Table of Contents
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Table of Contents
What Is the Labor Market?
The technical definition of a labor market is the availability of employment and labor. It’s a classic definition of supply and demand. Employers have open positions, and they want to hire the best person to fill that role. Job seekers and employees are all competing to get the best position to fit their needs.
The Current State of the Labor Market
As of 2023, the current labor market is a tight one. The unemployment rate throughout the country is at an all-time low, with some states hitting rates lower than pre-pandemic numbers. This changes over time, though. You can keep track of your state and industry by checking the Bureau of Labor Statistics at www.bls.gov.
Why Is Understanding the Labor Market Important for HR?
Understanding the labor market assists HR in many of our key functions.
- Recruiting. Businesses cannot run without workers. You will need to understand how to keep your company competitive in whatever market you’re in to keep bringing that new talent in the doors. Knowing what you’re up against helps you develop strategic and creative ways to get your positions in front of the applicants you want.
- Retention. Understanding the labor market gives you insight on your workforce. High demand for employment can create an environment where employees are more likely to quit. In that tight labor market, where employees can easily leave one position and re-enter the workforce quickly, you need a more aggressive retention strategy. This may mean evaluating the wages and benefits you offer, etc. Remember, open positions can cause productivity to suffer and your employees to get burned out.
- Relevancy. Having a seat at the table is a challenge for many HR professionals. When discussing workforce planning initiatives, understanding the current labor market gives you insight to share with senior leaders. Workforce planning isn’t just about the internal aspects of the business, but the external forces as well. With this data, you can contribute to the business strategy and what that will mean for future needs. This may include identifying new roles or new skill sets that will be needed, and if you will focus on developing your current staff to meet them or hire outside.
Factors That Affect the Labor Market
There are a variety of factors that affect the labor market depending on what lens you’re looking through. Here are a few from an HR perspective.
Supply and Demand
Supply in the labor market is the number of job seekers out there looking and what they are looking for. Then you add in the demand of the employers with what positions are available and what skills are needed. Understanding the current market will help you maintain competitiveness, especially where wages are considered. Job seekers are going to go for the best-paying position, or the one that fits their needs the best. If you find that your wages are not competitive, you may need to look at a conversation with your senior leaders on realigning to the market.
World events such as natural disasters and global crises certainly impact the labor market. For instance, during the 2020 pandemic, employers were faced with adjusting to mandated lockdowns, no-contact requirements, etc. Remote opportunities for work were created, and with that the entire mindset changed. Workers found opportunities to work from home, giving them a more flexible schedule and saving money on increasing childcare costs. This created its own unique challenges for those businesses who need in-office or in-person workers, extending the pandemic’s impact on labor for years.
According to the Bureau of Labor Statistics, seasonal trends are one factor used to adjust the benchmarked employment data (data that is collected and shown as a standard for what the current labor market is going through). You can compare this benchmark to your own situation so you can see where you measure up.
Benchmarks fluctuate for many reasons. Around holidays, there is a big rush for more part-time employees. In some locations, the weather plays a big part in certain industries, and employees look for work to fill in until their seasonal job picks up again. These are times that you want to plan ahead based on what your company needs.
How to Stay Up-to-Date on Labor Market Trends
It’s hard to know where to find this information. Here are a couple options to get you started.
Step 1: Subscribe to the Bureau of Labor Statistics
Go to www.bls.gov and subscribe to their updates. There are a variety of options; you can look at the nation as a whole, or just your state. Spend time looking through the website and saving pages you feel will help you in the future.
Step 2: Bookmark Your Favorite Blogs or Websites
To keep up on the HR trends, check out your local Society of Human Resources Management (SHRM) chapters, follow HR blogs, podcasts, etc. Many HR platforms offer free reports; for example, Human Resource Today, Paycor, and HR Acuity all offer free reports throughout the year.
Step 3: Network
Networking is a powerful tool. Many key influencers will use hashtags in their content, such as #labormarket, #employeerelations, #recruiting, or even #unemployment. Search the hashtags in the platform you’re using, like LinkedIn or Instagram, to see who is using them, and check out their content. If you find it useful, connect with them. And if you’re ever not sure where to start, reach out to the HR Mavericks community. We can always help.
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Questions You’ve Asked Us About Labor Markets
Heather is an experienced HR and Employee Relations professional with a strong background in compliance. Heather is an advocate for learning and enjoys mentoring others to help them grow and learn. As a Society for Human Resources Certified Professional (SHRM-CP), she earned her bachelor’s degree in Human Resource Management from Western Governors University and is currently obtaining her Juris Master in Employment Law and HR Risk Management from Florida State University. Heather currently serves on the Board of Directors for Utah State SHRM and has spoken at several conferences helping the new HR professionals with tips for success. She also is a mentor with LevelNext helping to educate others in HR as well as assisting with resume writing and social media optimization. When Heather is not spending time on her education or sharing her passion for the HR world, she can be found spending time with her family, playing pool, or helping create monsters for Fear Factory Haunted House here in Salt Lake as a part of the makeup team.