Pre-Covid, there were already many challenges associated with hiring people. Today, shortages continue to plague many industries across a variety of disciplines amidst a lack of qualified candidates to fill roles in technology and manufacturing.
Unfortunately, I believe these hiring issues will likely get worse before they get better. The trend of fewer qualified applicants is likely to continue given the expanding technology advancements, and career opportunities. This will only worsen as 10,000 Baby Boomers reach 65 every day until 2030, bringing vast intellectual capital with them.
The talent shortage is one of many factors contributing to inflation, alongside supply chain disruptions, strong demand, and monetary policy. However, these relationships are more complicated, given other trends and current news.
The impact of HIGHER Interest Rates
Higher interest rates have a widespread impact on consumers and businesses, including everything from employment to daily activities, in the form of making most goods and services more expensive. Interest rates have steadily increased to curb consumer spending and combat inflation, and there are likely a few more rate hikes coming. With this, we will continue to see challenges. Thankfully, it now appears unlikely that the economy will reach the devastating all-time highs as we saw in the 1980’s, where mortgage rates were as high as 16%! There’s no question that all-time high credit card interest rates over 23% and other indicative rates are beyond what we’ve seen over the last 10 years; in fact, they have doubled. For example, used car interest rates are around 6.5% and mortgages are currently over 6%.
With over 25 years of recruiting, it’s very common to engage with prospective applicants who are open to relocation. Today, the numbers in this group are far lower given the covid benefits of remote work that employees have become accustomed to as well as, economic factors such as the inflated cost of housing and mortgage rates and employee expectations to find something comparable to their current housing for the same price. Here, they either settle for less or simply decide not to move.
Even though individuals are looking for new career opportunities, they are selective in their pursuits and the type of opportunities they consider. This holds true for both executives and individual contributors. Depending on the opportunity we present, some individuals find the career advancement, location and opportunity attractive enough to justify the move despite these economic factors. We undoubtedly are still able to find the talent, it just requires engagement with many more prospects to find the right individual.
What’s Coming, Unemployment or Hiring?
The simple answer is BOTH. Companies must be forward looking in their pool of talent/resources to continue to provide their product/services at a price that is attractive to buyers. This requires a balance of maintaining productivity while managing critical cost factors.
Unemployment: More is Coming. Companies are looking to maintain profitability, interest rates have a direct impact to the bottom line, and the quickest way to adjust operational expenses is to reduce their workforce. As much as 70% of total business costs can be associated to labor, so reductions are expected. This is particularly true for publicly traded companies; they are likely to implement more sizable reductions due to the added pressures of inventors’ interests and earnings. Source: https://layoffs.fyi/.
Hiring: Will Absolutely Continue! Companies hire anytime they are understaffed or need to backfill a position, upgrade existing talent, and fuel growth. Again, there is a significant shortage of qualified talent, so many companies have been understaffed for long periods. While technology advancements are not going to stop, companies may slow during these inflationary periods. On top of this, individuals also feel the impact of inflation and may seek out new opportunities that offer more compensation to offset their increase in living costs. This creates gaps in the labor force that can lead to problems.
Companies will continue to face a variety of challenges. This is not limited to just finding talent, but also includes defining remote and hybrid work expectations and providing competitive compensation (increased salaries due to inflation). Additionally, today’s workforce is much more eager and discerning when it comes to understanding the company’s culture and leadership style to ensure these qualities in a company meet their expectations and preferences.
In the short term, there is the potential for a wave of worse-than-expected earnings for Q4 2022, which could drive another wave of uncertainty into the market. However, analysts are predicting a relatively strong outlook for 2023, with the first half of the year experiencing weak or slightly negative results then gaining momentum in the second half of the year. I believe that with the number of recent layoffs amongst larger companies, small and medium size organizations will benefit greatly from this and will be able to fill their gaps, providing the talent is local or they allow remote work.
Author: Mike DeLaney @ GNR.
Mike is the President and Founder of GNR – Global Network Recruiting. With over 25 years of recruiting experience in the technology and manufacturing sectors across the US, Mike serves as an expert advisor to companies in delivering talent for specific search assignments.
Follow him on LinkedIN: www.linkedin.com/in/mikedelaney