Today’s Jobs Report Shows That We’re Now In A Labor Shortage Economy -- Here’s How To Solve It

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Posted: Jul 06, 2018 1:45 PM
Today’s Jobs Report Shows That We’re Now In A Labor Shortage Economy -- Here’s How To Solve It

The jobs report for June 2018 was just released. It is another shocker (as was May's). The economic think tanks were estimating somewhere around 175,000 jobs added in June. But the Labor Department report listed 213,000 new jobs added. The job market is exploding in growth.

But there is another, somewhat more frightening, or — shall we say — "challenging" side to the news.

American businesses are having an increasingly hard time finding workers to fill needed positions. Some are already calling it a "crisis."

The drumbeat began early in 2018. After years of low annualized GDP numbers and rather tepid (but steady) job growth, it suddenly became apparent that something had snuck up on us. At first it was exhilarating. Unemployment had dropped to historic lows. But then alarming news began to surface. Due to the much lower unemployment rates, businesses were having problems finding enough workers.

Bloomberg published an eye-opening article back in March, 2018, by Jeanna Smialek and Margaret Newkirk. "This Is What Record-Low Unemployment Looks Like in America."  

It recounted how businesses were facing tremendous obstacles finding employees. Some were raising wages a little. Others were changing their hiring requirements, accepting those they would not have considered before: "Businesses have pulled in workers from the sidelines—including retirees, immigrants, and the homeless—and retooled processes to use less labor."

That was in March.  The authors rather ominously asked the question: "What will happen when the U.S. unemployment rate falls below 4 percent, which is expected to occur by this summer?"

Now, in early July, we are finding out. Recent reports had pegged the April unemployment rate at 3.9% and the May rate at 3.8%. (Note: Today’s jobs report has it back up to 4.0% for June, but only because people are now coming in off the sidelines and re-entering the workforce).

recent USA Today article quoted Mark Zandi, chief economist of Moody’s Analytics: “Businesses’ No. 1 problem is finding qualified workers… At the current pace of job growth, if sustained, this problem is set to get much worse. These labor shortages will only intensify across all industries and company sizes.”

Becky Frankiewicz of Manpower Group North America, in a recent CNBC interview quoted labor secretary Alexander Acosta: “Never before have we had an economy where the number of open jobs exceeds the number of job seekers.”

Then Frankiewicz repeated the change in policy many businesses are being forced to make, stating it was no longer about what candidates had done in the past, but it is becoming a question of their “potential”: “There is a huge movement towards relaxing the standards around education and experience… we need to assess people on what they can do in the future.”

What is happening to the business world in America?
 
 It is a "perfect storm" of sorts. Here are the elements:
 
 1) A quickly growing economy means there is much more work to do.

2) The immense Boomer generation is retiring.

3) The younger generations, the Gen-Xers and Millennials, are in some ways not as prepared for the surge of needed work. Many were trained in universities but not necessarily shaped into effective workers in desperately-needed areas; especially in the trades, logistics, business development, or even IT.

 4) A significant number of people had left the workforce during the past decade, either by becoming dependent on government help or just lowering their expectations and lifestyles. Some moved in with relatives. Many essentially gave up on their ambitions.

5) The disastrous effect of a lessened sense of personal ambition and work ethic is that it got passed down to many younger people they influenced.

The latter problem is very serious. We are aware that many young Americans (young men in particular) have practically given up on capitalism and personal goalsetting. And they often have a weakened view of what was once called “The American dream.” The concepts of economic independence, personal prosperity, and giving back to society with one’s material means have been diminished, at least when compared with previous generations.

So, it is not just a “hiring crisis” we are looking at.  There is a deeper CULTURAL crisis, which causes a business crisis.  

But this also presents a huge business (and cultural) opportunity.

In effect, we must realize that “policy” has done all it can, and now we need a culture shift. Tax cuts and deregulation have gotten us a low unemployment rate, which means that a very small proportion of people who want to work are unable to find work. But as more people come in off of the sidelines, we must help them and grow them into the workers for now and for our future.  

Here are some specific suggestions for what businesses can do:

1) First of all, though hiring is now painful, we need to realize this a very good problem to have. America is STILL the land of immense opportunity. And opportunities are multiplying quickly. There is something in that market need which calls out to all kinds of people and brings out the best in them. We have always believed that about America and it has always been true. Opportunity is the DNA this country was built upon.

 2) Many people were sidelined for so long after 2008 they may have forgotten what opportunity smells like. Even those who remained employed often were afraid to exchange a relatively secure position for a risky “opportunity.” They were more or less trapped.
 
This is a time for businesses to create amazing opportunities and amazing cultures. The goal is not only to attract and keep the best people on board, but to reinvigorate the culture of opportunity and healthy ambition in their employees.

 3) Even as businesses and corporations enjoy a robust call for their products and services and reap very healthy revenues, the pressing need to attract, keep and grow good co-workers can impel them to change their cultures. They are being forced to focus on their employees and business partners much more. If they don’t, they will lose their people to better opportunities beckoning them — and here is the kicker — they may not be able to find replacements in the dwindling pool.

4) Businesses not already doing it will have to learn not only how to attract and keep people but how to GROW their people. They must not only compensate them, but also empower and help them. The answer to this is coaching, training, and building them up. Sometimes it takes a change in leadership. It often requires changing a corporate culture. It can be done. It is just the kind of thing that made America really long ago.

American business has a tremendous opportunity in front of it. It's not all about money. It's about people.