BUSINESS CASE: A Monster Slump

BUSINESS CASE: A Monster Slump

The 1990s were famously an era of business hype, a decade when numerous online companies were created, then sold their stock at incredibly high prices, and, in the end, went bust. Some of the dotcoms, however, turned out to have workable business models and have endured. Among them is Monster.com, a job-search company that, along with its competitors, has helped replace traditional help-wanted ads in newspapers with online listings.

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Monster Worldwide (the company’s current name) and its competitors sell services to both employers seeking workers and workers seeking jobs. The employers place job listings, to which workers can respond; in addition to responding to these listings, job-seekers can pay for premium services such as résumé-writing and priority listing of their résumés.

The growing importance of online job listings was brought home in 2007 when The Conference Board, a business group that has long tracked the economy by producing an index of help-wanted ads, added an index of online help-wanted ads. As the figure shows, a plunge in online help-wanted ads heralded the surge in unemployment in 2008–2009; when online ads began to recover, unemployment stabilized and began a slow decline.

A Plunge in Online Help-Wanted Ads Heralds a Surge in Unemployment, 2008–2009
Sources: The Conference Board; Bureau of Labor Statistics.

In the late 1990s, when the U.S. economy was experiencing unusually low unemployment, some economists suggested that Monster Worldwide and other online job services might be partly responsible, by making it easier for workers to get new jobs without a prolonged intervening period of unemployment. The evidence for this effect is, however, inconclusive.

You might have thought that the 2007–2009 recession, in which many laid-off workers were desperately seeking new jobs, would have been good for Monster Worldwide. And the company did, in fact, receive a lot more business from workers wanting to post their résumés. But the company makes much more money from employer job listings, and these were sharply lower during the slump, hurting their bottom line.

By late 2010, the economy seemed to be on the road to recovery, and so was Monster Worldwide, with one caveat: by 2010, online job listings, which were cutting-edge a decade earlier, were losing ground to Twitter and social-networking sites like LinkedIn—a trend that continues.

Questions for Thought

Question

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How is the existence of services such as Monster.com likely to affect frictional and structural unemployment?

Question

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In light of our discussion of the determinants of the unemployment rate, how could improved matching of job-seekers and employers through online job listings help?

Question

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What does the fact that Monster Worldwide did badly during the 2008–2009 surge in unemployment suggest about the nature of that surge?