The labor market has gone a bit crazy. In the United States, there are more than 161 million people working and 15.7 million jobs open. This means that roughly one in 10 seats in your office are empty, and you’re competing with everyone else for staff.
Adding to this frenzy, the job creation continues. This month more than 530,00 new jobs were created and the unemployment rate is now down to 4.6% (and dropping). As the Biden administration pours even more money into the economy, we can expect this trend to continue. In fact, Citibank’s economist unit believes that next year we will have more than 20 million job openings in the US, bringing the percentage of seats unfilled to one in eight.
(PS the EU is experiencing similar growth. In Q3 the EU unemployment rate dropped to 6.3% and well below 4% in Germany and other countries.)
Wages are going up as well. The BLS research shows that average wages are rising at over 4.2% and in Q3 alone jumped by 1.5%, the highest growth on record. Lower-paid workers have seen the biggest gains, with pay rising for employees at restaurants, bars, and hotels by 8.1% in the third quarter from a year earlier. For retail workers, it’s jumped 5.9%. This means job seekers are looking for more money, they feel more empowered than ever, and they’re really looking around.
In fact, the Quit Rate, the number of people who voluntarily leave positions, is now 3.4% (4.4 million last month), by far the highest we’ve ever seen. So in the middle of all these job openings, almost a third of Americans will voluntarily change jobs this year. McKinsey’s research found that two-thirds of these job seekers do not have a new position, so people are feeling very optimistic about their opportunities.
So think about the numbers. One in ten (16 million) jobs open, over 4 million people leaving their jobs each month, and wages increasing at the highest rate ever. This is a crazy job market.
All this may be great for the workers, but it’s a huge burden for employers. As Larry Summers put it, “there is no slack in the labor market.” (The trending hashtag in TikTok is now #quitmyjob.)
Companies are finding it extremely difficult to hire and recruiters are in high demand. In fact, there are now more recruiter jobs open than software engineers! We need to take think about recruiters as the most valued workers we have!
What Should Companies Do?
Let me start by observing that three things are going on at once.
First, the job market itself is on fire. There are so many jobs open that almost every position feels like it’s tough to fill. Lots of HR managers tell me they’re posting jobs and seeing no qualified candidates at all.
Second, the nature of work is changing. With so many jobs disrupted by the pandemic and digital transformation, we have to search for skills and culture fit, not just experience. Many of the new positions we’re creating don’t have large pipelines of experienced candidates.
And third, the psychology of job seekers has changed. Candidates feel burned out, empowered, and ready to negotiate.
1/ Focus On Employment Brand, Culture, and Leadership
The biggest factor in recruiting great people is creating what we call an Irresistible Company. In other words, if your organization is not known for its good deeds, fair pay and work practices, and strong commitment to customers and the community, you’ll have a hard time finding people.
People don’t just look for a job – they look for a company. So if your company is unknown or poorly respected, they’ll look elsewhere.
Yes, wages matter. People will come to companies that pay more, but in our list of 80 practices for recruiting, total pay ranks pretty low (number 72 out of 80 in creating an attractive workplace). The real wage issue is fairness: you have to make sure your wages are fair and you treated people equitably: this factor rates #6 in importance.
2/ Identifying Culture and Skills Fit
In a more normal labor market you would typically look for someone who has done this job before. In other words, you look for specific job experience, validate the candidate’s success in prior roles, and call their references for feedback.
Today, as jobs change faster than ever, it’s ever more likely you will hire someone who has some of the experience you need, but is more likely to be hired based on skill, not experience. So this means you’re hiring for culture, intelligence, ambition, and potential.
And this means recruiters are more important than ever. Our new research (coming out early next year) shows that high-performing companies develop recruiters who can assess fit, culture, and growth mindset as well as skills, job fit, and experience. In fact, one of our findings is that “Human-Centered Recruiting” is more important than ever.
Not only does our research bear this out, my personal experience does as well. I’ve hired more than 50 people in my career and in most cases when I hired someone with deep experience but not a culture fit, I was sorry. The new employee came into the company ready to redesign and “fix” everything that was broken, and in many cases created more problems than we already had.
I’m not saying that experience is not important, but in this job market, you may have to live with less experience and rely on skills and ability to grow.
3/ Don’t Chase Pay.
For many jobs, particularly hourly and highly regulated roles, you must pay what the market demands. This means you may have to raise hourly wages, add more benefits, or even pay a bonus to get someone to join. But be careful, this is a dangerous strategy to follow.
Remember that the most expensive person you hire is someone who doesn’t work out. If you “chase pay” to get someone to join your company, you risk alienating existing employees and possibly hiring someone who feels so empowered they don’t perform to your hopes. So unless the person is a senior executive or well known by your team already, I’d be careful about “chasing pay.”
Right now this is a challenge. We are trying to hire a professional for a particular role right now and one of the candidates told me during the interview that she was making $140,000 in her current role. After several weeks of interviewing she came to the final interview and told me she wouldn’t accept a job for less than $200,000 per year. I was floored.
Of course, I decided not to hire her, but the message here is clear. Job seekers feel very emboldened right now, so you have to be careful about chasing pay.
(One of our manufacturing clients told me many of the candidates with accepted offers don’t show up for work. When she calls them they tell her “I found a job with higher pay over the weekend, I’m not coming.”)
4/ Don’t Over Extend Yourself.
This gets me to my fourth point. We are at the very peak of a 14-year economic cycle, the longest upswing in our country’s history. Some time in the next year or so the economy (and stock market) is going to slow down. If you hire like crazy and overpay people for the next year, you’ll find yourself with a lot of challenges ahead.
And remember this. Even though you may be in a hiring frenzy, bringing in too many people can backfire. Each new employee creates a burden for onboarding and may change the culture of the team. I’d be careful over-hiring at this stage of the economic cycle.
5/ Focus on Recruiters, Not Technology.
Finally, take good care of your recruiters. As I discuss in this weeks’ podcast, recruiters are still the key to great hiring. Yes, recruiting technology is amazing – but it’s a lot like self-driving cars. The tech helps you stay out of trouble but you still have to take the wheel.
As I discuss in the podcast, a new era of Human-Centered Recruiting has arrived – empowering the recruiter themselves. I’ve interviewed hundreds of talent acquisition leaders over the years and they always tell me the same thing: great recruiters hire great people.
Great recruiters are good at many things: they know your company’s culture, they work closely with hiring managers to understand your jobs, and they have a deep knowledge of the market. Not only do they know a lot of people, but they can search people out, assess their readiness and fit, and convince them that your company matters.
6/ Take Care Of The Employees You Have.
Let me leave you with this. If almost a third of the workforce is going to change jobs this year, you don’t want them to be the workers in your company. In order for the Quit Rate to be 4.3%, there have to be some companies losing a lot of people every month. That shouldn’t be yours.
Now is the time to really focus on Employee Experience, and EX is all about treating people well. Spend some time getting to know the people you have, building a culture of internal mobility, and taking care of your leaders. It’s the most important recruiting strategy you have.
Remember this: recruiting is the most important thing we do. If we don’t bring the right people into the company, no amount of management can fix the problems.
It’s a crazy job market out there. Now is a time to build your employment brand, focus on your culture, and get back to basics and recruit for potential, fit, and growth.