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The 2021 labor market challenged a belief that was once considered objective truth among employers: High unemployment rates equal robust candidate pools and a generally noncompetitive market for companies looking to hire.
The logic seems sound, so after a year of record-high layoffs and unemployment rates across the nation — peaking at nearly 15% in April 2020 — many expected that a rebounding economy would be met with a surge of previously furloughed and eager job seekers looking for new opportunities. Yet at the intersection of above-average unemployment and job availability rates, labor force participation undermined expectations in 2021. While worker demand has recovered powerfully since the low point of the 2020 recession, labor force participation was reported at 61.9% as of December 2021 — a slight improvement since its dramatic plummet in April 2020, but still its lowest since the mid-1970s. With workers hesitant to participate in the flourishing job market, more than 10 million jobs remain unfilled, while record numbers of employees are leaving their current employment. This supply and demand imbalance slowed the 2021 post-recession economic boom.
According to the U.S. Chamber of Commerce in May 2021, 90% of state and local chambers of commerce leaders reported that a "lack of available workers" was the main force slowing local economic expansion, implying stagnated business growth for both private and public enterprises. While overall unemployment rates steadily decreased throughout 2021 — from 5.9% in June to 3.9% in December — the number of potential workers available is at a record low of 1.6 per job opening, with only .65 unemployed workers per opening as of November.
In the first few months of 2022, the labor market has shown signs of continuing improvement.
According to the Bureau of Labor Statistics, in April 2022 the unemployment rate declined to 3.6%, putting it on par with February 2020’s pre-pandemic unemployment rate of 3.5%. There were notable job gains in fields like leisure and hospitality, professional and business services, retail trade and manufacturing. Labor force participation was also up from 2021, at 62.2%.
Challenges remain for employers, however. Workers are still leaving their jobs at high rates, with 4.53 million people quitting in March 2022 alone.
A variety of influencing factors came into focus in 2021 that diminished employee retention and labor force participation. Many of these factors are still observed in 2022, including:
Among those actively participating in the job market, employees experiencing stress and burnout, along with widening job availability, could be leading motivators driving worker quit rates. MetLife's 19th Annual U.S. Employee Benefit Trends Study 2021 reported that 70% of workers feel burnt out and anxious at work — an increase of 25% since the 2020 report. And according to Federal Reserve Bank of St. Louis, workers are quitting at the highest levels in over 20 years.
Additionally, half of the 2,000 workers surveyed in Prudential's 2021 Pulse of the American Worker Survey reported that the pandemic has enabled them to better control the direction of their careers. Motivated by factors such as compensation, work/life balance, and a lack of growth and learning potential in their current jobs, 53% of surveyed workers said they would change career paths if they were able to find the right opportunity.
Savvy employers will capitalize on this opportunity to adapt and bring in professionals who are eager to explore new career paths, while those unwilling to evolve and meet employee and job seeker expectations potentially risk facing massive talent shortages in this market. Employers can begin tapping into the growing pool of job-switching candidates by broadening their hiring profiles and considering individuals from a wider variety of backgrounds.
Throughout 2021 and into 2022, workers are showing increasing selectiveness when considering their options. Companies that are winning in hiring top candidates are those that are flexible and willing to adapt as they learn more about evolving job seeker trends in today's market, which include:
With some calling work-life integration the key to combatting the Great Resignation in 2022, companies need to take employee demands for flexibility and balance seriously. A recent study shows that 76% of employees surveyed want greater flexibility in where they work, and 93% want more flexibility in their working hours.
The growing push for a more diverse workplace also has implications for hiring. According to a Washington Post analysis, in 2019 the majority of new hires of prime working age were people of color. With the workforce growing steadily more diverse, it’s important that companies begin implementing Diversity Equity & Inclusion (DE&I) initiatives now.
Employers should note that DE&I and flexibility are closely tied together. Data shows that Asian, Black and Hispanic employees desire flexible or hybrid work at higher rates than white workers. Likewise, women who currently work fully remote want flexible or hybrid jobs at a higher percentage than men (85% vs 79%). Offering more flexible policies makes it easier to create an equitable environment that supports all workers.
Armed with the right knowledge, employers can re-evaluate and adjust their current offerings to make themselves more appealing and competitive against companies that have already pivoted to address emerging job seeker expectations.
As executives create and begin implementing return-to-office plans, a divide between executive and employer expectations may lead to growing dissatisfaction — and potential challenges in recruiting and retaining talent.
Researchers have forecasted that 25% of all professional jobs in North America will be remote by the end of 2022, including more than 15% of the highest paying jobs. Despite this, many employers are still unwilling to face this reality.
68% of surveyed executives reported that they prefer to work in the office all or most of the time. Of this group, 59% plan to bring workers back into the office at this rate, yet only 34% of employees want to return to the office that often.
Companies should discover what their own employees and candidates value in job opportunities and strive to meet them at least halfway. That might mean revisiting employee value propositions and benefits offerings according to what's best for your people, which likely translates to what's best for your company. Additionally, companies should develop and implement effective recruiting plans, which often involve strategies that are individualized to the candidate.
Reflecting on the 2021 market has led many employers to rethink how unemployment, job availability and worker participation rates work together to impact labor trends. With competitive market forecasts now in 2022, employers should continue to evolve and strategize how to best attract talent by seeking to understand impactful market and worker behavior trends, and by implementing proactive and individualized recruiting strategies.
Want to learn more about how we can help you navigate the labor market? Reach out to Aston Carter.
This article is taken from an excerpt of Aston Carter's white paper,
The Labor Market Paradox of 2021 and What Employers Can Do About It.