Two-and-a-half years after the pandemic shutdown threw millions out of work and one-and-a-half years after the economy began rebounding, demand for workers remains strong. With 11.2 million U.S. job positions still unfilled as of early August, the Wall Street Journal predicts that demand for workers will likely remain high for some time. Job openings far outpace unemployment numbers, and the number of layoffs has remained flat month-to-month, surprising those who anticipated that the Federal Reserve’s efforts to cool off the economy would put the brakes on hiring.
Job Growth Not Slowing Down
Industry forecasters are showing continued optimism despite ongoing inflation concerns. The U.S. Bureau of Labor Statistics reports high job gains throughout 2022, and the August 2022 U.S. unemployment rate remained at a near-record low of 3.7 percent. Economist Robert Frick of the Navy Federal Credit Union told the New York Times “We may be seeing a second wind for economic growth after high inflation and slowing job growth in the spring.”
The manufacturing sector has played a key role in the strong employment numbers–a notable change from past decades when manufacturing employment steadily declined as multinational companies shut down factories in the continental U.S. and opened them overseas to take advantage of lower labor costs. Off-shoring was part of the much-lauded “just in time” business technique created in the 1970s, designed to cut down on the cost of storing goods for weeks and months before they were actually needed.
American companies began rethinking the just-in-time practice even before the pandemic when Trump Administration tariffs created strains in the global supply chain. After Covid shut down overseas factories, closed U.S. offices, and compelled people to spend more time at home, Americans began putting more of their discretionary income toward home comforts rather than the previously popular restaurants, travel, and other outside entertainment. The combination of soaring orders for consumer goods and reduced imports soon depleted domestic inventory. The result was record numbers of backlogged overseas orders, a supply-chain crisis, and news photos of thousands of shipping vessels sitting in U.S. ports, waiting to have their cargo removed.
More U.S.-Based Factories Being Built
Unsurprisingly, this perfect storm prompted U.S. companies to begin rethinking their overall logistics strategies. Many have begun building U.S. factories in regions that previously saw little manufacturing, including the Mountain states and the Southeastern states. As a result, today the overall number of manufacturing employees in the U.S. is 67,000 higher than just prior to the pandemic, according to Chad Moutray, chief economist for the National Association of Manufacturers.
Though still a new phenomenon–a recent survey conducted by the U.S. China Business Council found that in the last year alone, around 8 percent of U.S. companies whose manufacturing was based in China have transferred segments of their supply chain to the U.S.–the trend is giving some optimism to manufacturing trade associations and their members.
Service-Sector Openings Continue
In addition to strong hiring in manufacturing, many service-sector positions that went away during the shutdown are still waiting to be filled, such as jobs with restaurants, barber shops and hair salons, childcare and hotels, and in-state and local education. The push for higher wages and more flexible schedules in many of these fields could lead to an improvement in job conditions, pulling back in many of those who previously left due to job dissatisfaction.
One post-Covid difference in business behavior compared to past inflation cycles is that employers are not trying to cut prospective financial losses by laying off people or leaving openings unfilled, as was typical during past economic downturns. Despite rampant talk of inflation, the August unemployment rate remained at a very low 3.7 percent.
Although economists have been predicting the rise in inflation would inevitably lead to a sharp slowdown in job growth, the slowdown has been milder than anticipated. The New York Times reports that the labor market has remained “red hot” even as other parts of the economy, such as housing sales, slowed. Wells Fargo economist Sarah House told the Times that the fact that August saw 315,000 new jobs added even after employment rose back to 2019 levels is “a really impressive feat.”
Indeed.com economist Ann Elizabeth Konkel notes that even with employer demand slowing down, hiring is still very strong compared to past years. And economist Kathy Bostjancic of the research firm Oxford Economics says that labor shortages in the U.S. “remain acute.”
A New Trend in Labor Hoarding
In September, the human-resources industry newsletter HRDive wrote that positions are filling at a rate 8 percent faster than pre-pandemic. A survey of search firms carried out by Employ Inc. found that employers, with fresh memories of the difficulties encountered in replacing employees who were laid off in 2020, have not slowed their recruiting despite the possibility of recession–spawning the new phrase “labor hoarding.”
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Tiffany Sacasas is the executive recruiter of Gertsburg Licata Talent. She can be reached at [email protected] or (216) 435-5800.
Gertsburg Licata is a full-service, strategic growth firm, specializing in business law, M&A advisory and executive talent solutions for entrepreneurs and executives of start-up and middle-market enterprises. Our proven process ensures time and resources are dedicated to identifying the goals of your organization and how your executive talent needs align with that vision. Our expert recruiters partner with you to build your dream management team, securing the best talent to help drive value for your employees and customers. Contact us today to discuss how we can help you secure your next competitive advantage.
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