DURHAM – What’s a company looking to hire workers – and there are many of them – to do when there are more jobs than candidates? That’s a growing conundrum for US execs, says a new survey from Duke University.
Last week, the federal government reported that in April there are more job openings (6.7 million) in the United States than people looking for work (6.35 million). That’s a first since the government began the so-called Job Openings and Labor Turnover Survey (JOLTS) in 2000. With unemployment continuing to decline (under 4 percent)and companies looking for people to fill vacant jobs, that means executives are spending more to hire and keep employees while at the same time facing in many cases more global competition.
In other words, many companies are seeing profits being squeezed between demands for human resources and resistance to higher prices.
Companies want to boost hiring by 3 percent this year, execs tell Duke University. But “wanting” oesn’t mean “doing” without some pain.
John Graham (Duke University)
As a result of worker scarcity executives are growing increasingly concerned, says Professor John Graham of Duke’s Fuqua School of Business. He has been running the quarterly Duke CFO Quarterly Business Outlook survey for more than 20 years with the latest edition published today, and he notes that concerns about jobs and prices are at record highs.
“The proportion of firms indicating they are having difficulty hiring and retaining qualified employees remains near a two-decade high, with 41 percent of CFOs calling it a top concern,” Graham tells WRAL TechWire.
Yet overall optimism about the economy is running at record levels in the survey (a score of 71 out of a possible 100) that dates back nearly 22 years. Graham says execs see many bright spots – thus they are planning to boost hiring in order to meet demand.
He cites several factors for the overall positive attitude:
Tracking CFO optimism in Duke CFO survey. (Duke University graphic)
“Consumer demand is fairly strong.
“Much lower corporate taxes mean that the after-tax return on investment has increased, all else equal making investment look more attractive.
“Less regulation means companies can focus on producing their products instead of getting stuck in red tape.
“Inflation is rising but still not particularly high.”
There also is little concern about a trade war despite increasingly heated rhetoric between the Trump Administration and other countries, exemplified by harsh words between the US and Canada as well as other allies last week at the G7 Summit.
More money on the table
To hire more will cost more – and execs know it.
“The typical U.S. firm says it plans to increase employment by a median 3 percent in 2018 and expects wages to increase 4 percent on average,” Graham explains.
Thus “wage inflation” is growing more worrisome.
“The tight labor market continues to put upward pressure on wages. Wage inflation is now a top five concern of U.S. CFOs,” he points out.
As for where pay is going up most, he predicts: “Wage growth should be strongest in the tech, transportation, and service/consulting industries.”
North Carolina is just one state where demand for tech workers exceeds supply, thus contributing to the wage pressure. The North Carolina Technology Association reported more than 20,000 information technology jobs as being unfilled in April.
Exec’s plans to increase hiring reflect similar findings in the most recent Association of International Certified Public Accountants survey which reported that 30 percent of executives said they are planning to increase hiring. That’s up three percentage points from the previous quarter.
The squeeze
So how do companies pay higher wages? The answer of raising prices is not necessarily the correct – or complete – one.
“Yes, companies would like to increase prices of their products to offset higher labor costs – but keep in mind that raising prices might decrease consumer demand, so companies might not pass on all of the labor costs; plus competitors from other countries might not face the same labor issues, keeping downward pressure on product prices.,” Graham explains.
“Overall, U.S. companies expect the prices of their products to increase by more than 3 percent over the next year.”
That’s 1 percent less than the expected increase in wages.
In another word: S-q-u-e-e-z-e.
