Fishing in Shallower Pools
Although it came as no surprise and it was wrapped in technocratic terms, the Fed made a big statement last week. In her semiannual testimony before Congress, Fed Chair Janet Yellen noted that the U.S. labor market is now in line with the Fed's notion of "full employment" - a level of unemployment that is low but sustainable over the long term. Despite the many signs of strength in the U.S. economy, this was not an entirely uncontroversial statement. The most recent of the government's monthly jobs reports sent a few mixed signals about the state of the labor market. Still, there was no mistaking the strength in the headline number, which was more than twice the amount needed to absorb new workers entering the labor force.
Good news for the economy is good news for U.S. job seekers, but that makes at least some people's lives harder. With fewer available workers to go around, employers need to work harder to attract good candidates. iCIMS data show that the average number of applicants per job posting has been declining across industries for the last three years, with some backtracking in 2016*, around the time the unemployment rate began to level off.
Within that shrinking applicant pool, 59 percent of HR professionals reported some level of basic skill or knowledge deficit among job applicants in 2016. With Yellen noting that the job market continues to tighten, the balance looks likely to remain in favor of job applicants for some time to come.
Going the Extra Mile
Yellen also noted in her testimony that the pace of wage growth has picked up, indicating that employers increasingly have to pay up to fill their job openings. "Paying up" is not just a question of money, though. Glassdoor research has shown the importance of employer brand and other factors in attracting and retaining talented workers.
At iCIMS, we hear every day from clients about how they invest in their employer brand. They know that putting in effort here sends many signals about how they view their employees. The savviest employers work just as hard as the job seekers do to find and land the right fit; they employ an increasingly sophisticated arsenal of recruitment marketing techniques to identify and attract good candidates; they make sure their career portals are attractive and user-friendly. The best convey their workplace culture and sense of mission as an organization.
Employees want to feel they are part of something bigger than themselves, and survey data indicate that this holds especially for millennials, who are now the largest portion of the U.S. labor force. Companies that succeed in creating a sense of shared purpose see benefits beyond just filling their seats. Studies by Deloitte and others indicate that mission-driven companies have 30 percent higher levels of innovation and 40 percent higher levels of retention than others.
Pressures in Healthcare and Manufacturing
Where are the hiring challenges most acute? As Glassdoor has noted, government data indicate that over one-third of outstanding job openings come from just two industries: healthcare and professional and business services. To compare that demand for workers to the available supply, iCIMS divided these industries' monthly number of hires by their monthly number of job openings. This tells us how much hiring activity is taking place relative to the unmet demand for workers. Taking a look at the top three industries by the number of openings, plus the always-topical manufacturing industry, we see that, on the whole, healthcare and manufacturing are seeing less hiring relative to their demand than the other two industries.
At the same time, iCIMS data indicate that, on average, healthcare and especially manufacturing receive more applicants for each posting than the other two industries. Leaving aside the seasonal effects in the retail figures, it appears that there is a mismatch. A lot of applicants want to join the healthcare and manufacturing industries, but they somehow do not meet the requirements of these employers, leaving those industries with fewer hires relative to their total openings.
In manufacturing, this may in part reflect some of the displacement that has received so much media attention. Fewer machinists and managers are required as more factory floor jobs have been outsourced to robots or cheaper labor abroad and manufacturing increasingly requires technical skills for working with computers. iCIMS data indicate that in 2016 nearly 10 percent of manufacturing jobs were focused on computers or mathematics - a proportion comparable to what we see in the classic white-collar category of professional and business services. While reports of a shortage of programming talent are widespread, iCIMS data indicate that programming jobs receive a large number of applicants (whether they are qualified or not), and that could drive up manufacturing's applicants-to-posting ratio.
As for healthcare, iCIMS data indicate that technical medical positions (including nurses and physical therapists) have a low number of applicants per posting. The relatively high industry-wide ratio must, therefore, be due to positions that are either less technical (home health aides, dental assistants, etc.) or entirely non-medical in nature (accountants, administrators, or facilities managers).
These pressures won't let up anytime soon. The U.S. Bureau of Labor Statistics predicts that the three fastest growing occupations between 2014 and 2024 will focus on healthcare, computers, or math. To the extent that the healthcare and manufacturing industries are facing skills gaps, some of the situation is out of their hands - it is up to the education and immigration systems to make the right skills available. However, fine-tuning their outreach could help these employers get more of the best-fitting applicants of those that are available, and that is something in everyone's interest.
*iCIMS data are reported on a non-seasonally-adjusted basis, unlike BLS data.