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Toyjobs Sees Surge in Search Starts

There’s a lot of gloom and doom on Wall Street right now which the media is only too happy to capitalize on in order to sell more advertising to more eyeballs (for the media it’s a sort of a stimulus program). However, most economists think there is only a 25-30% chance of a double dip recession. That percentage is up from 20-25% but economists overwhelmingly feel that the most likely outcome is continued slow growth (CSG?). While CSG doesn’t feel all that good, we’ve gotten used to it and it’s a helluva lot better than 2009, right?

Big investment managers on Wall Street are jumpy and stock indices are swinging wildly on any even minor news. “The current Greek bailout plan is in danger! Oh, heavens! …Gee, I think there will be another one. Factories in Pennsylvania, Delaware and South Jersey slowed down in the month of July! Oh, my.” I’m told (because I ain’t no expert) that a lot of this crazy volatility is caused by hare triggered computerized high frequency trading. The stock market has been trading in a range for a while so these programs are set to sell massive blocks of stock when we reach a point near the top of the range and conversely scoop stocks up when we near the bottom. This leads to wild gyrations which will take a little while to settle out.

On a positive note, retails sales were up 0.5% in July and figures for the previous two months were revised upward as well. Japanese supply chain disruptions are coming to an end. Prices have come down for oil, energy transportation and commodities. Unfortunately for the toy industry there are still problems in China with: manufacturing costs, labor, electricity and transportation.

The job market continues to slowly improve and unemployment has stabilized at just over 9%. The government also revised its May and June jobs reports upward. July non-farm payrolls increased by 117,000 (154,000 private market jobs minus government layoffs) which is the tenth straight monthly gain. 117,000 additional jobs per month isn’t enough to keep up with population growth (for that we need approx. 200,000) but it is heading in the right direction.

Total Nonfarm Payrolls All Employees

While it will be interesting to see the August numbers, we have to remember that during July and August we are in the midst of “the summer doldrums” when hiring slows down on a seasonal basis even during good times. I expect that we will see noticeably improved numbers in the October and November jobs reports. I hear you – “Where did that come from? What makes you say that, Tom?” Well, for one thing – I am in the employment business.

Toyjobs noticed a much improved employment atmosphere in January as companies started with new budgets after a decent, though unspectacular, Christmas. The slope of the improvement curve steepened in mid May as retailers went from “happy talk” to actually placing orders. Unfortunately we then hit July and August during which hiring slows down while hiring managers go on vacation and everybody (me too) is a little more focused on “outside activities.” A lot of the searches that we started in late May and June slowed to a crawl during July and will be finalized in the next couple of weeks. If we were publishing two or three weeks from now you would see a much bigger list of Toyjobs Success Stories (or you can just check back next month). Summer doldrums generally continue through the first half of August while toy company executives stare at their phones and pray that they don’t ring with purchase order cancellations. When they start breathing again about the third week of August, they suddenly seem to realize that the Fall Toy Preview is upon us and they better get moving if they want their team in place for the 2012 selling season. This year they didn’t all wait until late August. Toyjobs saw a surge in search starts at the beginning of August. Those searches are being worked now and will likely be filled in September/October. I foresee continued strength in search starts in late August and September. Why? Because that’s the usual seasonal pattern. Let me curb my enthusiasm by saying that we are nowhere near back to normal again but we are in so much better shape than we were two years ago and things seem to be getting better faster.

So, if you’re out of work, make the day after Labor Day the time when you renew your efforts to reach out to your network. If you’re working but would like to change jobs, now is the time to dust off your resume and tweak it up a bit. If you’re a hiring manager, think about how you can shorten your “decision cycle” and “pull the trigger” quicker. Otherwise one of your competitors might hire the person you want.

Muddling through more confidently,
Tom Keoughan

By ToyJobs|2020-11-20T08:51:02-06:00August 23rd, 2011|ToyJobs Blog|Comments Off

Japanese Supply Chain and Oil Price Shocks Temporarily Slow Recovery

The May unemployment rate ticked up to 9.1% from 9% in April. Incongruously U6, Toyjobs’ favorite employment statistic (which includes part timers and consultants who would prefer full time work) dropped by a tenth of a percent to 15.8. These numbers are just snapshots in time and it’s better to view their trends over a number of months. Should there be a trend toward slower employment growth, I think it will be reversing at about the same time it becomes readily apparent.

First, we should note that government statistics are notoriously inaccurate and will be revised several times before finalized. We also saw an oil price spike which has now begun to abate. Let’s not forget enough seriously crazy weather (tornadoes in Massachusetts?) to make an “endtimer” sound almost rational. Next time you’re at the supermarket remember to stock up on locust repellent.

I think that a good portion of the May numbers can be explained by supply disruptions after the Japanese triple disaster (3/11) especially in the area of auto components. No parts has meant less hours, no hiring, furloughs and layoffs in the huge US auto manufacturing sector which had previously been growing. In April, US economic growth was 0% but if you back out auto manufacturing the number would have been .4% which annualizes to a strong 4.8% (anything over 3% is pretty good). Now we can’t just extrapolate forward like that with any degree of accuracy but ex-autos the US economy was growing at a healthy 4-5%.

It will take Japanese suppliers several months to get up and running at full tilt and unfortunately the period of reduced supply will coincide with the usual summer hiring slow down. In July and August as people work shorter weeks (how much work really gets done on summer Fridays?), take long weekends and extended vacations it becomes difficult to get job candidates interviewed by all the necessary people or even get everyone together in a room to make a decision.

Additional drags on the economy this summer will be the end of QE2 (basically the government buying scads of bonds in order to keep interest rates artificially low) and the end of the Obama stimulus plan (roadwork everywhere).

As a seasonal/cyclical business the toy industry is naturally just a little out of sync. In most of the economy, companies get new budgets in January leading to a jump in hiring. The toy industry is up to its eyeballs in trade shows until March so much of that employment pop waits until then. Toy industry hiring has markedly improved this year but in just the last three or four weeks I have seen an even stronger acceleration in search starts. For small and mid-sized toy companies it’s often not until mid-May that retailers move from “happy talk” and planogramming to actually locking in orders. As toy companies gain clarity in their business outlook they feel more comfortable adding staff that they already knew they needed but were holding off on.

Increased search starts in late May/early June. Should lead to increased hiring in late June and early July. Typically there is a weak patch in search starts during July and in the first half of August. Late in August toy companies seem to suddenly wake up to the fact that the new sales season will begin in October (really before that if you want to get appointments scheduled for the Fall Toy Preview). If they want to make changes to their sales team before that they have to move fast. The reality is that they’re already late to the chase and probably should have started these searches in late July/early August. This next spurt in the toy industry hiring coincides with what should be an improvement in economic and employment numbers for the economy at large as people return from summer vacations and the Japanese supply situation improves.

That’s the plan anyway. Absent tea leaves and chicken entrails it’s all I can offer for now. That forecast will surely change with new information and heightened brainpower the latter of which seems unlikely during the summer months. September certainly feels a long way off for autoworkers and the unemployed but this soft patch should be over quickly so keep on keepin’ on.

Muddling through,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:02-06:00June 8th, 2011|ToyJobs Blog|Comments Off

He’s baaaaaack!…Neil Friedman Returns

After just a few short weeks in “retirement” Neil Friedman has returned to the retail side of the desk by being named Toys’R’Us’ US President. This comes just in time for the upcoming TRU IPO (good for him!). Early in his career, Neil spent ten years at Lionel Leisure before moving to the toy manufacturing side with Hasbro, Gerber and finally Fisher Price and Mattel. He also spent an additional short stint at Lionel Leisure in the early nineties.

The toy industry should benefit nicely by having Neil in such a prominent place at Toys’R’Us which has been looking awfully “Targety” lately. It should certainly be helpful that he understands and empathizes with the challenges that manufacturer/importers face. Congratulations to Neil and good luck to the toy industry which hopefully will find it just a little bit easier to do business with TRU.

Mr. Friedman’s alma mater, Mattel, just lost the most recent round in its “total war” with MGA. Most toy industry executives that I have spoken with are absolutely flabbergasted. To hear MGA Chief Executive Isaac Larian crow “After seven years of fighting with Mattel, I’m finally vindicated” reminds me of Ollie North saying “I’ve been completely exonerated. It seems that Mattel and MGA are now tied at one and one with one “do over”. So what happens next? Appeal? Jumpball? Tiebreaker?

From my reading of the case (which is admittedly far from complete) it seems clear that Carter Bryant created the original Bratz drawings on Mattel’s time and dime. It seems equally clear that Mattel turned the concept down internally (oops!). That’s completely understandable. We’re in a fashion business and much of product selection is just guessing at what a very fickle group will decide they must absolutely have usually for a very short period of time.

I, of course, haven’t read Carter Bryant’s Mattel contract but I do know (as does everyone in the toy industry) that these contracts are meant to cover all intellectual property developed day or night or weekend while in a company’s employ. Both Carter Bryant and Isaac Larian must have known that in producing Bratz, they were on a very slippery slope whether there was some loophole in the Bryant/Mattel contract or not. On the other hand, it is also very clear that MGA overwhelmingly built the Bratz franchise through smarts and hard work.

So, what should be done? This isn’t the way “the law” reads or the way contracts were written but it I were King Solomon…First, no damages for anybody. I would guess there was an adequate amount of “stolen trade secrets”, dirty tricks, subterfuge and just plain smarmy behavior by both combatants. The original concept was probably technically owned by Mattel but the business was built by MGA. So Mattel should receive the highest customary inventor’s royalty paid in some sort of split by MGA and Carter Bryant who surely knew he was violating the spirit if not the letter of his contract.

I’m not particularly happy with that opinion. I am decidedly not an MGA fan but in trying to be impartial that’s where I come out. It’s just one man’s opinion admittedly based on a very limited reading of the evidence (mostly newspaper stories). If I had more first-hand access to the evidence, my opinion might be different. So please, there’s no need for huffy phone calls from either the Mattel or the MGA camp. You both need to focus on the next round of your battle (and I’m predicting there will be a next round).

On to more broadly important matters. Last week we learned that US manufacturing output has been rebounding at an incredibly fast rate. During the first quarter it increased at an annual rate of 9.1% compared to an estimated growth rate of about 2% for the US economy as a whole. This is due to a number of factors. In 2010 most large companies postponed purchases in order to hoard cash. Now that the deer in headlights portion of the crisis is over and the recovery has slowly begun, companies are beginning to spend to satisfy pent up demand. Large increases in corporate spending for computer and software upgrades are being seen.

Another reason in commodity inflation as US companies seek to jump on the bandwagon of rising prices and growing sales volume. Food price inflation is boosting spending world-wide on agricultural equipment. Globally rising metal and oil prices have encouraged spending on mines and oil and mineral exploration requiring additional equipment. As freight traffic grows, trucking firms are investing in vehicles with better fuel efficiency.

All of this heavy machinery will require additional people to build it. Additional workers will mean increased spending on consumer products and consumer products firms will need additional employees to fulfill demand. When the manufacturing sector does well the rest of the economy generally follows. The whole shebang is beginning to snowball albeit very slowly. Indeed in March, the unemployment rate edged downward in its fourth consecutive monthly decline. I’ll be leaving tomorrow to attend a Pinnacle Society conference with the other Big Dogs of Recruiting. It will be interesting to hear how employment is fairing in all of their various niches.

There are, of course, a few concerns. One is that the recent earthquake in Japan will lead to shortages of automotive parts, semiconductors and electronic components. That could slow production of some goods but thus far the effect seems to be relatively minor. A bigger worry is a spike in oil prices due to Middle East unrest. Saudi Arabia has enough spare oil capacity to offset almost any Middle East problems short of someone going to war with Iran (which doesn’t seem likely). The biggest danger would be if Saudi Arabia itself sank into crisis. If that happens…well, let’s just hope it doesn’t.

Toyjobs continuing forecast is for increased toy industry hiring of specific and necessary jobs and an increase in sales to toy retailers. Unfortunately, due to China’s slowly strengthening currency, rising labor costs, rising commodity prices and general inflation – we foresee lower margins. Things are so much better than they were a year ago but in 2009 the economy sank so low that it’s still not even close to normal.

All the best,
Tom Keoughan

By ToyJobs|2011-04-27T10:02:00-05:00April 27th, 2011|ToyJobs Blog|Comments Off

Toy Fair (Without Snow) But Oil Clouds on the Horizon

Spirits ran high at the TOTY awards dinner and the Toy Industry Association did a fantastic job landing a great new venue – Jazz at Lincoln Center. The very fun evening was dominated by seeing lots of familiar faces and by Mattel’s Sing-a-ma-jigs. In a sense, the event was a well deserved Victory Lap for Neil Friedman who will be retiring from Mattel. Congratulations to all award winners, nominees, of course, Neil and Carter Keithley and the TIA.

The Women in Toys dinner was upbeat as always. Speechifying was kept mercifully short. Congratulations to everyone in attendance for being such a lovely and cheerful crowd.

Toy Fair itself was the best I’ve seen in several years with very strong traffic on Sunday and Monday even in what I’ve formerly called “the basement of gloom”. The bustling basement may have been the result of the strangely bifurcated main floor where it appears that the Teamsters are trying to secretly build a nuclear submarine. The smell of fear was gone. The falling have already fallen and the survivors were getting back to business. It was also nice to see major toy companies like Mattel, Lego and MGA supporting an industry wide trade show again.

The reason for all this cheerfulness was that the economy has been picking up. NPD reported that US retail toy sales for 2010 increased slightly from 21.4 billion to 21.9 billion. US GDP grew at a 3.2% annual rate in the fourth quarter. That’s up from the 2.6% pace in the quarter before. Toy industry hiring has increased as companies seem to have been much more comfortable putting together their 2011 budgets than they were for the previous two years.

Other positive post Toy Fair news includes John Barbour, everyone’s favorite Scotsman (with apologies to Bob Wann) being named President of Leapfrog. The company has always had great product but has been hurt by consistently tumultuous “leadership”. Mr. Barbour should be a stabilizing force that will allow the company to keep its eye on the ball. The toy industry should also welcome Tomy’s purchase of RC2. After their recent pull back from the US market, Tomy is showing confidence in the future growth of the US toy business. It also appears that they will be keeping most or all of the current RC2 team in place.

Now for the bad news. This has been the most difficult part of this piece to write because major events around the globe have been changing so rapidly over the last week or so. New information should naturally bring a shift in analysis and attitude. So rather than “phoning it in” like some Obvious Huckster in Ohio (OHiO) we’ve been repeatedly revising this as new information comes to light. The final revision was today – Wednesday, March 16 @ 8:57am (EST)

The – let’s call it what it is – Civil War in Libya has caused an upward spike in oil prices. This has already translated to a significant hike in the price of plastic resin. In their infinite wisdom the global community has opened an investigation into crimes against humanity thereby guaranteeing that Gaddafi will “fight to the last drop of blood” (Dudes! Do that – AFTER!). He has already begun to have his air force bomb oil infrastructure situated in rebel controlled zones so they can’t sell oil for currency or swap it for supplies. In Congressional testimony, US Director of National Intelligence, James Clapper stated that “Gaddafi is relying on two of his brigades which appear to be very, very loyal, disciplined and robustly equipped” – “his superior military forces mean that his regime will prevail in the longer term”.

The drop in Libyan oil production can be offset by Saudi Arabia which has significant reserve production capacity and acts as the world oil market stabilizer. Unfortunately, Mideast unrest has reached there as well. At this point, a few smaller protests appear to have been contained but, make no mistake, there are tiny but growing bubbles percolating in the Saudi streets. Saudi troops have also crossed the causeway into neighboring Bahrain after Bahrain’s police force was overrun by Iranian inspired Shiite protesters. Any real trouble in Saudi Arabi itself will cause oil prices to skyrocket and could cause the global economic recovery to stall.

Add to this the terrible triple disaster in Japan – quake, tsunami,and the Fukushima nuclear crisis which resembles a slow motion but ever escalating train wreck. Our hearts go out to everyone affected by this ongoing tragedy and their families. It’s just too awful to even think about…

Japan is the world’s third largest economy and an estimated 10% of their electricity is offline and is likely to be disrupted for the long term. They will need to import tremendous amounts of oil, diesel, natural gas and coal for a very long time. Over time, this will put significant upward pressure on the cost of these commodities and things made out of them (i.e. plastic resin). Japan is also a major supplier of electronic chips. There are several factories down and we could potentially see shortages of electronic components, wafer boards and chips into the late summer. Price hikes on these items have already begun.

What all this adds up to is that there is significant new upward pressure on the cost of making plastic consumer goods. This comes on top of already rising costs for wages, transportation, etc. Taking the good with the bad, Toyjobs’ (easy to make) forecast is for increased toy sales at tighter margins. That said, keep a wary eye on Saudi Arabia because if that blows it all goes Kablooey.

Again, our hearts and prayers go out to everyone in Japan and their extended families.

Tom Keoughan

By ToyJobs|2020-11-20T08:51:04-06:00March 16th, 2011|ToyJobs Blog|Comments Off

The Toyjobs Annual Review and Forecast 2011

Retail sales jumped out of the box quickly in November and overall holiday sales were strong despite a slowdown in late December. The International Council of Shopping Centers said that its index for November and December was up 4 per cent over last year, the most robust growth in the holiday shopping season since 2006. According to MasterCard SpendingPulse US retail sales, excluding automobiles, rose 5.5 per cent between November 5^th and December 24^th. Online sales grew 12 per cent to $32.6 billion, the highest total ever, according to tracking firm ComScore Inc.

While the big blizzard and rainstorms in California appeared to take a late month toll many retail analysts said the real culprit behind the weaker December sales was an avalanche of aggressive promotions in November. These deals pulled sales forward and raised unrealistic expectations about consumer spending for the rest of the year. In addition, promotional discounting was so deep that it affected retail profitability. Of course, we still don’t have the numbers for January gift card redemptions. Gift cards are particularly profitable because consumers tend to spend a bit more than the value of the card. Also 20-30 per cent of gift cards never get redeemed at all, making them the retail version of “printing money”.

So, in any case, after a fairly strong holiday sales season much of the toy industry sporting tender holiday heads, hopped on planes bound for the Hong Kong Toy and Games Fair. As I talk to senior toy executives what I am hearing is that US retailer attendance continues to grow lighter but international buyers have been upbeat. In the US, retailers overbought a little in 2010 and are now more cautious but not overly so. Manufacturers are pleased that Wal-Mart is expanding its toy aisle again, at least during the holiday shopping season.

The biggest discussion is about the continuing rise in production costs. China has a serious inflation problem and the authorities have been trying, mostly unsuccessfully, to repeatedly tap the brakes. Raw material costs are rising and the yuan is strengthening. Add to that a nearly 20 per cent hike in the Dongguan minimum wage and constant rumors that many workers will not return to southern factories after the Chinese New Year. Chinese authorities have been trying to push low-end labor intensive manufacturing to the north and west. Inexperienced factories and inexperienced workers will naturally lead to heightened quality problems. Add to this, that shipping back to the coast on overcrowded roads (such as they are) is bound to slow things down. Despite this I expect retailers to continue to confirm orders later and later leaving manufacturers with impossible to meet lead times. The big question is will they allow manufacturers to pass through rising costs by increasing their holy price points.

This is all, however, against a backdrop of an economy that is clearly gaining momentum. Private sector employers added 297,000 jobs in December. The gain over the November numbers was the largest in the reports 10 year history. Outplacement firm Challenger, Gray and Christmas, said that layoffs in 2010 were the lowest since 1997. The unemployment rate in December dropped from 9.8 per cent to 9.4 per cent and while some economists voiced disappointment, they seem to have forgotten that most companies operate on budgets. In late 2009, when 2010 budgets were being drawn up, many companies were still worried that the world was coming to an end. 2011 budgets put together in late 2010 seem to reflect that companies are “cautious but comfortable”. All eyes should be firmly focused on the January – April employment numbers.

Anecdotally, Toyjobs saw search starts pick up since late October. Companies were telling us “find people now that we can start in January when we have the budget”. Since January 3^rd we have seen a huge surge in search starts. This isn’t yet reflected on our job board because we tend to post searches toward the end of our work on them in order to keep LRWRB (Lonely Recruiters Without Repeat Business) at bay. I believe we will see this surge moderate as we move into the May/June time frame because it represents pent up demand just waiting for a flip of the calendar page to make budgets available. That said, I do think that hiring will continue to be much stronger than last year but it won’t be wholesale hiring. It will be companies filling necessary positions that were previously left open due to a mixture of fear and budgetary constraints.

On the road (or maybe “in the road”) leading to Toy Fair I have been flipping through the trade press and perusing new products. I regret to announce that Toyjobs has to once again present it’s much avoided “You’ve Gotta Be Kidding Me Award”

Wild Creations introduces Poo in a Box. Yes, really. This nutrient-rich animal dung comes from an elephant, reindeer, or rhinoceros. From the Natural History Museum, the Poo in a Box begins at a British zoo or safari park and is treated to be germ and odor free. Kids can sow the seeds, water the cardboard box, and watch the plants grow. Poo in a Box comes in three styles. Elephant poo with Christmas tree seeds, Reindeer poo with rose seed or Rhino poo with a banana tree seed.

Toyjobs predicts, that if this product sells well, the nation’s schoolyards will see a lot of tiny tears wearing pigtails in the coming year.

After the not so secret stealth fighter, the Gates trip to China and Hu Jintao’s visit to the United States; our China Report (and I’m sure you too) have been inundated with a flood of articles on China. In a not entirely successful attempt to stick a thumb in the dyke of this flood of information we have tried to focus on content that is: the most important stuff, more analysis than news reportage and is from unique sources that many of your may not regularly peruse.

Lastly, I would like to say, personally: Kudos for Neil Friedman. Mr. Friedman has been one of those rare combinations of savvy toy executive, a strong manager and an all around great guy who treated everyone he dealt with fairly and with respect. He’s fun too! I know that I join everyone in the toy industry in greedily hoping that Neil won’t be hanging up his cleats and will pop up somewhere else soon – hopefully leading a small to medium sized company where it can all be fun again.

I look forward to seeing everybody in February. There will surely be snow.

Tom Keoughan

P.S. For those in the know: Infomercial Dave – what’s he selling Snuggies or slapchoppers? Just a further revelation of his Huckster’s Heart.

By ToyJobs|2020-11-20T08:51:04-06:00January 25th, 2011|ToyJobs Blog|Comments Off

Retail Zombies and Statistical Aberrations

The Human herds were out in droves like something out of a cheap zombie flick as the Thanksgiving weekend kicked off the holiday shopping season. Although the lack of “door buster deaths” could be considered a negative indicator; retail chains reported strong customer traffic and increased per capita spending. According to the National Retail Federation, the average shopper spent $365.34, up 6.4% over last year. Weekend web and Cyber Monday web sales also set new records.

After several years of relative thrift shoppers may be parting with their money more willingly simply due to pent-up demand which retail analysts have been calling “frugality fatigue.” That said, consumers have been trained to only shop for bargains. We may see the Thanksgiving weekend spike fade as shoppers wait to see if retail prices come down before buying, leading to a second spike right before Christmas. Let’s just hope that everyone buys more Dance Star Mickey’s and Squinkies than they do iPads and Microsoft Kinect Systems.

The toy industry is expected to have a solid up year and that should translate into increased toy industry hiring for 2011. Most observers were surprised by the increase, from 9.6% to 9.8%, in November’s unemployment rate and several economists have called it a statistical aberration after the positive jobs trends of September and October. It seems that after seeing the strengthening employment environment many people previously too discouraged to even bother looking for work – “entered the job market” therefore driving the percentage of unemployed job seekers even higher. However, if you look at a wider variety of indicators, the overall trend continues to show steady, if unimpressive, improvement.

Hours worked and wages have been rising (although they were flat in November). Both measures tend to foreshadow future job growth. As we have seen, consumer spending is up. Third quarter results from Visa, Mastercard and American Express showed US consumers spending approximately 13 per cent more than last year. Consumer sentiment rose in November to its highest level since June. November Job postings on Monster were up 22%. Lastly, the government revised jobs data for September and October to show stronger numbers than previously reported. It would not be surprising to see November’s numbers revised upward as well.

Anecdotally, here to Toyjobs, we have seen search starts pick up sharply beginning in the second half of October. My impression is that coming out of the depths of 2009, few companies budgeted for much, if any, hiring during the current year. When they found themselves in need of people they would start to look, they would interview, but would then find some way to postpone actual hiring. Now that the economy has stabilized and is growing albeit very slowly – they are looking to shore up their rosters and have that in their budgets for 2011. That does not mean that I foresee a wave of wholesale hiring but rather that companies are now looking to fill the holes that in 2010 they left vacant. This is the employer version of pent-up demand.

The US economy is firing on more (but still not all) cylinders and the recovery is just beginning to pick up steam. That said, there’s still a chance that it could disrail as many employers remain cautious about hiring due to the uncertainty over taxes, new health care and environmental laws, etc. Nancy Pelosi and Harry Reid appear to be oblivious to the “shellacking” they took in the recent elections. Fortunately most of the Democrats and President Obama (despite what he says publicly) seem to get it. It looks like in the next week or so we will see a compromise bill passed which will forestall any and all tax increases for a period of two years. Unless Congress acts, tens of millions of people could see their withholding taxes go up in January. That could dampen household spending and further weaken employment and the fragile recovery.

In the interests of full disclosure, I am an independent who has voted Democrat more often than not. I generally (but not always) admire Democrat’s social goals but often find myself concerned about the unintended consequences of their proposed actions. With the economy at a tipping point this is no time to be raising any kind of taxes on anything and definitely no time for continued uncertainty. If you’re going to make those kinds of changes, do it during “good times” so that the system can better absorb them. Once we get the economy steadily growing again, tax revenues will rise and it will be easier to attack the deficit. If you can get rid of all the agendas, dogma and histrionics (fat chance!) it pretty much becomes common sense – Econ 101. I’m going to shut my mouth now, before I get into any more trouble.

Muddling through,

Tom Keoughan

P.S. Sorry, I just couldn’t help myself from taking one last stir at the pot. In the last couple of weeks, Isaac Larian of MGA Entertainment had publicly accused the Toy Industry Association of being prejudiced against him and his firm. While I can’t speak either for or about TIA or MGA; I’m not sure that prejudice is always such a bad thing. I oftentimes find myself biased against working with nasty, unethical people and/or the companies they control. Is that wrong? I don’t think so.

By ToyJobs|2020-11-20T08:51:04-06:00December 8th, 2010|ToyJobs Blog|Comments Off

Product Safety Conundrum and a Fall Toy Preview Review

Just as the toy industry began to make headway in convincing government agencies to rationalize product safety regulations along comes Mattel with an eleven million toy safety recall from its Fisher Price unit. Jakks Pacific then chimed in with its own half million piece recall and Graco added a recall of baby strollers. One thing that all three had in common is that they all were “product safety” issues or – design flaws. Certainly, it’s nearly impossible to police every factory in the Chinese hinterlands who may slip in a little lead paint to increase their beaten down profit margins when the gweilo isn’t looking. These, however, are design flaws and there just really isn’t an excuse. I’ve heard the arguments that if you look at these toys you don’t intuitively see any danger. That may be true, but Mattel is the largest toy company in the world and has entire departments focused purely on product safety. They also used outside safety labs who were apparently asleep at the switch.

Ironically, the biggest beneficiary of the recall will probably be Mattel. Most of those toys were sold between 2001 and 2008 and the majority of them are already on the scrap heap. Under the Mattel regime, Fisher Price toys don’t seem to have the longevity they did twenty years ago (thinner walls equals lower costs). Few will be returned and there is no inventory to pull off of retailer’s shelves or languishing in Mattel warehouses. Rational changes that were being considered in safety regulations will now most likely be shelves. The current overregulation disproportionally affects small and medium size toymakers. Mattel is the only company which gets to use its own internal safety lab which I have got to believe is less expensive than going outside. It can also amortize testing costs and manpower over a gazillion products sold. Small and medium companies are hit much harder by testing costs, time to market and eyestrain (having to read through all those crazy regs). Creativity has also been blunted as companies learn to play it safe. It’s very risky to produce a new and innovative product and take a flyer to see if it sells in the marketplace. Overregulation means that a company needs pretty large presells to be sure that a product at least breaks even. The unlevel playing field benefits Mattel quite nicely. No one believes that Mattel has been orchestrating large product recalls on purpose…but it sure makes you wonder.

Switching gears (kerlunk!) – the economy continues to improve albeit very very slowly. September’s unemployment rate was unchanged at 9.6% but U6, a broader measure of unemployment which includes people who have stopped looking for work and those settling for part time jobs rose to 17.1% from 16.7%. Government shed 159,000 workers half of whom were temporary census workers the rest are layoffs primarily from state governments and municipalities who have seen their tax revenues shrink. The somewhat good news is that private employers added 64,000 jobs. Unfortunately that is not enough. The US needs to add 200,000 jobs per month simply to keep up with the population growth of the workforce. It seems that we’re running harder and not even staying in place.

Despite what the media may say, the real disappointment isn’t consumers, who have good reason to be conservative given widespread unemployment and their damaged balance sheets. The real problem with the economy is large companies who are flush with cash but seem to be too scared of their own shadows to start spending. Economists are seeing an increase in the number of job postings but companies are very slow to fill them. It’s estimated that if openings were turning into jobs at the pace they usually do, the unemployment rate would be about three percentage points lower. One reason that companies are dragging their feet is uncertainty over the November congressional elections. Before hiring, business needs to know if what some call “the Bush tax cuts” but is really – the existing tax code – is going to be extended.

This was echoed at the Fall Toy Preview as many of the senior executives that I spoke with were finding it difficult to make planning decisions. As for the business of selling toys, most were upbeat. Sell-in has been good although margins are down. There is a feeling that the holiday season will have a very strong price focus which should help the toy business as most companies have been concentrating on producing lower cost goods. After the economic turmoil that we’ve had most companies want some clarity out of Washington and also want to cash their big January checks before they spend them.

Down in Dallas a common complaint was the lack of trade show support by larger toy companies. For years, the behemoths, Mattel, Hasbro and Lego have not supported toy industry trade shows. That practice is now being taken up by second tier companies like Jakks Pacific and MGA. Mattel and others were having their own “toy fairs” in LA in the two weeks following the Fall Toy Preview. Some buyers even left Dallas early to travel to Los Angeles. Certainly this makes business sense for larger companies as they know they are going to get their face time with the retailers. Obviously, they would prefer that buyers be totally focused on their product line rather than be “distracted” by hundreds of smaller competitors. Alright I get it, but the toy industry may want to consider whether they want these larger toy companies dominating the TIA board. Certainly, the TIA needs their dues but one of TIA’s main functions is to organize trade shows and industry events. In choosing not to support trade shows, these companies dominant place on the TIA board is a clear conflict of interest. One of a trade organization’s most important missions is to protect the interests of its smaller and medium sized members. The big boys have the ability to fend for themselves.

If the Fall Toy Preview was moved to Los Angeles at the same time that Mattel and others were holding their “toy fairs” then the larger companies would likely just switch weeks. I wonder if maybe all parties could be accommodated by having two shows in LA on consecutive weeks. The main show with small and medium size companies during one week. Mattel and other large companies could do their thing the following week. Any company that thinks it’s important enough to draw buyers away from the big boys would be welcome to take the gamble and show in week two. Of course, that may or may not work out for them.

“Everyone under one roof” is an admirable goal but it’s never going to happen. The toy industry can’t even get everyone in the same town at the same time. I don’t want to criticize the Toy Industry Association too much here. By all accounts, they have done an excellent job under the leadership of Carter Keithley. This is NOT the TIA of even just a few short years ago. However, TIA and the TIA board need to tackle this problem now. Meetings should be scheduled, smoke filled rooms rented, arms twisted and compromises made. Complaining quietly amongst yourselves doesn’t accomplish anything. I would recommend speaking directly with either Carter Keithley or your favorite TIA Board Member to ask how you can help.

Hoping I didn’t stir up too much trouble,

Tom Keoughan

By ToyJobs|2010-10-25T09:46:18-05:00October 25th, 2010|ToyJobs Blog|Comments Off

From the Yuan Wars to Toy Company Jobs

As November’s very heated election approaches in a continuing climate of economic malaise, desperate politicians are pointing the finger of blame anywhere and everywhere but at themselves. The nation is rightly disgusted with its banksters but is growing immune to the long and continuous public bludgeonings of their ilk. In search of another scapegoat the thundering congressional herd lurches eastward – “Blame the Chinese! – after all they don’t vote in our elections.”

Chinese workers have been striking (or just not showing up) and demanding higher wages. Frankly, good for them – they were being paid a pittance and many had pretty lousy living conditions. I’m all for an increase in the purchasing power of Chinese factory workers. That said, a dramatic upward currency revision, as many in Washington are calling for, could have all sorts of unintended consequences.

China is NOT sucking up as many U.S. jobs as is touted by the pandering vote grubbers. Low end (toys, sneakers, small appliances, et al.) manufacturing left our shores long ago and is not coming back. You can’t make these goods in the U.S. and still meet “the Wal-Mart price”. Even in these dire economic times no one will accept a wage low enough to make widespread U.S. consumer goods production feasible. Well, except maybe in Detroit. “What about cars?” you ask. “Building cars isn’t low end manufacturing.” Yes, they are building cars in China but they are not shipping them here. Those cars are for Asian consumption. By the way, part of “they” is “us”. U.S. auto manufacturers are building cars in China for Asian consumption as well.

If the U.S. political class is able to harangue China into a significant upward revision of their currency, it will cost U.S. jobs. American companies who have their products manufactured in China will have higher costs, and because it is very difficult to budge retailer’s price points, will therefore have smaller margins. An environment of diminishing margins is not likely to spur additional hiring. Companies will not be looking for additional sales marketing or product development staff. This is especially true of smaller private companies where owners tend to view the cost of each additional employee as coming straight off the bottom line – which translates to straight out of their pockets. A rising yuan doesn’t support these small businesses which are supposed to be the engines of American job growth.

In taking a country from the 12^th century to the 22^nd in the span of a mere fifty years, China’s leaders have to deal with far bigger problems than the U.S. Congress. They are going to move slowly and do what they think is right for them – whether what they think is right, actually is right or not. Them, of course, being the Communist Party, which is committed to maintaining power whether the country is communist or not. What we will likely see is a few small gestures such as the past two weeks 1% rise in the yuan in an attempt to mollify the situation until after the U.S. elections (now only six weeks away) when everyone’s attention will be focused elsewhere.

One of the factors that is really holding up job growth in the U.S. is uncertainty. Business owners like predictability. They determine what profit margin they want in order to make an enterprise worthwhile. Then they try to project sales (always tricky) and try to set costs at a level that will give them that margin or better. Costs are supposed to be the easy side of the equation to figure out. Unfortunately, we are currently in a situation where no one knows what health care costs will be or what climate change legislation costs will be. No one even knows what the tax rate will be. The tide may turn either for or against the business community but once we know what the rules are we can decide what to do about them. Until we know the costs we can’t even do the calculations, therefore many things are being put on hold . . . like hiring.

In the current economic climate it’s time to scrap blindly chanting ideology and focus on the pragmatic. Just so you know where this is coming from – I consider myself socially liberal and fiscally conservative but most of all a pragmatist. “People can believe in whatever they want, I want to do what works.” I know, I just painted a huge target on my back and expect to be pelted from all sides by Nerf missiles when I arrive in Dallas for the Fall Toy Preview. In any case, what seems to be pragmatic in that it would help the economy and can also actually be passed and signed into law is to extend all Bush tax cuts for a period of two years and then review them two years on. This is not the time for a 700 billion tax increase. I think it’s likely that is what will happen. Obama doesn’t have the votes to do what he wants and everybody realizes it will be disastrous if taxes increase for everyone at the end of 2010.

Upcoming tax certainty isn’t the only positive as the economy continues to slowly (very slowly) improve. There are other “reasons to be cheerful”. Despite the hot summer doldrums, retail sales for July and August slowly but steadily increased, coming in ahead of expectations. August saw an acceleration in manufacturing in both the U.S. and China. Growth was slow but again it was positive. However, we should temper our enthusiasm on this particular metric. It is completely natural for production to ramp up in July and August as seasonal goods are manufactured for late August/September pre-holiday delivery to retailers. While sell in is good, the ultimate question is sell through.

Average hourly earnings – which decide how much money people have available to spend – were up by 0.3 percent. There was also a rise in temporary employment which is often a prelude to the creation of permanent jobs. A better than expected 67,000 private sector jobs were added in August and there were upward revisions to data for the previous two months. True, the government shed 114,000 temporary Census workers but that was expected.

The September stock market has been strong and most economists are de-emphasizing the chance of a double dip recession. Warren Buffett last week stated: “I am a huge bull on this country. We will not have a double-dip recession. I see our businesses coming back almost all across the board.” After all the gloom and doom of the summer it seems that we find ourselves in a situation where the economy is not collapsing but rather heading in the right direction though at too slow a pace to drive unemployment down.

The toy industry has several things going for it. Most toy companies have focused this year on producing low cost goods. While retail sales have been creeping upward, shoppers have been hesitant to purchase big-ticket items like autos, furniture, appliances. In fact, electronics retailers are revamping their aisles to focus on handheld gadgets to try to excite consumers who have grown weary of their traditional big-sellers: televisions and personal computers. After all, how many big-screen TV’s do you need? Handheld devices are still pricey compared to toys. The toy industry may find itself in the pricing sweet spot for the 2010 holiday season.

The growth of Toys’R’Us pop up stores is also exciting. Last year Wal-Mart only had to deal with the competitive impact of 90 somewhat hastily assembled Toys’R’Us Express locations. This year Toys’R’Us is planning 600 express stores with 300 of the locations already up and operating. More locations, more shelves to fill and more competition for a Wal-Mart whose toy department will be 25% smaller this year, are all positives for toy companies.

As for toy company jobs, the annual late August/September hiring bounce has been somewhat muted for a number of reasons. Retailers continue to order late in an attempt to shift as much liability as possible onto toy manufacturers. The trouble is that factories have been relocating inland and north. It takes longer to get goods to the coast, there has been a shortage of shipping containers and also massive traffic jams on roads leading to the ports. Later ordering combined with longer lead times is not a recipe for success. Over my three decades in the business, I have noticed that toy companies feel better about themselves and start hiring once their goods hit the retailer’s loading docks. Later shipping has caused many companies to delay pulling the trigger on hiring decisions. Also, all of the uncertainty over government rules, regulations and taxes has been a considerable factor. Make no mistake about it some companies have begun hiring and we have begun a number of searches, but there are also a lot of companies talking about their staffing needs but dragging their feet rather than getting going. Like the economy, things are moving in the right direction but slowly, slowly.

Still Muddling Thru,

Tom Keoughan

P.S. Wow, sorry about the long tirade. There must have been some “pent up demand”. I guess the main difference between me and the Washington gasbags is that I have not yet learned how to talk in bullet points. See y’all in Dallas.

By ToyJobs|2020-11-20T08:51:04-06:00September 22nd, 2010|ToyJobs Blog|Comments Off

Toy Company Jobs……What Next?

Job growth was anemic in July due to large government job cuts. There was job growth in the private sector but it was less than expected. Businesses are waiting for consumers to start spending while consumers are waiting for companies to start hiring. It reminds me of a junior high school dance – nobody wants to be the first to step out.

There are two things we should keep in mind. First, all the journalistic doom and gloom keeps people’s eyes glued to the screen/page which helps sell TV, print and internet advertising. The entertainment/news business has been going through its own protracted slump and they are pumping out the pessimism for all it’s worth.

Secondly, July and August are always slow when it comes to both retail sales and hiring. People are on vacation, outside, at the pool or hiding in their air conditioned homes instead of skulking around retail outlets. Companies have different people on vacation at different times and it is very difficult to get much interviewing or hiring done. Hiring slows even more in the seasonal consumer goods business as companies wait until retailers receive their pre-holiday shipments before they pull the trigger on spending decisions.

Economic indicators have been mixed but the economy is NOT falling off a cliff. That July employment statistics were weak really isn’t that surprising. I would expect the August numbers to be unimpressive as well. It won’t be until we get to the end of September and end of October numbers that we will have a clear vision of which direction the economy is headed.

Most toy companies are telling me that sales into retailers are up (sell through to consumers remains a question mark) but that there continues to be pressure on margins. Labor costs are up and the yuan and material costs are up marginally. Factories are trying to raise prices.

Our forecast remains that there will be an increase in toy industry hiring beginning in September and running through the end of the year. I am a little more concerned than I was that we may need one more year to reach that point in the cycle but I am going to wait for end of September and October economic numbers before succumbing to pessimism. While things certainly are not good they are already vastly better than last year.

You will likely notice that our Toyjobs postings are currently a little thin. Partially that is due to a number of searches that we recently completed. Additionally, we are currently in the gap right before shipments hit the retailers’ warehouses. I can say that we’ve been having a number of constructive conversations with employers and I expect a fatter list of toy company jobs after Labor Day. So, steady as she goes. Keep manning the oars. Things could go either way from here. We’ll know in November.

All the best,

Tom Keoughan

P.S. Toyjobs Executive Monthly will be switching over to a Constant Contact format with our next issue. If you don’t wish to continue receiving this every six weeks or so this would be a good time to opt out. Just send us an email with “unsubscribe” in the subject line and we’ll take care of it.

By ToyJobs|2010-08-17T09:03:33-05:00August 17th, 2010|ToyJobs Blog|Comments Off

Toy Company Jobs Turnaround Continues

The headline US unemployment rate fell from 9.9% to 9.7% in May. Unfortunately most of the decline was due to the hiring of temporary census workers who will hit the streets again in early autumn. The numbers weren’t good, no matter what the Obama administration may say, but negative reaction was likely exaggerated.

When looking at anything as complex as an economy it’s important to look at multiple data points and many of the relevant numbers showed continued signs of slow improvement. Toyjobs has long been partial to U6 which includes underemployed people who would love to have full time work but can’t land any. In May, U6 dropped from 17.1% to 16.6%. We also saw an uptick in the length of the work week and average hourly earnings. Small business confidence in the US rose in May to a twenty month high. These are all “reasons to be cheerful.” It’s also important to remember that the government statistics are always inaccurate and will be revised two more times before they settle on final numbers.

It’s better to evaluate trends rather than specific points in time. Over the last few months the majority of key economic data points have been improving at a slowly increasing rate. TGBF. Things are Getting Better Faster. If we see two or three consecutive months of many economic metrics declining then it will be time to get worried. We will have the final revisions to the May data by then as well.

Let’s try to keep in mind that the big government unemployment numbers include all types of jobs like construction, as well as factories and warehouses where unemployment is exceedingly severe. Most US toy company employees are white collar workers where the unemployment rate has been bouncing around between 4.7 and 5.0%.

That’s not to say that the toy industry doesn’t have its challenges many of which lie in China. While the revaluation of the yuan seems to have been temporarily postponed due to the Europe’s sovereign debt crisis; a prolonged drought is causing Chinese manufacturing centers to operate in a climate marked by rolling blackouts. There is also a severe shortage of workers which has emboldened those still on the job to engage in strikes (see The China Report). Consequently labor costs have already risen 20-30% and will likely continue to rise. If this keeps up consumer-product manufacturers will likely seek new manufacturing centers. Factories are already springing up in Vietnam, after that?… North Korea?… Greece?… Detroit?

Anecdotally, Toyjobs has seen increased new search starts in April and May and the rate of improvement is strengthening. TGBF. Last week I spoke at the Fordyce Forum, an educational conference for senior recruiters. As I talked with the other speakers, all top recruiters in their fields, I heard overwhelmingly that their business had either already turned or was just beginning to turn.

Companies aren’t expanding their staffs from pre-2008 levels but where holes have developed, they are now filling those holes. A year ago they just left them vacant. My ongoing forecast is for a pop in search starts beginning in late August running through September and October. Most toy companies are telling me that they think they are having a good year but that, coming out of The Great Recession, they will remain cautious until they are sure. In late August and early September as goods are shipped and reorders begin the toy industry will be much more comfortable as the perceived improvement in the business becomes tangible. Until then order revisions from retailers are still a concern.

A troubling trend I have noticed is that an increasing number of people, on both the client and candidate side appear to be suffering from misplaced anger. Individuals, families and businesses have found themselves in a period of prolonged economic stress. Frustration is understandable as people feel that they have lost control over their lives. There is an increasing number of long term unemployed, people see their businesses under severe financial strain and even the currently employed feel the stress of doing their own work as well as the work of two other people who were laid off. One thing I can say for certain is that there are very few bankers, mortgage brokers, congressmen or (insert your favorite here) working in the toy industry today. In the toy business at least, it’s a pretty safe bet that anyone you are dealing with is not the cause of the current economic climate.

As you can see in the article below, acting out upon misplaced anger can be the start of an ongoing pattern which certainly won’t help anyone personally or professionally. Most of us are mostly keeping it together but for a few it’s important to realize that things are getting increasingly better. Don’t let this period of stress leave a permanent stain on your reputation. People would be well advised to cool it a little.

All the best,

Tom “Cucumber” Keoughan

By ToyJobs|2020-11-20T08:51:04-06:00June 14th, 2010|ToyJobs Blog|Comments Off

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