The boom is back (part 2): wages set to jump (along with counter offers)

Last week I posited that the boom was back.

On Sunday one of the dads in my son’s soccer team, who owns a local café told me he had to shut for two days last week because he didn’t have enough staff to open.

On Monday a study was released that documented the struggle that leisure centres have around the country in the recruitment and retention of pool lifeguards.

The evidence continues to mount that we are entering a new era in the demand for labour; and not just in Australia.

A few hours after my blog was published the ABS released the March 2021 labour force data which provided further evidence that the Australian labour market is gathering a full head of steam, namely:

• Unemployment declined from 5.8% to 5.6% with total unemployed workers now only 62,100 greater than March 2020 (all March 2020 figures were tabulated before the first COVID-19 lockdown)
• The underemployment rate decreased by 0.6 pts to 7.9% (0.9 points lower than a year ago), the lowest it’s been for seven years.
• Total employment increased by 70,700 to exceed total employment in March 2020
• Monthly hours worked in all jobs increased by 1.2% over the year,
• The participation rate reached a record high of 66.3%; an increase of 0.4 points over the year.

The monthly hours worked not only climbed from a year ago the 1.2% increase in total hours was larger than the 0.6% increase in employed people, indicating hours per worker have jumped by an even greater amount. One month is not a trend however it’s pointing strongly to the underlying strength in the total demand for labour.

The record participation rate is evidence that discouraged jobseekers are returning to the job market, buoyed by the recent record number of vacancies advertised. Even at the height of the pre-GFC boom the labour market participation rate only reached 65.6% (April 2008).

Clearly all this employment optimism is flowing through to households as Australian consumer confidence is at its highest level since 2010.

In other bright employment news from around the globe:

• In the UK the week of 5-11 April recorded 140,000 new job postings, on top of a further 181,000 in the previous week, which was the highest weekly figure since the Covid-19 pandemic began.
• Recruiters are in high demand by UK recruitment businesses, perhaps at a 20-plus year high, according to a rec-to-rec owner.
• Employment in Canada surged by 634,800 jobs in March from February, after a January to February rise of 259,000 jobs. Canada’s total employment now exceeds pre-pandemic levels by over 300,000 jobs.
• US jobless claims last week fell to 576,000, their lowest since the start of the pandemic and retail sales rose 9.8% in March.
• US temporary staffing revenue will grow by 11% this year to a total of $134.7 billion — surpassing the pre-pandemic level in 2019.
• The U.S. economy added 916,000 jobs for the month of March, after month-on-month declines across the latter months of 2020, however total employment (150.9 million) in the US remains 3% below March 2020 levels (155.5 million).
• US consumer confidence is at its highest level since the pandemic began.

All this good news culminated in an ERE writer declaring A Tidal Wave of Hiring Begins to Take Shape.

Even the normally cautious Economist newspaper produced a feature two weeks ago A Bright Future for the World of Work asserting, among other things, that:

“The pandemic has been a catastrophe for many……But its lasting legacy may be a better world of work, as it speeds changes that were already underway and highlights those places where further improvement is needed.”

All of this good news points to the perfect storm that is fast approaching: a record decline in the supply of labour and a record increase in the demand for labour.

It’s not only going to be skilled labour where the competition occurs. As my local café owner and Australian pool operators have discovered low-skilled workers are difficult to find and retain.

There is only one possible outcome: rising wages as employers compete for labour.

Recent moves from large US employers, where unemployment is still relatively high, is a lead indicator of what’s almost certainly ahead for Australian employers.

In response to increased competition for delivery drivers and other minimum wage employees, Costco announced it was increasing its minimum wage for US employees to $16 an hour, pulling ahead of rivals like Amazon, Target, and Best Buy.

Last week Walmart announced that it will convert thousands of its part-time workers into full-time employees, a move that will give workers more consistent hours, while also giving Walmart more stability in staffing as its pickup and delivery business explodes.

Recruiters think their toughest role this year will be sourcing quality candidates. I think it will be just as tough, and even more important, to have conversations with hiring managers about the necessity to raise salaries.

Employers that resist the need to increase salaries will not only find they can’t attract the candidates they want to hire they will also start to lose their own high performers, and even moderate performers, as proactive employers take the initiative to push up remuneration and be open to the flexibility request of current and potential employees.

You thought 2020 was tough?

I think 2021 is going to be even tougher, but in a completely different way: welcome to the ‘new, new normal’ of counter-offers like you won’t believe.

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