The pandemic has created the tightest US labor market in at least 20 years.
Trying to hire? The January 2022 numbers released by the Bureau of Labor Statistics (BLS) are the stuff HR headaches are made of. Employers are being whipsawed between a near historically low unemployment rate (3.7% in December, 3.9% in January) and historically high numbers of unfilled job openings (now 10.6 million). Before you reach for the aspirin, read on.
In many important respects, the economic news is good. The economy is rebounding quickly from many of the effects of COVID. Unemployment has plummeted, from a high of 14.8% in April 2020. While the unemployment claims rate is beginning to climb, likely due to Omicron, and inflation is a concern, overall, the economy is robust.
Headlines have obscured the good economic news. Many articles point out that several of BLS’ 2021 monthly labor reports announced hiring below predicted levels. Few articles, however, stress that updated BLS numbers show nearly 1 million more jobs created during 2021 than initially reported.
A headline grabber that is hard to get one’s head around is the rocketing number of unfilled jobs. How can unemployment be so low and the backlog of unfilled jobs be so high?
For one thing, some people able to work are still sitting it out. COVID and its successive waves (Delta and Omicron – to date) appear to keep some prospective employees at home for caregiving or for fear of infecting their children and immunocompromised family members. If people stay out of the job market long enough, BLS stops including them in the unemployment figures noted above. More on this below.
An overlooked side-effect of COVID is closing our borders to legal immigration. Since 2020 there have been two million fewer legal immigrants than usual. This means that a large number of people, half of whom are college educated, are unavailable to fill jobs.
Of course, the biggest headline grabber is the ‘Great Resignation’. This refers to the BLS ‘quits rate’ calculation (voluntary terminations as a percentage of the workforce). The rate of people voluntarily leaving their jobs is now higher than at any time since 2001, when the metric was first reported.
According to the Roosevelt Institute, a high quits rate is pushing up the job openings number as employers post to find replacement workers. While this ‘frictional unemployment’ may help explain the high job openings rate, it means that HR is working overtime to manage a revolving door. The explanation begs the questions of why people are quitting, and what to do about it.
What should you do – other than grab for aspirin?
Adopt strategies that suit today’s realities. One is to ‘pay attention to retention’ – see Circa’s blog on how to increase worker satisfaction so employees don’t leave in the first place.
Address the needs of those who are leaving other companies to attract them to yours. Is it toxic culture? Your company should be brushing up and advertising its bona fides as an ‘employer of choice’. Is it because the old job did not recognize performance? Make sure your company recognizes employees’ great contributions, and brag about them online. Fear of unsafe working conditions? Emphasize the steps your employer is making to meet Center for Disease Control (CDC) guidelines. (This is especially important for workers in ‘front line’ service capacities, the sector that has been hardest hit with resignations.) Promising flexible schedules, where possible, can help.
Today’s 3.9% unemployment rate overlooks many people who could be in the labor force. The BLS ‘U-6’ unemployment rate, which includes ‘discouraged workers’ who have given up looking for work, stands at 7.3%. The BLS no longer considers them in the labor force, so it does not count them in the most quoted, lower rate. Many in this category come from traditionally marginalized groups, and would work if work were available. Many in this group, however, complain that their applications are overlooked. Do not automatically reject applicants whose background and experience doesn’t dovetail neatly with your openings. Tweak your selection process to review for capacity, not just accomplishment. If your company’s recruiting protocol rejects those with gaps in their resume, think again – it may automatically exclude the long-term unemployed.
If you are not interviewing diverse slates of candidates, rework your outreach— you are missing opportunities. Companies had great success hiring from minority communities in the tight labor market immediately pre-COVID. Do well by doing good. See Circa’s blog ‘Hiring: Throwing a Wider Net for Bottom Line and Commonwealth’.
One thing is clear. One study reports that recruiters take 6 seconds to review a resume. In a tight labor market, this will not do – it takes much longer to identify talent. Elbow grease will be more effective than aspirin.