CHARTS OF THE DAY: On Increasing Job Openings and Scarce Candidates

Today's chart(s) of the day come courtesy of Gluskin Sheff + Associates, and the excellent (and filled with charts) report from David Rosenberg titled 'The US Labor Market in Pictures, Tighter Than It Looks!', which provides a fantastic overview and re-set of the macro trends for employment in America.

Taken from the Gluskin Sheff report, I want to call out two of the report's dozens of charts, the first on the growth in absolute job openings in the USA:

Job openings continue to rise from the post-recession bottom, and with about 4 million current openings, seem on track to eventually climb to eclipse the pre-recession highs. In fact, if suddenly all 4 million openings were filled from currently (officially) unemployed workers, the unemployment rate would fall to about 4%.

But of course things are not so simple or neat, and this next chart illustrates the challenges that many employers are reporting trying to fill jobs in a time of rising openings:

Companies, especially smaller companies, are reporting increases in 'difficult to fill' positions, (a level just off it's five-year highs), and if you dig into the Gluskin Sheff report further, you will see that over 40% of companies are reporting 'few or no qualified applicants' for their openings.

These trends of rising job openings combined with, at least for many types of jobs in many industries, are having a tightening effect on the labor market overall. I am not smart enough to try and tell you exactly why this is happening right now, it is certainly a complex and debatable set of circumstances that includes the aging workforce, the governmental safety net, firm's inability or unwillingness to invest in training candidates, and the 'fake-or-maybe-it-is-not-fake' shortage of candidates with the needed skills for the modern age.

But the data seem to show one thing that is clear - the labor market is starting to show signs of tightening, probably making it more difficult for you in the short and medium term to deliver the candidates you need to sustain your business and talent objectives.

It might be time to start re-thinking all the things that make your shop the place where increasingly scarce candidates want to land.

Happy Wednesday.

CHART OF THE DAY: The Labor Force in 2022

...will be older, (relatively smaller), more non-white, and will certainly have more robot participation...

First, here is the chart, courtesy of our friends at the Bureau of Labor Statistics:

And below are the key findings from the aggregate data presented in the chart above, as well as in the details on gender, ethnicity, and sub-age group data (all found from the BLS in a piece titled "Labor force projections to 2022: the labor force participation rate continues to fall").

The Bureau of Labor Statistics (BLS) projects that the next 10 years will bring about an aging labor force that is growing slowly, a declining overall labor force participation rate, and more diversity in the racial and ethnic composition of the labor force.

The labor force participation rate increased in the 1970s, 1980s, and 1990s and reached an all-time high during the 1997–2000 period. The rate declined during and after the 2001 recession before stabilizing from 2004 to 2008. The labor force participation rate fell in 2009 and continued to fall after the 2007–2009 recession ended. As the baby-boom generation ages and begins to retire, BLS projects that the overall labor force participation rate will continue to decline to 2022.

During the 2012–2022 period, the growth of the labor force is anticipated to be due entirely to population growth, as the overall labor force participation rate is expected to decrease from 63.7 percent in 2012 to 61.6 percent in 2022.

There is lots more in the details from the BLS piece, but I think you get the gist. And if you have been following this trend for any amount of time, you are probably not really surprised by the data.

What is surprising, at least to me, is that whenever a new monthly employment report is released by the DOL that the talking heads on the business news continue to lament the low (and declining) labor participation rates, and speculate on the reasons why and the potential policies that could reverse this trend.

If these 2022 projections from the BLS are accurate, or even close, I wonder if it makes more sense to quit trying to bring back the days of 2000 or so, and instead focus on what a smaller, more diverse, and older labor force means to our organizations and our economy.

No fiscal program is going to turn back the clock for all the aging boomers. And hardly any feasible rise in the minimum wage is going to convince more 16 - 24 year olds that they would be better off working more and going to school less.

The only age groups where participation is increasing are 55+.

Keep that in mind this year as you are working on your 5 - 10 year business plans.

Happy Wednesday.

CHART OF THE DAY: On the Labor Force Participation Rate

Lately whenever we get a new jobs report that shows the official unemployment rate continuing on its slow but steady decline (currently at 7%), we also have to consider the Labor Force Participation Rate, that is, the percentage of the working-age population that is either employed or is actively looking for work, and thus considered to be officially unemployed.

As seen in the below chart, the Labor Force Participation Rate has declined to levels not seen in about 35 years or so, to about 63%. 

Or said differently, the percent of people that are classified as actually being in the labor force, (either working or actively seeking work), has sunk to a level not seen since the late 1970s.

Every time these figures are reported and repeated, there seems to be quite a bit of speculation around the causes of this decline. Just why are there relatively fewer participants in the labor force?

Is it simply a matter of demographics as retirements of the first wave of baby boomers (now in their mid-to-late 60s) start to accelerate?

Or are younger workers simply dropping out of the labor force due to the frustration of not being able to find work, either due to a simple lack of openings or having repeatedly failed to secure work in what is still an extremely competitive job market?

The underlying reasons for this drop in participation do matter I think, as they can be used to more effectively create policies and programs to address them, (if that is needed), as well as for HR and talent pros that might need to understand these trends and include them as an input into their workforce planning process.

Shigeru Fujita from the Federal Reserve Bank of Philadelphia recently published a research paper on the topic, titled On the Causes of Declines in the Labor Force Participation Rate, that attempts to break down the causes of these declines, and for anyone interested in the topic is well worth a read.

In a nutshell, the paper concludes that about 65% of the decline in the Labor Force Participation Rate since year 2000, (roughly when the decline began), and 2013 are due to retirements and disabilities, both suggestive of the 'demographics' side of the declining labor force equation. Note that the 'retirement' portion of the decline only commences in about 2010, when the oldest boomers would be about 65 years old.

Additionally, the paper also concludes that while there was a significant jump between 2007 and 2011 of 'discouraged' workers leaving the labor force, i.e. people that wanted to work, but simple gave up trying to find work, that all the declines seen in participation since 2012 are due to increased retirements and not increases in discouraged workers. These conclusions suggest that the lower labor force participation rate is really the new normal, at least for the short term.

I know I am probably boring you to tears at this point, but I find this data, and the reasons driving the changes, really interesting. If you're organization is having a hard time finding the people you need for your opportunities, or has plans to grow or expand in any substantial way in the near future, then these macro labor force trends are worth considering.

Once folks leave the labor force, it is really hard to get them to come back, whether they have retired, or have simply given up.

Have a great week!

FOLLOW-UP: More on Home Ownership and Employment

Yesterday, I posted about the downward trend in home ownership rates in the United States, coupled with the sharp rise in 'all-cash', primarily investment-driven home purchases, (which almost always are converted into rental properties), and the implications these trends might have on work, employment, and mobility.

So it was really interesting to me that this morning more on the topic of the relationship between home ownership and employment was posted on Business Insider in an article called 'High Home Ownership Is Strongly Linked To High Unemployment [STUDY]", a look at some recent research out of Warwick University on this very subject. 

The piece is relatively short, but I will pull out the most pertinent points below:

High levels of home ownership are strongly linked to subsequent rises in unemployment because labor mobility becomes reduced, according to new research.

Using data going back to 1950 across all U.S. states except Alaska and Hawaii, Warwick University economics professor Andrew Oswald finds that the lag from ownership levels to unemployment rates can take up to five years to show up.

But he said the linkage, established using data on millions of randomly sampled Americans, was extraordinarily robust.

Doubling home ownership in a state can lead to more than a doubling of the jobless rate.

"I have become convinced that by boosting home ownership we have ruined our labor market," Oswald said.

Oswald said the research may go some way to explaining why Spain, with a home ownership rate of 80 percent, has unemployment above 25 percent, whereas Switzerland, with a 30 percent ownership rate, has a jobless rate of just 3 percent. Germany, another nation of renters rather than home owners, also has relatively low unemployment.

Home ownership unwittingly impairs the labor market by deterring people from moving in search of work, a process that is time-consuming and expensive; long commuting times might also discourage a householder from taking a particular job, his research suggests.

A nation of renters, if indeed that is where America is moving towards, might not be all that bad for the future of work and employment, if this study has any truth and validity.

And aren't we seeing and hearing from pretty much every front that surely one element of the nature and future of work is that it will be, for many more people that before, more fluid, more temporary, more 'project-based' and not 'employer-based'. 

A future where many more people will bounce around from assignment to assignment, from 'employer' to employer, and from city to city even, as they chase the much more transient opportunities to ply their trade and earn a few bucks.

Many of us have tales we like to tell about the 6 crappy apartments we lived in after college before we 'settled' somewhere and maybe bought a house, got married, or at least decided to live with a significant other, and maybe even had some kids.

But that 'settling' process almost always came after the steady, 'permanent' jobs were landed. Maybe they were not the jobs or companies you saw yourself staying in forever, but they would be secure enough to save up some dough, prove to the mortgage company that you could in fact afford your new house, and even convince skeptical in-laws to be that you would be a suitable partner for their child. 

But in a economic climate where 'permanent', (if there was really ever such a thing), work is fast-becoming a relic of the past, then too, it seems like some of the follow-ons that came from landing those jobs, (getting married, buying houses, having 2.2 children), are also naturally going to be impacted.

If there are far fewer permanent jobs than it stands to reason that more and more workers will end up living like many of us did in our twenties - bouncing around from one place to another, living out of a few suitcases and boxes, only staying until the next job takes us somewhere else, since no 'job' is going to last too long.

It is a great deal for the companies that want to engage with labor and talent in this manner, but I am not at all sure that as a society we are prepared for a much more transient, less-rooted, nomadic population of professionals, wandering from place to place, and rental house to rental house, chasing a dream that is receding further away all the time.

But think about it, if we were all willing/able to move much more freely in pursuit of work and opportunity, how many of us would stay right where we are and how many would pick up and find something better?

Happy Weekend all!

More on the STEM talent shortage, or lack thereof

Fall weekends are for two things, watching my beloved New York Football Jets display their unique brand of ineptitude on fields across America (big non-relevant aside: I am starting more and more to come down on the site of Malcolm Gladwell regarding football and its eventual and likely marginalization. The only football game, college or NFL, I watched all weekend was the Jets vs Bucs, and in that game alone in the first half, two Jets players wobbled off the field, pretty much incoherent from blows received to their helmets. Multiply that by hundreds of games, many played by little kids as young as 7 or 8 and try to count, you can't, the number of kids/teens/collegians/men who are absorbing ridiculous and repeated trauma to the head each weekend. I don't know. Most of think boxing is a crazy sport. But we are ok with football. Sorry, that was a long aside), and catching up on some longer reads from the week I did not have time to really review.

The piece I'd like to call your attention to is titled 'The STEM Crisis is a Myth', an absolute takedown of the notion that currently the American economy is suffering, and will continue to suffer from a dearth of workers with the needed STEM skills to fill current and expected demand for them (or more precisely, the skills themselves). The author, Robert Charette, makes a compelling case that there is not, in fact, a STEM worker shortage. If anything, there is a surplus of STEM-capable workers, both from the amount of STEM graduates that are produced each year, and from the upwards of 11 million STEM-trained workers that for one reason or another, are not working currently in STEM roles.

Chech the below chart from the piece to see where Charette is coming from:

Do the math, (no pun intended), if you like, but when you break down the estimates of new STEM jobs being creating against the numbers of new graduates and existing STEM-educated workers it becomes harder and harder to make the 'shortage' case.

Additionally, it might be in tech and other firms best interested to play up the shortage narrative.  Why?

From the piece:

Companies would rather not pay STEM professionals high salaries with lavish benefits, offer them training on the job, or guarantee them decades of stable employment. So having an oversupply of workers, whether domestically educated or imported, is to their benefit. It gives employers a larger pool from which they can pick the “best and the brightest,” and it helps keep wages in check. No less an authority than Alan Greenspan, former chairman of the Federal Reserve, said as much when in 2007 he advocated boosting the number of skilled immigrants entering the United States so as to “suppress” the wages of their U.S. counterparts, which he considered too high.

 And STEM wages are 'in check', check this nugget from the article:

And over the past 30 years, according to the Georgetown report, engineers’ and engineering technicians’ wages have grown the least of all STEM wages and also more slowly than those in non-STEM fields; while STEM workers as a group have seen wages rise 33 percent and non-STEM workers’ wages rose by 23 percent, engineering salaries grew by just 18 percent. The situation is even more grim for those who get a Ph.D. in science, math, or engineering. The Georgetown study states it succinctly: “At the highest levels of educational attainment, STEM wages are not competitive.”

It is a complex and even controversial subject, but in light of all the available data, it gets harder and harder to make the 'shortage' case, and in fact, it gets more dangerous if it perpetuates to the point where it serves to help create a real shortage in the future, as students decide to avoid these fields in the future.

If you're interested at all in these issues, I encourage you to take a few minutes to read 'The STEM Crisis is a Myth', maybe bookmark it for new Saturday though!

Have a great week!