Recruiters in the U.S. can expect to be busy filling a lot of jobs in the coming years. What makes this likely are the massive amounts of money flowing into U.S. stocks from other countries; investors switching from lower-yield bonds into stocks; and the return of a substantial portion of the $2.5 trillion in cash held abroad by U.S. companies because of the Trump administration’s plans to reduce taxes on profits of foreign subsidiaries.
Since the end of the last recession GDP growth has been an average of 2.2 percent, well below the post-war average of 3 percent. If the economy returns to that level, we will add about 4 million jobs per year (compared to 2.4 million/year for the last six years). Employee turnover typically increases with increase in GDP growth as more people see opportunities. So given the likely rate of new hires needed, employers will fill about 65-70 million jobs annually. The Trump administration’s plans to roll back regulations and increase infrastructure spending may also add to GDP growth but at this point just how much is unknown.
Now for the bad news. It’s not going to be easy to fill jobs.
Three reasons why:
Population growth in America has slowed to 0.7 percent – the lowest level in 80 years. The birth rate has fallen to 1.8/woman — the lowest level ever recorded in America. This is below the replacement level of 2.1 percent that allows the population to maintain itself. With members of the boomer generation rapidly reaching retirement and 1.2 million leaving the workforce annually for the last four years, population growth will be slow for decades.
When the population growth rate falls below replacement level, any growth that happens can only come from immigration. The U.S. admits about a million people annually as permanent residents and about 2.3 million on temporary work visas, including about a half-million on H-1B visas. Restrictions on immigration, including stricter limits on visas for skilled workers are all but certain under the Trump administration.
Labor Supply and the Skills Gap
The economy is near full employment, so there’s not much more supply of labor available. But the bigger problem is that there’s a big disconnect between the needs of the economy and the jobs that younger generations are attracted to. Skilled jobs, such as plant operators, railroad workers, machinists, plumbers, and electricians are at very high risk of going unfilled. The needs of the economy are also changing. A study by the McKinsey Global Institute predicts that in many areas workers will need to work with technology, specifically robots, in ways that few know how to today. AI will become more commonplace but not as a replacement for most jobs. AI will be more used in augmenting work, and knowing how to best use it will also require different skills.
So we’ll have lots of jobs, and not enough people. One thing you can be sure of is that making hires is going to get a lot more expensive as demand for labor outstrips supply.
No Easy Answers
This may be a good problem to have, but it’s still a problem. In other circumstances the solutions would be simple — increase immigration, automation, and outsourcing, but none of those is an option.
There are some glimmers of hope that could help this situation. The labor force participation rate (the number of people who are either employed or are actively looking for work) is at its lowest point in 30 years: 62.7 percent. An increase in the rate of just 5 percent would bring over 10 million more people into the workforce. But a majority will need to update their skills or learn new ones, so the impact on employment may not be much. Increased use of AI and robots will boost productivity of workers, reducing some of the demand for labor, but the benefits are highly uneven and require large investments.
There’ll be a lot more need for recruiters, but they’ll also be working a lot harder.