It is not a new headline that the United States experienced seven percent inflation in 2021 – the highest inflation 40 years. What has this inflation meant in the job market?
Going Backward
If you’re an employee not earning seven percent more at the end of 2021 than the start of 2021, you are going backward. The price of nearly everything is up exponentially from used (and new) cars, gasoline, housing, and food. In fact, this afternoon I paid $45 for a two lb. bag of shrimp that was $25 a year ago. Simply put, $1 today buys you less stuff than it did one year ago.
Milton Friedman . . .
Was an American economist and intellectual that won the Nobel Prize in 1976 for his work in economics. Friedman was an advisor to several U.S. Presidents, and his monetary theories including inflation are widely respected. This blog is way too brief to get into much detail but Friedman’s studies on monetary and fiscal policy – how governments spend and tax, borrow or print money – upended much of John Maynard Keynes’ economic theories from the previous century. In a controversial statement to Politico in April 2020, then U.S. Presidential candidate Joe Biden stated, “Milton Friedman isn’t running the show anymore.” Today in March 2022, I respectfully disagree. Fact: nearly two years into the Covid-19 pandemic following massive government stimulus we are seeing once-in-a-generation inflation. I don’t think inflation is a bad thing but I do believe a worker that is happy with a 5% raise in the face of 7% inflation is disillusioned.
Three times a charm
One of my clients is a subsidiary of large publicly traded company. The good news for us is my client is growing so quickly that their recruiting team keeps asking us to find them employees because they can’t keep up. One particular search is for entry level to 3-year professionals that my firm has now been asked to fill three times in less than a year. I have personally watched the compensation for this role grow in steps to now nearly 20% higher than when we did our first search.
In a twist of irony, I recently found a candidate a new role that would result in a 17% raise last month only to get a phone call a few days prior to the candidate’s start date that they accepted another offer. Naturally, I asked about the other offer and that’s when my jaw hit my desk. My candidate had just scored a 62.3% raise! Read that last sentence again. This was a very solid two-year candidate but not somebody that is going to turn around a company, or even a department, in the near future. Like they say in baseball, sometimes you just gotta tip your cap, which I did offering my congratulations to my candidate. Fact: in this very tight labor market, the wages of younger workers are the fastest growing of any age group.
More job openings than candidates
This current candidate’s market will continue as long as there are way more job openings, at 11 million in January 2022, than candidates to fill those openings. The last published unemployment rate was 4% which continues to shrink from 14.7% at the onset of the Covid-19 pandemic in April 2020. Candidates continue to be scarce. Just ask any hiring manager or simply look at the reduced hours of the retail and restaurant establishments that you may frequent. The good news is employers are generally responding with increased wages and treating employees better than ever, including flexibility of working from home.
In Conclusion
Inflation is everywhere we look and not something we simply read in the news or see on television. The goods we buy and places we live cost more than they ever have. Correspondingly, employees will cost more than they ever have just based on inflation and I am not even considering the impact of the Great Resignation and scarcity of solid candidates, which increases the cost of employees even higher.
Bill Wednieski is the Managing Director for The Headhunters. Learn more here.