The Ugly Side To Today’s Low Unemployment Rate
This economic cycle is really setting records. We’ve had almost ten years of US economic growth, the unemployment rate is at a 30 year low (it is expected to go lower), and every few days I hear someone in the administration bragging about how well the economy is performing.
I’ve lived through five major economic cycles in my career and while all this is great news for many people, I just want to explain the dark side of all this, with a particular focus on what HR organizations and employers should do.
There Are A Lot of Jobs: Just Not Enough Skills
Yes, there are a lot of jobs being created: more jobs than there are people in fact. As I discussed in an earlier article, employers are opening up many new positions to compete for this economic growth, and most of these are positions in software, service, sales, engineering, design, and other digitally-enabled roles. LinkedIn’s data shows that jobs like analytics, machine learning, cloud computing, and cyber security are 4-10X more scarce than the typical role, but data also shows that healthcare jobs and elder care are also in great demand.
Interestingly, most of these jobs demand softskills not just technical skills. A study just completed by Bloomberg and Workday finds that college graduates are not bringing enough technical or softskills to the job market (only 35% of employers feel grads are sufficiently ready) and four in ten are building remedial programs to try to fill this gap. So while there are a lot of jobs open, we are seeing an increasingly wide gap between the jobs being created and the skills and experiences in the workforce to fill them.
This creates stress among hiring managers, stress among HR teams, and stress among CEOs. The 2018 Conference Board CEO study found that “failure to attract and retain top talent” is now the #1 issue on the minds of CEOs, even more important than competition or the disruptive nature of technology. This is why the L&D market is exploding with growth and new L&D tools and solutions are being snatched up by employers.
Automation Is Creating Jobs But Also Stress
Contrary to many articles written a few years ago, AI and robotics are not doing away with jobs, they’re creating them. We now have demand for people to build AI and robotics, sell them, train them, and repair them. My daughter works in digital marketing and her job has become one of operating, measuring, and refining data-driven systems to capture leads, segment buyers, and continuously improve sales production. Yes she is also a gifted designer and writer, but that’s only a part of the job now.
More than 2/3 of the companies we interviewed in the 2018 Deloitte Human Capital Trends believe the pace of automation is increasing, and this creates stress in selecting technology, implementing it, and wondering if the tools you’re buying are good enough to compete with others. With an economy as hot as the one we have today, you don’t have a lot of room for error in buying the wrong tools, delaying your implementation, or selecting the wrong vendor. Expectations are sky-high, which of course makes all our jobs harder than ever.
And despite all the wonderful positive things technology can do, it has gotten away from us. There are now more than 100 different corporate learning vendors, at least 20 different tools for corporate collaboration, hundreds of new tools for recruitment, performance management, and employee engagement, and at least five major ERP vendors competing for payroll and core HR. All these are great companies, but selecting the right one and making sure the vendor doesn’t go out of business is a challenge.
Added to all this, we can’t trust technology like we did before. These vendors are moving so fast (they see all this growth) they’re becoming sloppy in their own ways. Facebook just revealed that it gave away more data than it hard reported to congress, and it “unblocked” confidential information for almost a million people in messenger “by accident.” Google just revealed that hundreds of vendors have been reading your Gmail accounts (I use hosted Exchange), and despite their best efforts to “not be evil” I sometimes wonder what’s happening to my enormous cache of photos.
A recent study by Edelman found that even Californians, where I live, don’t trust tech the way we used to. More than 3/5 of Californians believe tech firms over-focus on profits and drain local resources for their own benefit (more on this below), 58% believe tech companies fail to protect them from security threats, and 67% believe the industry is “secretive.” Worst of all, 60% believe tech jobs are good for the state, but only 38% believe tech companies benefit them as individuals. This is because many of these great jobs are unavailable to normal people.
Traffic, Housing Costs, Infrastructure
I have always measured the state of the US economy by simply measuring how much traffic there is on the San Francisco Bay Bridge. Well it has reached an epic level of frustration. I have to leave my house at 5am to catch an 8am flight from SFO now, and there seems to be traffic all day everywhere. Uber drivers tell me the same.
The San Francisco BART system, which was an absolutely state of the art system in the 1970s (I actually worked with the IBM team that built the Bart computers in my early career), is heavily overloaded. I talked with a good friend last weekend who told me it takes her 90 minutes to travel from Berkeley to San Francisco because she has to walk to a Bart station far from her house that lets her get on the train. Many of the trains are so full you can barely get on.
Housing costs are clearly going up (the median house now costs $880,000 and it takes four minimum wage jobs to afford one average apartment rent), and in most neighborhoods here (and in many cities) they are far out of reach for new families. The Deloitte 2018 Millennial Study discovered that 51% of respondents believe their financial situation will be worse than their parents and they rate pay as their #1 criteria for a job. They see rising healthcare costs, high housing prices, and the high cost of food and transportation (and student debt) as expenses growing faster than their income. In fact 43% are willing to leave their jobs for better pay and 62% plan to work a “side-hustle” to make more cash. (Is that a full time worker driving that Uber car?)
These are all nice problems to have of course, except for the fact that wages are barely increasing while the cost of living is now going up by 2-2.5% per year. Inflation is here (we just don’t notice it) and the gap between wages and costs is not closing.
I also look at productivity data and again it shows a lag. As I’ve talked about with many companies, global productivity is slowing, which means we’re creating jobs, hiring people, but getting a little less done per hour each year. I think this is caused by many factors (commute time, poor infrastructure, and also re-engineering of work practices), but ultimately it shows a “sloppiness” in the way we run our companies. Why? We are in such a rush to “grow” and hire people to meet demand, we don’t always have time to really re-engineer what we’re doing to become more efficient.
Surprising to me, in my research this year I’ve found that many of us are not very good financial planners in general. Research now shows that 50% of American households have no savings at all, the median retirement balance is only $3,000, and the average credit card debt is over $10,000. In fact 40% of adults rate themselves a C or worse in financial literacy and even Millennials feel stressed (15% of college graduate salaries now go to student loan debt and 32% of millennials say pay is causing them stress).
I’m not saying business leaders aren’t trying hard: everywhere I go companies have a focus on the “employee experience” or some other terminology for making work easier and better. But programs like Wellbeing programs, employee engagement programs, and better benefits are kind of like putting bandaids on a wound, when the real problem is deeper and harder to fix. No amount of wellbeing subsidy makes up for a two hour commute, a rent that takes a third of your income, or a lack of cash management to make ends meet.
Difficulty To Hire, People Leaving Jobs Faster
Of course the biggest challenge employers find in this kind of economy is how hard it is to attract the right people. Recruiters are arming up with lots of new weapons to find people (I’ll be talking much more about this at the HR tech conferences coming later this year), but they’re also finding a 40% increase in time to hire. This is simply the result of candidates being more picky, and even trends like “job ghosting,” where job candidates just “disappear.”
Voluntary turnover is at a ten year high. A study just completed by Salary.com shows that voluntary turnover is at 19.8% (almost one in five people leave jobs each year) and in hospitality it’s over 30%.
I remember interviewing a large telecommunications company that told me they have “walk-aways” all the time – people who accept jobs and then just “walk away” when they don’t understand what to do. Now candidates are just “disappearing” in the interview process because they see so many other opportunities available. One company told me they are now paying job candidates to take an interview, even though they may not get an offer!
And yes, job hopping is on the increase. Today one in seven people looking for work left voluntarily, and new research shows that the “voluntary unemployment rate” is at the highest it has been in 17 years.
What Should We Do?
I”m not writing this article to be negative, but rather I think it’s important for us to realize that in this economic cycle, we have a whole new set of winning strategies as employers. We can’t fix what’s going on in Washington, we can’t necessarily fix the commute or the state of traffic – but we have to realize that our focus has to change.
Here are a few of the massive trends I see in my world of HR, business leadership, and the HR tech market.
Don’t take me wrong, I’m a big fan of economic growth. But right now I believe the economy is a bit overheated, and it’s creating stress for employers and workers everywhere.