the economy inasmuch as new firms need auditors. Much of the revenue can simply come from winning new business from existing firms that are already required to have an outside auditor.
Mendonca, the Ernst & Young project manager who was hired in October of last year, does project management reviews for clients, and his long list of certifications and 22 years of experience in the field makes him exactly the type of worker who can still thrive in a sluggish labor market. And while the economy may work for him no matter how slowly it grows, ultimately sustained job growth will require more firms engaging in more economic activity, not just being better at what they already do. That’s a problem too big even for one big services firm to fix, let alone four of them.