As seen on Tire Business's publication "Mid-Year Tire Report", June 19th, 2023.
By: Mike Cioffi, CEO & Founder of Tire Talent.
Is The Economy Half Full or Half Empty?
As I write this, a deal to raise the nation’s borrowing limit is becoming law. The markets are relieved. Some think a government default would have wrecked the economy. Now, some allege the modest spending cuts the deal included will push the economy into contraction. And after a strong new jobs report, others are saying a recession is no longer likely at all.
Confused much? Uncertainty still reigns, to put it mildly. Now more than ever, hiring managers need to be asking: What will the next six months bring?
Let’s take a look.
The Data Still Walks a Tightrope
There are contradictions in the data. Americans seem to be thinking pessimistically but spending optimistically. Consumer confidence fell in May, the fourth decline in five months. Yet consumer spending increased 0.8% in the most recent reading.
May saw 339,000 new jobs created. It was an increase from April’s 294,000 (revised), and in the same ballpark as the May 2022 figure of 364,000. That’s a pretty good ballpark. There are now only 0.6 unemployed workers for every open position. By way of comparison, during the Great Recession that figure reached six unemployed workers for every opening.
On the other hand, May’s unemployment rate rose to 3.7% from 3.4% in April, due to people losing prior employment. In addition, large layoffs have hit the tech sector, both globally and in the U.S. If this is the canary in the coal mine, then the labor market may look very different in other sectors—including the tire industry—by year’s end.
What About Anecdotal Evidence?
For its part, the Federal Reserve recently released its Beige Book, which focuses on anecdotal evidence rather than numerical data. It concluded that the job market, while still hot, is showing signs of cooling. Nevertheless, policymakers seem more worried about inflation than recession. The Fed’s Open Market Committee increased interest rates another quarter point at the May 2-3 meeting. Because of language Chairman Powell used after the meeting, some think rates may be left alone at the June 13-14 meeting. But like so many things now, it could go either way.
The Bureau of Economic Analysis revised its estimate of first-quarter U.S. GDP growth up from 1.1% to 1.3%. That’s hardly a red-hot number. But it’s not a recession either. And it’s much better than the first quarter 2022 decline of 1.6%.
The Consumer Price Index increased by 0.4% in April, after rising only 0.1% in March. Annual inflation is now 4.9%, a bit lower than expected and an indication that the previous rate hikes have had some impact. Wage growth even outpaced inflation in both March and April, so workers and job seekers are still holding a strong hand.
In rubber product manufacturing, U.S. employment changed little in the most recent report, from 135,500 in March to 135,800 in April. Tire manufacturing stayed flat at 58,400. Both figures are marginally higher than the year-earlier numbers of 134,600 and 58,100, respectively. For now, we see no definite problems in the industry. But as Bruce Davis’ recent article (Wave of M&As Gathering Strength) reports, merger & acquisition activity sped up in 2023. Consolidation often brings job losses. We will have to wait to see how severe they may become.
In Any Economy, It’s About Getting the Best Workers Available
To thrive in uncertainty, keep your options open. So far, the job market has not cooled much. But have a plan ready to go when it does. You may need it in the next six months.
From a hiring point of view, some things change in a downturn. Others don’t. You still want the best workers for open positions. Attracting them may become a bit easier in a loose market. But don’t let that make you complacent. The best candidates are in demand in good times and bad. In fact, identifying them can be more challenging when the pool of applicants is larger. You need a structured hiring process that defines and assesses each candidate consistently. That doesn’t change with the business cycle.
Mike Cioffi is the founder of Tire Talent, a boutique recruiting agency dedicated to our industry. You can reach him directly: firstname.lastname@example.org if you have any questions about this article.