Jobs, Jobs, Jobs, And More Jobs. What's Up With The Economy?

February 04, 2023 00:19:02
Jobs, Jobs, Jobs, And More Jobs. What's Up With The Economy?
The Josh Bersin Company
Jobs, Jobs, Jobs, And More Jobs. What's Up With The Economy?

Feb 04 2023 | 00:19:02

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Show Notes

This week we saw the US unemployment rate drop to 3.4%, a 53 year low. Yet many large companies are announcing layoffs. Is this "the big shift" from Tech to Retail, Hospitality, Healthcare, And Travel? Or is this just the new normal: too many jobs and not enough people? In this podcast I'll explain what's going on.

Additional Resources

Labor Shortage In The Middle Of A Business Slowdown? It All Makes Sense.

Were All These Layoffs Inevitable? Perhaps, But Here’s How It Happened.

Predictions for 2023: Redefining Work, The Workforce, And HR

Understanding Chat-GPT, And Why It’s Even Bigger Than You Think (*updated)

The January 2023 BLS Jobs Report (itself) Want More?

Join The Josh Bersin Academy!

Irresistible: The Seven Secrets Of The World's Most Enduring, Employee-Focused Organizations (my book)

View Full Transcript

Episode Transcript

Speaker 1 00:00:06 All right. Today I would like to talk about the jobs report and the economy and what this means to those of us in HR and various is leadership roles. Let me start with one thing. All of my articles on a website and all of our research is written by human beings. We have no chat j p t content anywhere to be found. We've been playing with it, but we're not using it. Somebody made a comment to me the other day and asked if my blogs were real and they really are written by humans. Okay? So staggering findings on Friday. I think most economists are embarrassed that 517,000 jobs were created in January and most economists were forecasting, I don't know, 200,000 or something like that. That is a high number during the boom, we can get as high as 600,000, but that is a high number. Speaker 1 00:00:58 And it seems paradoxical because there have been all these layoffs, but it's not really that hard to understand. And let me tell you how the numbers work. There are close to 29 or 30 million businesses in the United States. There are about 165 million people working. Most of the employment, I think more than two thirds, almost three quarters of the employment is by small to medium size companies. So when you see a layoff by Amazon or IBM or Meta, those are a very small number of companies and a very small number of people. The total list of layoffs from the companies that have announced it in the last six to eight weeks is probably around 300,000, which is a very small number in a labor force of 165 million. And you have to also remember that the pandemic is not quite over. So there's still retail stores, restaurants, movie theaters, hotels, theme parks that are kind of still opening and growing. Speaker 1 00:01:59 People are just getting back to the lifestyle they had before the pandemic. And so most of the hiring that happened in those 517,000 people was in retail and hospitality and transportation and those kinds of industries. So the job market is actually pretty good for people in those kinds of jobs. Plus nursing. And I've talked about nursing a lot. The nursing industry or the nursing profession is massively understaffed and there's almost no limit to the consumption of nurses needed as we all get older. So in fact, healthcare, as many of you know, is the largest employer in the United States. So this 517,000 jobs is indicative of the fact that the GDP grew at 2.9% last quarter. It's still growing at some rate, maybe not as fast as we thought. And there are still jobs being created. Now, the other part of the numbers is the 3.4% unemployment rate that is the lowest in 53 years. Speaker 1 00:02:58 I'm 66, so I was young man or was kind of a kid the last time it hit this rate, many of you before you were born. So this is a very different kind of economy. When the unemployment rate is that low, a lot of things change. It's much harder to hire, it takes longer to get people to make decisions cuz they have more options, wages go up, which they are. And the Fed talked about that on Friday and Thursday. Your employment brand becomes very important because there are more options for people. The deal or the employment offer that you provide to candidates is very important. Defining that clearly your employee experience is critical, which I'll talk about in a minute. Employee retention becomes a big issue. And maybe the biggest change of all is that internal mobility is now vital to your success because it will be hard to hire. Speaker 1 00:03:51 Now, all the software people who got laid off during the tech crash the last couple of months, they're gonna be looking for work, but they're not gonna have a hard time finding it. Many of them, as long as they're willing to change industries and change locations perhaps. But this is a big thing because it's not going away. Now, I wrote a long article yesterday and it was something I'd been wanting to write a long time about why this low unemployment rate is so big a deal. And so let me explain it briefly right now. First of all, the primary reason the unemployment rate is so low is there just aren't enough people working. It isn't a skills problem, it's a human being problem. And that is caused by low birth rate delay in having children. Baby boomers retiring, low labor participation rate about 62, little over 62% of eligible workers are working. Speaker 1 00:04:43 That's down from 64%, 64 and a half percent before the pandemic. People in their earlier stages of their career are less committed to work than they were before the pandemic. They're kind of burned out quiet. Quitting is a true sentiment and there's some research in the Wall Street Journal, which I point to in the article that shows that the younger you are, the less likely you are to be ambitious about your career, which is weird. It's usually the opposite. And that's because young people are feeling the pain of inflation. They're not sure that their wages are keeping up, and so they're working to their wage, it's called they're reducing their work aspirations to the level of pay, which is not an unreasonable thing to expect. And so all of these things are long-term problems. They're not temporary. And if you look at the growth rate of the population in most developed economies, China's a shrinking, Japan's a shrinking. Speaker 1 00:05:40 Germany is shrinking, UK is flat, will be declining over the next few years. The Nordic countries population will decline over the next 10 to 15 years. United States is expected to continue to grow because we have a pretty good amount of immigration, but our fertility rate is not high either. India is the IS is the big growth engine of the population, but India's got plenty of challenges in their infrastructure and just general standards of living. So we as employers, as HR people are going to have to hang on to the people we have for dear life. And I mean that in a positive way. My assessment of this situation is if you really think about everything that's happened to us in the business world for the last 40 or so years that I've been working, there's one very significant trend. And that is more and more and more of the value in businesses is driven by labor, by humans, by value add services, design, engineering, support service, sales, management of humans. Speaker 1 00:06:42 We have not automated away people chat. G B T will not automate away jobs. It will create better jobs and allow us to do our jobs more productively. And this has been true of every piece of technology that's ever been invented. Going back to the voicemail machine, to the email, to the computer, to the phone, to the video recorder, all of that stuff. Because what companies do fundamentally is find unique ways to add value to a market, to generate a profit. That is what business is all about. So if you simply automate your business and don't add value on top of it, you're probably gonna get disrupted by somebody else who's gonna do the same thing better than you. So automation is a tool, it's an aid, it's a support system, it's an infrastructure you need just like electricity and power. But it itself does not eliminate the need for people. Speaker 1 00:07:35 Our human ingenuity is what makes companies successful. You see that in every single company that succeeds. So what it means is we're back to many of the basics we've been talking about for a long, long time. Taking care of people, paying them fairly, giving them a great employee experience, hiring people to fit your culture, implementing diverse and inclusive management, creating a sense of mission and purpose, making sure that people feel that they belong. All of those things that we talk about in the ex research are very, very, in some sense sacrosanct in a 3.4% unemployment rate economy. By the way, our ex assessment, which we developed over the last year or two, is a fantastic way for you to assess where you are. We offer that to clients. You can take the assessment across your whole company and within a few days you'll know where you have weak spots and you can focus your attention on those areas. Speaker 1 00:08:30 Although I know many of you do this in other ways already. Now, there's a couple of other implications of the low unemployment rate. What happens when people can change jobs easily is they negotiate for higher pay. And employers don't like to pay more for jobs because wages are sticky. And as most of you know who might be in the compensation part of your company, once you raise the wage wage for one person, the person sitting next to them wants a raised, especially if you have a lot of pay transparency, pretty soon the whole company wages go up. And the reason companies are laying people off is to save money. And, and you know, Intel actually made an interesting strategy, which is to cut the pay of all the senior people, which I don't think is a bad idea at all. Senior people can usually afford a pay cut for a year or two. Speaker 1 00:09:15 Well, that puts a lot of burden on you as an employer to decide what level of investment are you willing to make in the human part of your business versus the other part. Interestingly enough, if you look at the overall economic data on where money is spent in the economy, labor is about 50 to 60%, sometimes 70% of the cost in most companies, sometimes much higher. If it's a IP software services company, if it's a professional services company, it's probably more like 80 or 90%. So if that number goes up, it's a pretty big number. So you ask yourself, how much are we willing to pay? Well, what we've discovered in the research that's gonna come out next month or the month after is that level of pay is important, but not as important as fairness of pay, equity of pay, accountability of pay, and clarity of pay strategies. Speaker 1 00:10:14 So just because it's hard to hire people, that does not mean you have to suddenly pay everybody more money. Now, we've experienced this in our company where we have fairly limited budgets because we're small. There's always a candidate that seems great, that makes 50 to 75% more than another candidate. You don't have to hire that person if you don't want to. Your employment value, your brand, your deal should be enough to attract the right people. Now let's talk about employment brand for a minute. Employment brand is not the advertisement you put on LinkedIn or Indeed employment brand is the sum total of the benefits and experiences that you offer to employees. It includes the job, the pay, the financial benefits, the opportunity to grow, the mission and purpose of the company, the culture of the company, the team, the leader and manager that somebody's gonna work for. Speaker 1 00:11:11 The flexibility you offer people, which by the way is very high value. The opportunity for Slack, time and personal time in the job and the opportunity for the individual to do new things and multifaceted things in their career. Most research shows that the number one reason somebody with ambition takes a job is because they think that this job is gonna take them somewhere as a result of this job. They're gonna learn something, meet some people, get some things on their resume that's gonna help them in the following position they have in their career. And that's not pay. So just because the unemployment rate is low, we don't have to go paying skyrocketing wages to get good people. And I think most of you know that. But I just wanna point that out. The second big implication of a 3.4% unemployment rate is the urgent need to do a better job of internal talent, mobility, career development, and career pathways. Speaker 1 00:12:09 You all know what I'm talking about, but this is not an easy thing to do. We've made a huge amount of progress in creating internal talent marketplaces, building career models, creating agile work experiences inside of the company. But it's certainly not a solved problem. In fact, most of the companies we talk to have it on the agenda, but they're not necessarily doing it yet. And we are doing a lot of research on the productivity and the implications of that and the cultural implications of that. And we actually have a whole workshop process we go through with companies that are getting into this to help them. But I think this is in some sense the end or death of what we used to call integrated talent management pre-hire to retire. That model applies to some companies and some number of employees, but the vast number of employees are gonna be jumping around from job to job, role to role and even company to company. Speaker 1 00:13:02 And we need to manage that continuous growth process in the best possible way for them and for the company. Give them a mentor, give them a coach, give them some AI enabled advice on what course of action to take, what education they need, what skills they need, what is a good next job, what is an adjacent job to the skillset you have now. And of course a lot of that is asking people what they wanna do with their lives and creating a system for sharing that information. The third thing that is impacted by the low unemployment rate that I've been talked to quite a few companies about recently is performance management. We've had a pretty big uptick in performance management interest the last couple of months because the economy slowed down and companies are looking for justification for layoffs. And I just had a long talk with one of the larger tech companies, in fact one of the largest tech companies about this. Speaker 1 00:13:57 And the question they were asking me was, if we wanna simplify and refresh our performance management, what do you think we should get rid of? And what do you think we should invest in? And you know, it's impossible to answer that question in a five minute conversation, but the simple answer is the things that don't seem to make nearly as much difference now are things like calibration meetings, talent reviews, nine box grids, incessant, hierarchical meetings about who should get promoted into what job. Those decisions have to be made and they have to be made in a fair way. But most of the larger companies I talked to used to spend the entire month of December going through the ratings and distributions and so forth. I'm not sure any of them got that much out of it. They may argue with me on that. So I recommended to this company, maybe instead of having six levels of ratings, you should have three, which by the way is very common. Speaker 1 00:14:51 Exceeds expectations, meets expectations, doesn't meet expectations. And focus your energy on the feedback, the development, the performance enablement, the performance management, not the evaluation. Even in a time like this, I have had quite a few conversations with companies about their layoffs. And as I talked about in the article last week, most layoffs are not done very strategically. They're usually done very quickly cuz it's suddenly time to cut costs. And if you have a reasonably good performance experience at work, it becomes much easier to do a layoff. If you have to do that. It's never easy, it's never cut and dry, it's never simple cuz every human being is different. Every human being is important, but that is impacted by this too. So where's this all gonna go? I think the most important finding I take away from the current situation out there is that productivity is the king of our job going forward. Speaker 1 00:15:48 We have to work on things that simplify work, focus people on the most important projects, jettison the projects or initiatives or products that aren't selling. Move people to the high growth parts of the company, train them, develop them, and get rid of the bureaucracy, the meetings, the overhead, the multiple HR driven processes that we probably over-engineered a little bit and help the company become more productive. Revenue per employee is a very good surrogate for productivity. Look at your revenue per employee compared to your peers. If it's way below, I can guarantee there's stuff going on in your company that's not working and you haven't had the guts to stop it. And when it's hard to hire people and when people are going to leave for a better world, you're gonna have to focus on productivity because you might have fewer people in the long run. Speaker 1 00:16:39 And some of that's just demographics. And then of course, focus on employee experience and reminding your CFO who's probably looking around for things to cut that we are in the people business. And then if we take care of our people and if we develop them and we move them into the higher value roles and we invest in leadership and we invest in benefits and pay equity and all the things I've been talking about, Mr. Cfo, we're gonna make more money. It's gonna be good for our shareholders, it's gonna be good for our customers, it's gonna be good for your conversations with Wall Street. It's not simply an expense. And going back 40, 50 years, that is the biggest thing that's been happening in the economy. Every human being in every company adds either unique value to your business when they talk to a customer, when they talk to a teammate, when they design or develop or support or fix or repair something, they are making your company more successful. Speaker 1 00:17:37 If you can make them more productive, more happy, more engaged, you're gonna be fine in a 3.4% unemployment rate and you're gonna make more money and your CEO and CFO will be happy. And that is where I would like, like us to spend our time in hr. In the next podcast or two, I'm gonna talk about the HR operating model. We're doing some work there. It's not ready to publish yet, but I want to give you a sense of where we're going. So it's a weird economic period with these 517,000 jobs just being created. But hang in there. I still think we're gonna have an economic slowdown, but you're gonna have to deal with it in the middle of a very tight labor market and a bit of a labor shortage too. Have a great week and I'll talk to you guys next week.

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