Niki is Insperity's director, service operations. She specializes in employee onboarding, human capital management and HR infrastructure.
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Two years after the start of the Covid-19 pandemic and the ensuing "Great Resignation,” the job market remains in favor of job seekers. In an encouraging step for employers, the Bureau of Labor Statistics reported a 3.7% unemployment rate in August, an increase of 0.2% points, with a 0.3% increase in the labor participation rate. Nonetheless, that has not yet made up for the estimated 2 million workers missing from the labor force, according to findings from the Federal Reserve Bank of Kansas City.
In any tight labor market, business leaders need to think carefully about how to navigate a shortage of candidates while keeping teams fully staffed and operations running. The solution requires that businesses stay on top of shifting trends, keep employee interests at heart and make decisions in the face of uncertainty.
Follow Trends Closely
Even in an employer-friendly labor market, businesses must constantly compete for top talent. In a tight labor market, leaders who fail to follow trends in their industry and among their competitors can quickly fall behind. Businesses that grow desperate for workers may offer larger compensation packages, improved benefits and greater flexibility.
To prevent falling behind, leaders need to adapt quickly. Research competitors carefully to understand trends in compensation. According to the Federal Reserve Bank of Atlanta’s September study, Americans who leave one job for another saw a median annual raise of 8.5% in July, the highest in decades. Those statistics show that even long-time standards can evolve.
Some industries may see compensation norms shift even more rapidly than others. For instance, the tech industry has seen significant growth in salaries year over year. Other industries may have seen relatively flat compensation, yet major changes in expectations for benefits and work schedules.
The Covid-19 pandemic also served as a reminder that labor trends can also shift suddenly in response to major world events. Pew Research Center found that a net of 2.4 million women and 1.8 million men left the labor force between February 2020 and February 2021. In the unprecedented labor market that followed, businesses had to stay agile to remain competitive. While events like Covid-19 may be unpredictable, leaders should remain aware of developments in news and politics that could impact the market. In a tight labor market, trend-watching can help businesses stay competitive in finding candidates.
Keep Focused On Existing Employees
Recruitment remains critical for maintaining productivity and relieving pressure on remaining teammates, but leaders should not make the mistake of forgetting about their existing employees. Filling open positions may seem like a more pressing concern than supporting staff who have yet to resign. However, supporting existing talent is as important as pursuing new candidates.
During a labor shortage, resignations happen often. As HR leaders know, the consequences of a single resignation can be significant for their remaining team. Employees who remain in their positions often disengage as they watch their co-workers leave and absorb the extra workload. Business leaders must address those consequences or risk a toxic company culture and even higher attrition.
That begins with asking employees what they need to feel content in their roles. Employee needs and wants will differ between industries, regions and workforce demographics, so strategies may look different between businesses. Research, surveys and conversations with employees can offer insight into the best retention strategies that support existing staff.
Without a satisfied workforce, businesses could see more resignations than qualified candidates, undermining workflow and reducing productivity. Leaders who fully understand and respond to employee concerns can navigate the labor market more effectively.
Make Decisions Against Uncertainty
Above all, tight labor markets breed uncertainty. Candidates may feel less tied to their roles, businesses may struggle to predict hiring needs and government policies may shift in response. Even economics struggle to accurately predict GDP growth in the following quarter. The International Monetary Fund recently downgraded its forecast of global economic growth to 3.2%, 0.4% lower than forecast in April, after the United States, China and the European Union saw slowdowns.
If slow economic times breed uncertainty, a tight labor market only compounds the problem, challenging business leaders to make decisions despite murky information. Ironically, when uncertainty peaks, both business strategy and recruitment decisions hold greater weight. Choosing the right talent becomes even more important in times of slow economic growth so businesses can stay ahead of competitors.
With that in mind, leaders need to have the confidence and skills to make strong decisions in the face of uncertainty in a tight labor market. Leaders may not be able to individually address the problem of a labor shortage, but they can eliminate uncertainty in other areas of business. Strive for clarity around core business goals and values. Emphasize the importance of accurate forecasts, accounting and analysis across all departments. When risks arise, like an unproven partnership or supplier, consider postponing the decision if possible. If not, stagger risks over time to limit their downside.
By watching trends carefully, remembering to value the employees still at work and using strategic decision-making skills, business leaders can navigate the tight labor market with success.
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