Job candidates have long held strong negotiating positions, even pre-Covid unemployment rates were down to 3.5%. That was well below the Federal Reserve’s expectation of ~4.5%. Following Covid, some 25 million people had left the workforce, and with that vacuum created, the scramble to fill or find alternatives to those positions began.
In the last two years, if your recruitment process took more than a month, odds are your prospect found new work in that time frame. Many factors can contribute to this trend of fast paced recruiting. Whether your argument is the lag of some companies to shift into a modern practice, the shake up of remote work, or a shift in worker culture, the fact remains that for the last two years in recruiting; if you snooze, you lose.
As Covid reaches an inflection point between pandemic and endemic, is there likewise an inflection point that’s shifting from a candidate-driven job market to a more employer-friendly one?
Is the Tide Beginning to Turn for Employers?
As with many aspects of business, it’s important to consider both the immediate situation and the broader trend when analyzing employment.
The current situation is clearly one that still favors candidates, as hiring managers know without even looking at the data. Low application numbers, salary negotiations, and specific requests (e.g. scheduling, remote work) show that individual candidates continue to hold a strong negotiating position. The seasonally adjusted unemployment rate is currently at 3.6% (for July 2022), which isn’t far off from the pre-Covid low. Candidates were in control then, and they still are now.
While historically low, that 3.6% unemployment rate actually indicates a slow change in the employment landscape. It’s been the same rate for the past four months, thus indicating a slow transition toward a more employer-friendly job market. During this time, the size of the civilian labor force has remained essentially stagnant (158.5M in March; 158.1M in June).
A tidal metaphor is particularly apt for the transition that’s forming, as the transition is gradual rather than abrupt. The tide is still out for employers. It’s the slack water, though, and the tide will soon begin coming in.
Several different observable trends corroborate what the employment data is showing. That is, the job market appears to be slowly becoming more employer-friendly.
High-Profile Layoffs From Large Companies
Established major companies and hot new companies that were regularly in the news for positive reasons just a year ago, are now having layoffs reported. JP Morgan, Microsoft, Netflix, PayPal , Tesla, Twitter, and Carvana to name a few have all trimmed their workforce. Ford just recently announced it may layoff 8,000 or 25% of its workforce to meet green commitments.
These workforce changes at some of the largest companies is a single indicator of a possible inflection point, where employers are reevaluating how many employees they need. That’s the express purpose of Google’s recent two-week hiring freeze. Numerous smaller companies are following this trend of laying off and reducing new hires, which could make this the beginning of a major and continued change.
The logical prediction is that such large job cuts from some of the most well-known companies will cause a spike in unemployment rates. The spike might be muted because of the immediate situation, but the 3.6% unemployment rate that’s stabilized over the past four months could increase slightly in the next few months.
The job cuts won’t cause a tidal wave of change in the job market, but a noticeable current will probably develop as the tide begins to come in.
The Tide is Shifting for Employers
The current labor force (total eligible workers) still remains smaller than it was pre-Covid, with 62.2% workers participating today compared to 63.2% in December 2019. Businesses should be prepared for a continued candidate-driven job market in the near term, but a further outlook shows a shift. Our firm sees initial but clear indicators that companies aren’t so desperate to hire. Although our firm represents a small sample size it is still representative of what we are seeing in the macro data.
We do notice an extreme inflation for the right candidates in our industry. Pre-Covid we were able to hire territory sales representatives for manufacturers in the base salary range of $65K-$75K without issue. In today’s market we struggle to fill some of these same positions with a base salary range of $85K-90K. Much of our workforce is less willing to travel, unwilling to change companies, or have left the industry. Unfortunately for companies we don’t see the cost in salary decreasing anytime soon. However, due to cost of living increases this is a good thing for employees.
We are also seeing companies slowly shift toward a higher analytical workforce rather than a larger one. We are seeing companies really focusing on analytical backgrounds as opposed to the traditional “tire hire”, focusing more on the skills of the employee rather than the experience in the field. This tactic allows for that recruiting pool to fill up, which in turn allows the recruiter to pick the very best candidates for the role. Sure they may not be able to tell you the intricate workings of every pneumatic tire on the market coming in, but they are able to bring a level of analytics and insight that some others might have lost due to complacency in the field and not growing their skillset.
The higher-quality professionals often want more compensation, less travel, remote work (if possible), and other perks that they’ve become accustomed to during the pandemic. Although companies usually still have to meet these fairly new expectations, employers slowly are gaining more control over who they decide to hire from what we see on our side of the table.