The July jobs report from the U.S. Bureau of Labor Statistics (BLS) adds evidence that the Great Resignation is not a short-term phenomenon but rather an indication that talent shortages and high levels of structural employee turnover could last for the long term. Amid concerns over inflation and potential recession, effective leaders are taking action to combat the challenging combination of labor market and broader economic headwinds.
The BLS report shows that total nonfarm payroll employment rose by 528,000 in July, and the unemployment rate edged down to 3.5%. While both the overall U.S. employment levels and the unemployment rate have returned to February 2020 levels, certain industries continue to report less favorable numbers than pre-pandemic levels. For example, the leisure and hospitality industry added 96,000 jobs in July, but employment in that industry remains below its February 2020 level by 1.2 million. Other industries, such as health care, have gained jobs during that time.
Average hourly earnings in the U.S. rose 5.2% from last year, indicating that wage growth and wage inflation continue to rise. The Consumer Price Index hit 9.1% in June, representing a 41-year high (June’s increase was the largest 12-month increase since the period ending November 1981). The gap between wages and prices leaves many employees with reduced buying power and feeling less well-off financially despite their increases in pay. Recent research shows 30% of U.S. workers are struggling financially, and 43% are having difficulty meeting basic needs. The impact is particularly pronounced among low-income workers.
At the same time, BLS reported that quit rates in June remained unchanged at 2.8%, indicating resignations remain generally high across industries, though slightly lower than previous highs of 2.9% earlier in the year. In some industries, such as construction and real estate, quit rates decreased materially in June (and on a year-over-year basis) indicating potential sector-specific shifts and a further changing economy.
Labor force participation, at 62.1 percent, remains little changed month-over-month but below its February 2020 value (63.4 percent). This indicates a potential plateau in the return of those who left the workforce during the pandemic and a smaller ongoing pool of potential employees.
In essence, the data suggest more permanent generation-based demographic shifts have manifested into talent shortages for certain jobs, skill areas and geographies that could last for years. Worker categories with particularly acute shortages include early-career workers (16-24 years old) and those in the experienced individual contributor and leadership cadre (45-54 years old). Employers remain challenged with more than half of U.S. employees looking for new opportunities or at risk of leaving their employer. 40 percent of employees report being ready to leave their employers for a 5% pay increase and 20 percent are willing to leave for a different job with the same pay.
Effective leaders understand that talent shortages are here to stay and appreciate the long-term nature of the associated challenges. They are taking action now to address them.
These leaders embrace talent strategies that involve both offense and defense and create workplaces where people want to be regardless of circumstance. They strive to be “net talent gainers,” attracting and hiring more employees and categories of workers (e.g., full-time, part-time, contract) than they lose, and learning why people join and stay as well as why they leave.
They differentiate culture and employee experiences instead of merely ratcheting up pay and perpetuating wage inflation. They proactively communicate and shape a narrative that acknowledges employees’ concerns about pay increases and inflation, using data and refreshed program design to create greater financial resilience amongst employees through updated and tailored programs.
Overall, effective leaders know that providing workers with flexible work, pay, benefit and skill development programs results in significant competitive advantage over less flexible peers. They reset total rewards to meet the needs of new workers and the new ways of working. They use purpose as leadership glue and a guiding light to drive constancy in company culture to thrive in an ever-challenging business environment.
A version of this article originally appeared on Forbes.com on August 11, 2022.
