Episode Transcript
[00:00:06] Speaker A: Happy Friday. Happy weekend. I want to talk about the job numbers that came out from the Bureau of Labor Statistics on Friday. Well, first of all, it was a spectacular report. 303,000 jobs created, much more than was expected. The stock market traders were hoping for lower numbers so that the Fed would reduce interest rates. But obviously we don't have to reduce interest rates because the economy is booming. Even though some high tech companies have over hired Amazon, Google and some others.
[00:00:35] Speaker B: You'Re seeing some layoffs there.
[00:00:37] Speaker A: Most organizations are growing, and this is the post industrial age we are witnessing experiencing it. And it's going to continue and continue and continue. The unemployment rate went down to 3.8%. We've been sub four for more than a year, probably almost two years. And let me talk a little bit about how the economy is changing and why this is going to continue. You know, I've discussed many times why we're having labor shortages. It has to do with demographics. It has to do with the generation x, y, Z behaviors and people postponing their careers and having a more flexible lifestyle. But there's also changes in the economy itself. Right now, based on the data we have, interestingly enough, the largest single population of workers in the United States is state, local and federal government. 16% of workers in the United States.
[00:01:31] Speaker B: Are in government jobs.
[00:01:33] Speaker A: 15% of workers are in professional and business services, which continues to grow as a percentage of the economy. Because as we move away from the industrial jobs, not that we're moving away from manufacturing at all, but more and more manufacturing is automated. We don't need as many manufacturing roles. Manufacturing, by the way, is 9% of the jobs in the United States. Healthcare is 12%. That's a third. I think you've heard before that the BLS data that came out last year showed that 50% of the new jobs to be created in the next five years are in healthcare. So that's a massive part of the economy. And that whole industry is growing like crazy. A leisure in hospitality is 11%. And that's is also a big growing part of the economy, as I'll talk about in a minute. Retail is also 11%. We're getting back to retail. Of course, retail industry took a big hit during the pandemic, but that's coming back. Finance insurance is only 5%. Construction is 6%, and construction actually grew by 11% over the last three years. So we are building things, albeit maybe not as quickly as we'd like, and then there's smaller ones. So what you're basically seeing is in this post industrial economy, limited to some degree by the number of workers and employees. We have an economy that is dominated by healthcare, professional services, government. But, you know, a lot of government, by the way, is teachers and people that work in local government, not federal government. Federal government's very small. It's really mostly local government. Retail, leisure and hospitality, and then manufacturing and construction. The other industries are interesting. You know, the information industry is not that big. It's a couple percent. But the information industry is growing the fastest. If you look at these numbers over the last three to three and a half years, from the beginning or really near the end of the pandemic, let me show you how they've changed. Retail has gone up about 2% from pre pandemic. So it's actually quite caught up and slightly above where it was during pandemic. Manufacturing has grown by 4%. Government has grown by 6%, which is, you know, not a huge number given how the economy has been growing. I know a lot of people complain about that, but we do need teachers, and we do need people to clean the streets and, you know, fix potholes and take care of things like that. Professional services is up 9%. Healthcare is up 10% over the last three years. Leisure and hospitality is up 11%. Transportation and warehousing is up 12%. I don't know where Uber drivers fit in here. They probably belong in there. And education is up 12%. So, I mean, this is kind of where we are. And what it says to me and to you, hopefully, is that, first of all, human capital is the most important and most valued resource in businesses. It used to be financial capital, human capital, and physical capital. The human capital is now the most valuable and the most difficult to find. You know, you can get a lot of money from a VC or an investor, but if you can't hire the right people and manage them well, you're not going to have a sound company. Both Disney and Boeing were in the press this week, obviously, talking about the turnaround in both cases. And, you know, in some cases, you could sort of argue that both of them are human capital issues. Boeing, of course, with the human capital issues dealing with safety and quality, Disney dealing with the transformation going on there to improve the effectiveness and productivity of their streaming business and bring together new ideas in the theme parks to make the company more profitable. And by the way, Disney had a great week. The stock went way up. And Bob Iger, I listened to him, gave a really pretty interesting discussion on CNBC about what they're doing now. The other thing that I want to talk about relative to human capital is the impact of AI. You've heard me talk about this a lot. We're experiencing it in our own company. We're talking to lots and lots of clients about it. There's Jon Stewart had a funny piece last week about how AI is going to eliminate everybody's jobs and that the tech guys are overselling it. I don't think that's really true. It's interesting. It's kind of entertaining to see what some of the tech bros say.
AI is going to cure global warming. AI is going to make us live forever. I mean, I don't believe all that AI is a productivity, and obviously information productivity technology, but what it does do is it moves jobs around. So we have talked to quite a few companies, and you're seeing stories of roles in routine work, like customer service call centers that are being reduced or upgraded because of AI. I'll tell you what's going on in our company. The process of developing a research report, writing a study, editing it, crafting the story, putting together the graphics, creating the PDF, laying it out is radically easier now than it was. So the, the back office types of people that do that are going to be more creative and more productive than ever before. What that means is we'll be able to generate more materials, more content, faster.
All of the examples of automation in blue collar work don't really show massive elimination of jobs. I told you, manufacturing is still 9% of the workforce in the United States, and it grew by 4% in the last three years. But we can produce more stuff at more speed with greater quality. The machines, once we get them to work correctly, are very repeatable. So I'm not going to talk about the search engine business. That's another animal. But most of the AI applications we're going to see in HR are going to be reducing or eliminating routine work. I just posted a whole bunch of stuff about paradox and what they've done on conversational AI. And what you find out from all the companies that have used it is massive scale in hiring and better candidate experience, better scheduling of interviews, saving all sorts of time on background checking, and all these other things that recruiters have to do. And the recruiters spend more time talking to people, which is what they really should be doing, not doing all these other things. That's going to be true in retail. That's going to be true in all the professional services, hospitality, and of course in the blue collar jobs, as has already been happening. And what that says about us is something else. Interesting. Nick Bloom, who's a very esteemed professor down at Stanford who I've talked to several times, does a lot of work on the future of work and hybrid work, and he did some analysis in his group on the pay for HR executives. Chros and I posted this on LinkedIn and I'll put a link to it in the podcast. Are now reaching parity and pay with the other c level executives. 23 24% of c level executive HR execs, usually called Chros, sometimes called chief people officers, are now paid on parity with the CIO, the CFO, or the other c level officers. And the job titles of Chros have also changed. You know, the Chro used to be the VP of HR, the EVP of HR, something that was slightly lower and sometimes reported to the CFO. That's over because of these human capital issues, because of the demand for talent, the supply chain issues in talent, the skills development we have to do, the cultural issues we have to do, the reorganization and job design we have to do to improve productivity as we automate more white collar work. The HR function is highly strategic and basically business critical. And there are beginning to see CEO's coming from Chro titles. That isn't happening as much yet, but it will. So you guys are sitting on one of the most interesting, important, critical strategic roles in your company, which leads me to, of course, why we're here. We are here to help you and educate you. Your skills, your innovation, your creativity, your interest in learning about the economy and really understanding this new generation of technology is really, really critical. And let me make just a comment on technology, because we have a couple technology conferences coming up. We're completing a white paper on enterprise.
[00:10:20] Speaker B: Talent intelligence, and it's not done yet.
[00:10:22] Speaker A: But it'll be out in May. And what it's about is the way these AI platforms, which were originally used for recruiting, are now taking over the entire talent process. Recruiting, skill development, internal mobility, career development, leadership assessment, leadership development, pay equity, resource management, workforce management, job design, job architecture. Those things which you used to try to do using traditional transactional systems can now be done in talent intelligence platforms orders of magnitude more effectively, because these new AI powered HR systems have models that can look at data across hundreds of millions of people, not just the people inside your company. And I have seen this, I have used this. We use these kinds of tools for the global workforce intelligence project. The information and the data and the intelligence that you can get out of these systems is spectacular. And that is coming just at the.
[00:11:28] Speaker B: Time we're going to need it as.
[00:11:29] Speaker A: The job market gets tougher and tougher and we have these AI transformations taking place. Now, we are doing a lot of research on this, and you're going to see it in the white paper that comes out in May. We're also in the early stages of a massive study of people analytics and talent intelligence. I'll also put the link to that survey in the podcast. What is happening as we get these AI systems into the core HR infrastructure is this idea of analyzing the data about our people can also be done very differently. Traditionally in our domain, in order to understand what's going on inside the company, you had to do a lot of work. You had to consolidate data from all these transactional systems, the ATS, the LMS, the hrMs, the payroll systems and the multiples of those. You had to put them into a data warehouse. You had to define all the metadata, you had to run reports. And the data was not really real time. It didn't have highlights. When things were out of range, there weren't a lot of benchmarks because the definitions were different from company to company. And so a lot of tools, vendors built things to sit on top of this visier, one model cruncher and others.
[00:12:39] Speaker B: Visor being sort of the leader.
[00:12:41] Speaker A: Well, that's going to change too. And it is because this data that's sitting inside of your company can be amassed and consolidated by AI and analyzed very, very quickly. We're doing work with Visio right now that we're going to preview and probably launch at our conference. That'll sort of blow your mind in that area. Their tool, V V E E is an AI tool that allows you to ask questions about people. But even beyond that, these talent intelligence jobs, by the way, there are 2000 jobs in LinkedIn now for talent intelligence, are not just sourcing and recruiting jobs. There is a whole domain of people analytics and talent intelligence that's going to.
[00:13:24] Speaker B: Bring data head people like me into HR.
[00:13:28] Speaker A: Many of you are already there, people in IO psychology backgrounds, and a lot of people in HR have backgrounds in statistics and math to look at this data about our organizations, to plan for the future. And I think this is going to be absolutely critical. If you're not doing it, you have.
[00:13:45] Speaker B: To do it, because when the labor.
[00:13:47] Speaker A: Market is growing, this, the job market is growing this quickly and the unemployment rate is this low, every decision on where you hire, who you hire, where you source, whether you use an internal person, whether you develop somebody for the role or try to find somebody in the outside market for the role? Who's going to take on leadership positions? Who's going to take on project management positions? What are the skills adjacencies we need to be developed? What skills do we have that we don't really need? What are the skills our competitors have? That kind of information is absolutely critical to growing and competing in this economy. And if you think about AI as a tool for the war of business, business is a little bit like a war because companies are always competing with each other and your competitors have better AI and better data and better tools. They're going to blow by you and you won't even see it coming.
That kind of stuff is going to happen. It certainly did during the early days of digital, too. So you're going to need this people analytics and talent intelligence team to be in the center of that. So take the survey, because we're going to write the book on this later this year, would probably take us a couple more months. And if you're doing any work in that area and you'd like to share it, let me know, because we really would like to talk to you. You. So I think this job report is not just the report of a good economy in the United States, which to some degree we have, because we've done a lot of stimulus here, but it's an indication of the post industrial age playing out exactly as the way we talked about it in our research, mandating that we spend more time thinking about human capital as an investment, not as an expense. We invest in HR, we work in a systemic way on systemic HR, and we really take care of the people we have in our companies because in some sense, they are the most important assets that our businesses possess. And people have a lot of autonomy, they have a lot of activation now, there are a lot of opportunities for them. So they may not change jobs at the moment because there's a little uncertainty about the environment and change. But you have to take care of them, develop them, regardless of their age, by the way, all the way up until their seventies and eighties. People are working later too, and particularly younger people. So that to me is the message out of this jobs report. Let's keep in touch. More to come.
