Why Reshaping the Talent Supply Chain is a Business Imperative
I’ve been hanging out with a lot of colleagues lately, at board director conferences, economist webinars, and other places where current and former C-suite executives convene. All are trying to figure out the conundrum of rising inflation and increasing recession risk within a historically tight labor market. They’ve never seen it before. Unfortunately, they aren’t urgently addressing this situation as a macro talent supply chain disruption for their business. (Maybe they should read our insights!)
The immediate need for reshaping the talent supply chain hit home for me when I recently attended a conference for board directors. During a breakout session for compensation committees, 100% of the conversation focused on the overall talent issue, not compensation. During a breakout for audit committees, 90% of the conversation was about talent as an enterprise risk for corporations, not cyber or geopolitical risk. Long ignored at the board level, human capital management is clearly front and center. It’s time to move beyond the talk.
Enter the January US Jobs Report. This report showed 517,000 jobs added, 3.4% unemployment (the lowest rate since 1969), an average monthly gain of 356,000 jobs over the past three months, a participation rate of 62.3%, and average wages at an all-time high. All of this is happening while the Federal Reserve increases interest rates and tries to cool the economy enough to bring unemployment up to 4.6% by the end of the year. Let’s take a look at how that’s going.
Data Point 1: Initial Jobless Claims Declined in January
Despite the layoff alarms going off, look at what’s happening with overall jobless claims.
Jobless claims are down in January. Tech jobs, the largest cause for alarm recently, account for a very small portion of total employment. Don’t count on these layoffs to provide the slack the Fed and companies are looking for to move the labor market and human capital management topic to the back burner. A recent Zip Recruiter survey highlights that 79% of workers laid off from tech are finding a new job within three months. That’s hardly enough time to update a resume and do some interviews before being scooped up by another employer.
Data Point 2: Tech Industry Layoffs are an Anomaly
No, the job growth in January didn’t come from tech, but it did come from across a wide range of industries.
While tech companies likely over-hired talent during the pandemic, other industries are still scrapping for workers. With labor demand exceeding supply for education, healthcare, and various other industries, companies are still hiring.
Data Point 3: Quit Rates Signal Employees are Still Exercising Choice
Reshaping a company’s talent supply chain should be priority #1 for C-suites and boards. Moving beyond the talk means understanding the macro labor market dynamics, asking the right questions, and putting a mirror in front of yourselves when asked whether or not talent would choose you in this environment. Quit rates would suggest that most companies are not realizing this.
This is no surprise to me, given that labor arbitrage has long been the tool that leaders reached for. Yet, as we head into a cycle of cost savings and productivity to offset rising inflation, labor arbitrage may not be enough, or even effective, this time around. Squeezing more pennies from fewer workers will not lead to economic or organizational growth. Analyze what else is needed to reshape your talent supply chain. That will be the winning formula for workforce success.
-Teresa
