The Labor Market Continues to Make Hiring Tough

Hiring started the year with a bang. The seasonally adjusted total of 467,000 jobs added in January was at least double economists’ expectations. And many had braced for job losses due to the omicron surge during the holidays. The report from the U.S. Bureau of Labor Statistics (BLS) was a promising sign to start a year with more locations and industries scheduled to fully recover all the jobs lost during the pandemic. 

The report was filled with more good news for 2021. At the beginning of each year, the BLS performs revisions to job growth for prior years. It turns out that there were 217,000 more jobs added in 2021 than originally estimated, and more industries fully recovered lost jobs. The trade, transportation and utilities, professional and business services, and information industries joined financial activities as the first industries to recover.

The BLS recently also released the results of its Business Response Survey that focused on how private-sector businesses adjusted strategies related to compensation and work flexibility due to the pandemic. The results shed light on how industries were differentially impacted as employee demands and operating environments changed considerably within a very short period. (As a note, the surveys were administered between July 27, 2021 and September 30, 2021, but the impacts are still noticeable early in 2022.)

The Rise of Wages

More than 24% of businesses changed at least one aspect of compensation in response to the pandemic-induced shift of talent supply and demand. The responses included changes to base wages or temporary higher pay, as well as various one-time payments, such as signing or referral bonuses, beyond what the businesses would have done prior to the pandemic. 

For many of you, that number might feel lower than reality, but consider that many employers were already paying above the market rate. Additionally, other businesses didn’t or couldn’t adjust strategies related to pay.

The accommodation and food services industry was hit much harder than other industries, and to attract and retain talent, almost 46% of those establishments adjusted compensation because of the pandemic. For years, the industry had lagged in wage growth, and its ability to attract workers during the pandemic was challenged on multiple fronts. 

Healthcare and social assistance also experienced an outsized impact with 35% of businesses changing compensation due to the pandemic, which should not be surprising given the demand for healthcare workers and the higher risk of exposure to covid. Retail trade and manufacturing were also above the national average with 33% and 29% of businesses making compensation adjustments, respectively. 

On the other end of the spectrum, only 13% of companies in the utilities industry made changes to compensation strategy. Utility workers include those involved in power transmission and water and sewage. The industry includes high-paying roles, with relatively low pandemic risk since many roles are outdoor and of solitary nature. 

Remote Work and Flexibility 

Nationally, around 35% of businesses surveyed increased remote work (or telework) for some or all employees. With many schools implementing virtual learning, it was not surprising to see educational services — about 63% of institutions — offering remote work. More than half of businesses in the information, financial activities, and professional and business services industries transitioned some jobs to partial or full-remote status.

However, remote work is simply not an option for many roles due to the in-person nature of the work itself. Thus, some industries were not able to add the flexibility demanded by many employees. Only 31% of manufacturing businesses transitioned some jobs to remote. The construction and retail trade industries were even lower at 17% and 15%, respectively. 

Accommodation and food services was at the bottom of the list with fewer than 4% of businesses increasing remote work. Consider, a reason some companies were able to maintain hiring velocity was by expanding into the talent pools of other locations for newly remote roles. 

Oftentimes asked is, “Which of the work dynamics created by the pandemic will persist throughout 2022 and beyond?” For companies that increased the amount of remote work, 60% expected it to continue through and after the pandemic. In other words, remote work is going to remain a key factor in the ability to attract and retain talent for a bit longer. These days, it can often be impossible to even get candidates to the interview stage if the flexibility to work remotely is not offered as an option.

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Flexibility in the work world has not been limited to just the physical location of the work but also the time and schedule. The typical 9-to-5 is becoming less common. For example, businesses may require employees to be online or available during certain hours, allowing for people to complete the remainder of their work on their own schedule. 

Nationally, 25% of businesses started flexible or staggered work hours, ranging from natural resources and mining at 12% to educational services at 31%. There has been more flexibility around where people work than when people work, with logistics playing a big role. 

Talent Acquisition Will Remain in High Demand

In addition to coordinating pay increases and changes to remote work options, TA and HR professionals are on the front lines of record employee turnover. Last year, the labor market experienced several records, most notably job openings and voluntary quits. While those numbers should moderate from historic peaks, they are expected to remain elevated in 2022 and beyond, keeping talent acquisition and HR professionals in high demand for years to come. 

For 2022, the employee transition will continue with close to 43 million voluntary quits projected. While the forecast is lower than the 2021 total of approximately 47 million, it is likely premature to say the Great Resignation will conclude this year. Another 19 million employee separations are expected to occur in 2022 through retirements and terminations. 

There will be enough hiring to offset employee turnover with more than 72 million hires projected in 2022. The number will be down from more than 75 million in 2021, but the decline can be viewed as a positive sign because it is based on slightly lower levels of employee turnover. Additionally, overall job gains should moderate as the market returns closer to previous norms with more industries stabilizing. 

Unfortunately, there will still be more jobs open than people to fill them. The current projection is a cumulative total of more than 91 million jobs will be opened in 2022, meaning only about 80% of the jobs opened will result in a hire. Additional emphasis on talent-retention strategies is crucial for businesses. 

The numbers are mind-boggling when taking a longer-term view. From now until the end of 2027, there are projected to be more than 500 million jobs opened, 400 million hires, and close to 390,000 employee separations — a combination of approximately 1.3 billion touchpoints in the employee lifecycle. The pressures faced by talent acquisition, along with the demand for their talent, are unlikely to let up any time soon.

Jay Denton serves as senior vice president of business intelligence and chief innovation officer at ThinkWhy. In addition to leading the company's business intelligence unit and product innovations, his expertise in market analytics and media engagement is a cornerstone for the organization. Prior to joining ThinkWhy, Denton was senior vice president of business intelligence at one of the largest U.S. multifamily investment and management firms. He led the company's market research efforts, as well as the creation of the company's next-gen BI platform, which was described as a key differentiator during subsequent fundraising initiatives. Denton brings more than 15 years of leadership experience in SaaS organizations.

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