With the weather finally starting to feel like fall, it seems like we can all start getting into our favorite fall traditions: carving pumpkins, eating pumpkin-flavored things, and going to pumpkin patches (fall is really all about pumpkins, huh?). This year, business owners and HR teams may be looking to add another tradition to that list: adapting to a cooling labor market. Much like the weather, the U.S. Bureau of Labor Statistics’s latest job report points to a cooling of the labor market, with job postings as well as hiring and quitting numbers remaining either unchanged or showing slight decreases.
For some, this might sound a little scary—and not in a fun, Halloween season kind of way. A cooling labor market can affect a lot of things that aren’t just strictly hiring new talent. At Payday HCM, we’ve seen plenty of the market’s ups and downs throughout many different seasons. We’ve helped numerous businesses tackle the unique challenges a cooling labor market can cause, whether that be hiring or something else.
In this article, we’ll go over the issues that your organization might face coming into a cooling labor market. We’ll go over what factors actually create a cooling labor market and how this combination of factors can affect your business. By the end, you’ll be equipped with all the tools you need to brave this cold hiring weather.
In this article, you will learn:
- What Creates A Cooling Labor Market?
- How To Attract Talent During A Cooling Labor Market
- Strategies For Retaining Talent In A Cooling Labor Market
What Creates A Cooling Labor Market?
Before we discuss how your organization can prevent common issues from arising during a cooling labor market, we need to understand what actually determines whether the labor market is, in fact, cooling.
Determining The Status Of The Labor Market
The “labor market” is made up of a few different numbers and statistics. The main factors that make up the labor market are unemployment, hiring rate, job openings, and separations (firings, layoffs, and quits).
Looking at these things at a macro level, one can get as good a sense as possible of the status of the labor market. The labor market is best understood, much like any purchasable good, on a supply and demand curve. This curve reflects how the supply of jobs as compared to the demand of them affects things like wages.
What Creates A Cooling Labor Market?
You might see a few different terms thrown around when it comes to describing the labor market: hot, tight, cooling. These terms describe two trends in the labor market. When the supply of jobs exceeds the demand, the market can be described as tight. When demand exceeds supply, the market is hot.
So, then, a cooling labor market isn’t one that’s hot or tight. A cooling market means we’re heading toward something like a tight market: unemployment rates remain low and people are staying in their current jobs for longer.
How To Attract Talent During A Cooling Labor Market
The question then becomes how to attract talent still looking for a job in a cooling job market. Luckily, your organization can use a few methods to do this.
Wages, Wages, Wages
As mentioned before, the cooling or heating of the job market can largely be visualized on a supply and demand curve, with your amount of labor on the x-axis and wages on the y-axis. So what does this mean when there are too many jobs and not enough people to do these jobs? Wages must go up.
Therefore, the best strategy for your business to hire in cooling or tight labor markets is to increase your pay. This is the most direct strategy for combating a cooling labor market as increasing wages can help to shift the demand curve back to equilibrium.
It’s All About Benefits
Alongside good pay, a great benefits package can also go a long way in determining whether or not a potential candidate will choose you over another employer. According to the Pew Research Center, thirty percent of workers are only somewhat satisfied with their job’s current benefits, so making the most of your benefits package is crucial.
To do this, you’ll want to offer things that other businesses in your market aren’t offering. Things like employee assistance programs, pet insurance, fertility benefits, and more are all great options for distinguishing your job opening from a sea of others.
Strategies For Retaining Talent In A Cooling Labor Market
Not only can a cooling labor market impact your hiring, it can also impact your retention as well. Luckily, there are strategies to combat this.
How A Cooling Labor Market Impacts Retention
As explained above, a cooling labor market is created when the supply of jobs begins to exceed its demand. While one component of this is a low unemployment rate, the flipside here is employees hunkering down and staying at there jobs—a phenomenon being called “The Big Stay.”
Essentially, people aren’t quitting their jobs. According to the Bureau of Labor Statistics, the quite rate in the U.S. is 1.9 percent, a stark contrast to the Great Resignation. This is, at its core, a good thing, but it has its own unique set of issues. If nobodys leaving their jobs, then there are no jobs to fill. In fact, this phenomenon has lead to an increase in part-time and contract positions, things that are not necessarily ideal.
Avoiding Stagnation
Then the problem isn’t wholly retention as that is seemingly happening all on its own. Instead, a new problem arises: stagnation. With employees preferring to stay put where they are than seek out new opportunities, there’s the chance both the employee and employer could become stagnant, choosing the comfortability of what they know than seeking out opportunities for growth.
To avoid this, you’ll want to ensure your organization has the proper systems in place to encourage employee growth. Things like regular feedback sessions are a great way to ensure both you and your employees are staying on your feet.
Keep Yourself Warm In A Cooling Job Market
While some things have managed to return to a somewhat normal state following the COVID-19 pandemic, hiring is not one of them. For job seekers, it feels like you send out hundreds of applications just to never hear back from any of them. For employers, it seems nearly impossible to find just one somewhat qualified candidate. Now, with a cooling job market, it may feel like you’re going up against another uphill battle.
It’s not all so dire, though. Signs are pointing to a possible heating up of the job market over the next few months, so the relatively cool market we’ve been in for most of 2024 could be on its way out. If anything, this article has equipped you with some more strategies in case the market wants to stay cool for a bit longer.
Perhaps you’ve been lucky, though, and you’ve been able to hire someone. Learn more about how to ensure your new hires have a successful first thirty days.
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