What's up, everybody?
Alas, this was not the jobs report we were meant to get. The one-two punch of higher interest rates and high-visibility job cuts was supposed to cool down the simmering hot job market. And yet, last Friday, the US announced that it had added an additional 517K jobs and that its unemployment rate was 3.4% -- its lowest in 53 years.
So what gives?
We so often conflate "tech" with "the economy." And just as tech is not the economy, tech layoffs don't necessarily mean layoffs happening across all industries.
Of course, there is always a risk that cuts like those at Google, Microsoft, et al start to bleed into other sectors. And there's also the chance of a more drastic "Lehman-like" event creating a global contagion. If that happens, heaven forbid, all bets are off.
But in the meantime, what's going on is simple supply and demand.
Demand (as in, consumption) is clearly still strong. And by the way, we're still not fully "recovered" from the pandemic shock to demand dealt to offline sectors like restaurants, transportation, retail, and hospitality. Meantime, we see from Story #1, below, that the demand for labor is shifting -- not going away.
But the piece we really want to focus on is supply -- the dwindling supply of labor available to fill the jobs which continue to be created. Everywhere we look, we see powerful shifts that are systematically shrinking supply. These are real, hard-to-reverse trends (two of which comprise our 2nd and 3rd Stories this week):
- Baby boomers retiring
- Declining birth rates
- Restricted immigration
- A quit rate that is still squarely higher than it was before the pandemic (Story #2, below)
- The skyrocketing cost of child care preventing more people from joining/re-joining the workforce (Story #3, below)
- A decreasing labor participation rate
- Men opting out of the workforce in increasing numbers
- The lingering physical effects of long Covid
- Young workers, especially, quiet quitting, if not opting out of the work system altogether
- A pandemic-fueled, cross-generational questioning of the role and importance of work and career
This gap in supply and demand explains so much of what we see going on in the world of work right now. More than anything, it animates the incredible jostling for power between leaders and employees we've been witnessing (and writing about in TalentStories).
Leaders -- rightly -- perceive themselves as losing leverage to employees. And it is employees' stubborn refusal to come to heel -- i.e. to get back to work, to go back to physically, to work the way they did in the past -- that explains the downright shrill tone of so many leaders and investors. But if you think their tone is exasperated now, it's only going to get worse as these trends play out.
Of course, as observers of work, the battle is pass-the-popcorn riveting. 🍿
Entertaining, sure, but as with all change, the question is how will we choose to respond? How will we adapt to a world in which the supply of talent is severely -- perhaps permanently -- constrained?
For our part, as TalentStories, we repeat the same refrain: organizations need to put their time, money and effort where their mouth is, by investing more thought, intent and care into their people. And if that has long-been the need, then in this work climate of eroded trust, decreasing labor supply, increased employee leverage, and sweeping demographic change, there is even more urgency to meeting that need; and even more upside to be had by doing that. People, and their trust, are up for grabs. And what they want is as clear as what they will do if they don't get it.
Thanks for reading and exploring with us -- and have a great week! 🙏🏻
Aki + Usman
P.S. The podcast link to our discussion of newsletter #52: “Different Generations - And Different Values - Make A Complex Cocktail At Work" - Episode 6 -- is right here.
This Story doesn't just underscore the extent to which tech is not the economy -- it goes even further by explaining that the number of tech jobs across industries increased to a record 6.39M through the end of last year. It also expounds on the trend we wrote about in issue #36: the way demand for talent is not going away, but shifting to other industries. The article lays out the way workers from big tech are being hired into more traditional pharma, banking, retail etc. companies, in order to fuel those firms' digital transformations.
The quit rate is down from it's all-time high during the pandemic, but is still squarely higher than it's pre-pandemic level. Meantime there were 11 million available jobs in December, which is nearly double the 5.7 million unemployed workers looking for work. And longer times to hire (employees with leverage tend to be more choosey about their next role), the torrid pace of new job creation, and this historically high quit rate make it awfully hard to think that gap will close any time soon.
If people have to be at home to take care of children, they can't be at work; especially if remote work isn't an option. The logic is simple enough; but when you dig into this article 👆🏻, you learn how systemic and damaging this particular talent shortage is: a shortage of childcare workers drives up the cost of employing them -- which then puts paying for that childcare out of reach of many working parents. Which in turn adds to the labor shortage in sectors other than childcare.
Thanks for reading, and have a great week. 🙏🏻