In May, the U.S. labor market had almost enough open jobs for every unemployed person in the U.S. So why aren’t we seeing more accelerated job growth and recovery? A record 9.2 million jobs were open in May, following a revised total of 9.19 million job openings in April, which demonstrates the ongoing challenge for businesses to find workers.
Complicating matters are the 3.6 million people that quit their job in May after the record-breaking 4.0 million quits in April. Now, businesses are not only faced with staffing new open roles but backfilling roles vacated by employees seeking different opportunities and more competitive compensation.
The pressure on companies to improve retention caused layoffs to fall for the sixth straight month in this “worker’s market.” Companies are increasing wages and trying to create new incentives such as remote flexibility to simply keep workers and not find themselves with yet another seat to fill.
The Impact by Industry
The record number of quits can have unique consequences for different industries. It could be a good thing for Professional and Business Services or Construction when top performers make themselves available to a new company. In this case, a new employee with specialty skills can give the business an advantage in attracting new business. Typically, there is a bit of runway to onboard new hires without much disruption. Both of these industries showed quits revert back towards previous levels after series highs in April.
On the other hand, quits within Accommodation and Food Services can disrupt day-to-day operations immediately. The quits rate in this industry jumped to highs in April and stayed there in May. This demonstrates the unique challenges faced by service-sector businesses eager to reopen and recover from a blistering 2020 as demand for their services surges.
Talent Shortage Impact on Wages
Each of the industries below saw higher than average wage growth in May and significantly higher quits during the same period. It is worth noting that wages continued this trend into June. Key influences attracting workers away from current roles include higher wages – paid also as sign-on incentives – followed by more sought-after schedule arrangements. But the industries below leave little opportunity for remote flexibility, so compensation becomes even more important.
- Manufacturing - Workers have been able to tap into different jobs with other businesses eager, if not frantic, to fill spots.
- Leisure and Hospitality - Consumers have shifted from spending on goods to services as businesses reopen, but understaffed restaurants are struggling to operate.
- Transportation, Warehousing and Utilities - Having fared well for most of 2020 when hires were on pace with job openings, there is mounting pressure to find new workers to keep up as customer demand remains strong.
Labor Force Outlook
LaborIQ®, talent intelligence software by ThinkWhy, projects the U.S. will reach 73 million hires for 2021. This will be from a combination of filling current job openings, refilling roles as people leave their current jobs and adding new jobs. This volume may not be reached until some employment conditions change and consumer and worker habits return to pre-pandemic patterns.
Businesses will continue to offer higher wages to get workers into open roles until staffing challenges subside. We will likely see people begin to rejoin the labor force in larger numbers in late summer and fall seeking to benefit from the higher pay.
LaborIQ by ThinkWhy reports, forecasts and advises on employment conditions and the impact to jobs, industries and businesses across all U.S. cities.