A Penny for Your Thoughts? How Survey Comments Help Us Understand Our Region’s Labor Market

We regularly report the quantitative results from the Richmond Fed business surveys, but participants' comments also provide useful context for changes in local business conditions. Most recently, a survey of human resources professionals complemented our surveys of area businesses. The comments from both surveys have provided insight into the region's labor market, as well as indicated that the persistent challenge of finding workers has led executives and recruiters to intensify their efforts and expand the tools they use to attract workers.

It Has Been Particularly Difficult to Find Workers

Even before the COVID-19 pandemic, finding workers with the right skills was a challenge for firms across our district. However, by May 2021, the monthly business survey indexes measuring firms' ability to find workers with the necessary skills reached all-time lows. Although the index has climbed back to more normal territory, recent survey comments indicate that among some firms, challenges persist.

A firm that produces custom shirts and sportswear highlighted both the easing and continued challenges of hiring: "[Finding] quality labor continues to be challenging although [now] there are at least a few coming to the door to apply. For the previous two years, there were NO potential employees even looking for a job." Another respondent shared that although they have added two employees lately, "if we could find some more, we would add 1 or 2 more."

A staffing firm that was part of the business survey reported on the continued scarcity of workers: "Even in this slowing time, candidates are scarce, so we have to continue to advertise to attract them. Almost without exception any quality candidate who is actively looking will have multiple offers. Just this week we had someone accept a job and an hour later backed out saying they got a better offer. We have to assume that any candidate who accepts an offer will continue to look up to and even after they start a new job. No shows for interviews, aka ghosting, continues to be a problem."

Businesses Have Raised Wages

One way that businesses are competing for qualified workers is by raising their wages. As firms increased their wages, our wage index (the share of businesses that reported increasing their average wage versus the share that reported decreasing their average wage) rose notably. The incidence of wage increases has moderated, but firms, on net, continue to increase compensation.

The impact of wage increases on recruiting has been limited, however, for some firms. According to one respondent: "We remain constrained by an employee shortage even after significant wage increases in multiple categories. We have concluded it isn't the pay rate, it's a people shortage."

Businesses Are Intensifying Recruitment

We've been hearing that even when offering competitive wages, recruiters are having to use many more tools to find candidates. The survey of human resources professionals indicated that businesses in the Richmond region are using, on average, six modes of recruitment. The most popular methods were referrals, commercial job boards, and social media.

One survey participant described their transition from passive to active recruitment:

"The current recruiting environment demonstrates that employers can no longer rely on a "post-and-pray" strategy (post the job and pray applicants will apply). Therefore, we have been training people throughout our organization to use a pro-active approach that relies on reaching out to professional organizations and professional networks that lie at the intersection of the profession being sought and diversity (gender, race/ethnicity, veterans, disability, and more). This approach is designed to not only increase the size of the applicant pool but also to diversify the applicant pool. Bottom line, we can no longer act as if passive recruitment methods work; they don't."

Recruitment challenges and strategies also vary by the type of position. We previously reported that coming out of the pandemic, hiring challenges were particularly prevalent for lower-skilled roles but that has since transitioned to higher-skilled positions.

One recruiter for a vending machine supplier noted: "For positions that require specific experience/skills, a majority of applicants are not qualified, so I'm weeding through an overwhelming number of applications."

The Wrinkle of Remote

During the pandemic, many jobs became remote. Recent attempts from many employers to bring workers back into the office and for in-person interactions have met resistance from workers and sometimes made hiring more difficult. One survey respondent reported that some candidates wanted more remote days than their current hybrid schedule allows (three on-site, two remote), and thus withdrew their applications from consideration.

For most respondents, however, an inability to accommodate applicants' desire for hybrid or remote work was not a primary recruitment challenge. (See chart below.) Of course, it may be that some workers seeking hybrid or remote positions do not even apply for less flexible positions, resulting in fewer qualified applicants. In fact, this seems to be true: Recruiters shared that they now spend more time and effort recruiting for on-site roles while weeding through a significant number of applications for remote roles. Consequently, the amount of time and effort to find a candidate for an open position has increased.

One respondent reported that the number of applicants for on-site positions (i.e., recruited locally) is "vastly" fewer than the number of applicants for nationally recruited, remote positions. The respondent said, "[For an] onsite position we may get 6 to 8 resumes in a month where [for a] remote position we will get over 200 applicants a day."

What This Means for Our Region's Labor Market

The comments from our surveys indicate that finding workers with the right skills continues to be a challenge for many firms across industries and areas. Besides raising wages, many businesses in our district have become more active recruiters by expanding their methods and relying on referrals. Although the labor market remains tight, there are some indications that hiring activity is cooling; we will continue to use respondents' qualitative information to understand the evolution of our region's labor market.

If you are a business leader and interested in making your voice heard, click here to sign up for the Richmond Fed's Monthly Survey of Business Conditions.