In many ways, when analysing the trends of the US labour market, it’s become increasingly hard to see anything happening as a glass half-full or half-empty-type scenario. On August 5th, the US Bureau of Labor Statistics released its employment situation summary for the month of July. In July, the report states that 528,000 jobs were created. “Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care.”
“Economists keep getting it wrong.”
So where’s the bad news, you ask? Well, that lies in the notion that despite the jobs that are being created, the unemployment rate has edged down to pre-pandemic level of 3.5 percent. In other words: jobs are still being created en masse, but who’s there to fill them? ‘What does this mean?’, Josh Bersin asks in a recent blog entry. ‘Well, economists keep getting it wrong – it’s actually quite simple. The economy is shifting from goods to services, with an ever-increasing need for people.’
It’s not always sunnier in Europe
Whereas Bersin’s analysis are mainly based on the US, European countries have similar causes for concerns. The UK unemployment rate for February to April 2022 decreased by 0.2 percentage points on the quarter to 3.8%. Yet the number of job vacancies in March to May 2022 rose to a new record of 1,300,000.
The trend of record-high open vacancies and record-low unemployment is happening virtually everywhere.
In Germany, the unemployment rate also inched down to a record low of 2.8%, as the total number of vacancies reached a record high of 1.7 million in March. The Netherlands is no different, with roughly 451.000 open vacancies, and the total unemployment numbers dropping. The trend of record-high open vacancies and record-low unemployment is happening virtually everywhere.
‘The economy has peaked’
“It’s obvious from the economic data, that the economy today has peaked”, Bersin explains. “The Federal Reserve, the ECB and other organisations are raising interest rates to slow it down. That is a normal business cycle effect from 14 to 15 years of near zero interest rates. We also obviously have supply chain issues creating inflation. There’s been a lot of money pumped into the economy by the federal government and other governments around the world, and now we have to slow it down.”
“Wealth in the United States in general is as high as it’s ever been for most people, even though we still have this huge disparity of income.”
There doesn’t appear to be a global recession on the horizon, however, according to Bersin. “People are still buying things. People are going on vacation. Wealth in the United States in general is as high as it’s ever been for most people, even though we still have this huge disparity of income. But we’ve learned a lot through the pandemic, and we’re not out of it yet.”
What’s gone well?
But it’s not all doom and gloom. “I look back on what’s gone well: who would have guessed that every company would transform itself for remote and hybrid work and customer experiences, digital delivery of products and services”, Bersin notes. “Everybody has done this. I don’t think anybody would have ever imagined that this would be possible before the pandemic. And to accommodate that, companies have generally taken really good care of their employees. Employee experience has turned into a multi hundred million dollar billion dollar market.”
“People with skills can move. They can go to a new job without picking up and changing cities.”
“Companies are worried about well-being, mental health, resilience, what we call human-centered leadership. CEOs have been taking time to communicate with employees and listen, create a sense of purpose in the organisation. They have to because they can’t hire people fast enough to grow. The pandemic may or may not go away and in the near term, but if you don’t take care of your people, you will find yourself with high turnover. You will find yourself in an underperforming operation. People have a lot of autonomy right now. They have a lot of power over their careers. People with skills can move. They can go to a new job without picking up and changing cities.”
The systemic HR model: Recruit, Retain, Reskill, and Redesign
In September, Bersin plans to launch his company’s full Global Workforce Intelligence research. “The big message for CEOs and CHROs, however, is that you have to think about your company differently. You can no longer can you just recruit your way out of this problem. We need what we call systemic HR strategies and totally integrated HR operating models that bring together the four R’s: Recruit, Retain, Reskill, and Redesign, all in one integrated way. The only real solution, regardless of the direction of the economy, is to treat people as an asset.”
The hot labour market crisis
But in every sense of the word, the hot labour market has become a crisis, Bersin says. “We cannot manufacture more people in a flash. We can solve the global supply chain problem by building a factory, buying a ship, or scaling up a distribution center. People don’t work that way. We need to educate them, train them, and coach them to perform at work. And as all the data now shows, when you “push” people too hard, they just quit, check out, or change careers.”
“Employers continue to rely on traditional levers to attract and retain people, including compensation, titles, and advancement opportunities. “
Bersin cites studies that illustrate that the desire for change is real among employees. The quitting trend won’t quit, as McKinsey recently aptly put it. “What we are seeing is a fundamental mismatch between companies’ demand for talent and the number of workers willing to supply it”, they said. “Employers continue to rely on traditional levers to attract and retain people, including compensation, titles, and advancement opportunities.”
- Yasar Ahmad (HelloFresh): ‘A hiring culture doesn’t just stop when that person is hired’
- 27 things we didn’t know about the European labour market (part 2/2)