A recent LinkedIn employment report has revealed that the US job market is hale and hearty. The country's unemployment rate is down across the board while hiring is 4.5% higher when compared to this same time last year. While the news certainly is encouraging, the report also underlines the challenges that small businesses are facing with regards to hiring and keeping the right people.
Numbers Point to Good News
Aside from the news that hiring rates are high and unemployment rates are down, the LinkedIn Workforce Report for June also revealed some interesting specifics. For instance, there's a 12.4% increase in hiring in cities that rely heavily on the oil industry. Tech firms, financial and insurance services, architecture and engineering firms, and automotive and transportation companies are also hiring more people.
However, there are also several cities where the demand for skilled workers is simply not being met. These cities include Austin, Washington DC, the San Francisco Bay Area, New York, Los Angeles, and Seattle. Conversely, Hartford, Miami-Ft. Lauderdale and West Palm Beach have thriving communities of skilled workers, making it easy for small and big businesses to fill their employment requirements.
The LinkedIn study isn't the only one touting these numbers. Reuters has also reported that job growth in the US went up in May while the unemployment rate dropped to 3.8 percent, an 18-year low for the country. Total payrolls rose to 223,000 and the average hourly earnings have increased by 0.3 percent month-to-month.
The report does paint a rosy outlook for American households. Tom Porcelli, Chief US Economist of RBC Capital Markets admits the news about unemployment rates “literally checks off all the right boxes.” He also said that they have been looking for any negatives about the findings but admits that so far, they haven't found anything.
What it Means for Small Businesses
The LinkedIn report doesn't mean everything's smooth sailing though. One key takeaway from it is the fact that with more businesses hiring, the labor market has become a tight one. This means companies are fighting for a workforce that's steadily growing smaller.
The labor shortage means that the majority of businesses will have no other option but to increase wages in order to attract the workers they need and keep the ones they want. This is good news on the side of the employees, as it implies that salary growth is picking up.
Unfortunately, not all small businesses can go head to head with bigger and more established companies who have better financial backing. This year's Randstad US Salary Guide says that wages have risen by as much as 3% across different industries, a rate that not all small businesses can meet.
Low unemployment rates also mean small companies will start to lose out on business. A Federal Reserve survey showed that in some states, restaurants struggle to find waiters and cooks while construction and manufacturing companies simply can't find workers, regardless of whether they're skilled or not. This lack of workers has translated to rising production costs, as well as canceled or delayed projects.
So what can small businesses do to attract skilled workers? Aside from matching the going rate, they can offer an incentive program or a profit sharing option. Work from home options and extensive training can also be used to sweeten the deal. In short, small businesses would have to be more creative with their perks.