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Businesses say they’ll hire … if they can

Ninth District hiring and compensation survey

December 7, 2018


Joe Mahon Director, Regional Outreach
Businesses say they’ll hire … if they can
job candidates sitting

“It seems that the number of jobs available in the economy has exceeded the number of people,” wrote a Minnesota manufacturer about the labor market. That comment captured the general sentiment of Ninth District businesses surveyed about hiring and compensation plans over the coming year.

Nearly 100 firms in an array of industries from across the district responded to the survey, conducted in late November. Just over half of them reported that they were planning to increase total employment at their firms. Most of the remainder were expecting to leave employment unchanged, but some of those firms were still hiring to replace turnover, just not increasing total headcount. Fewer than 5 percent were planning to cut staff (Chart 1).

chart 1

Solid demand appeared to be driving hiring expectations. Among those firms that were planning to increase employment, 62 percent cited high expected growth of sales as the most important factor behind their plans. An additional 13 percent of firms cited strong sales as their second most important factor behind expanding their workforce.

Having overworked staff was also a prominent consideration behind hiring plans, as 11 percent of respondents cited that as the most important factor behind increasing employment, and 36 percent identified it as the second most important factor. Another 11 percent of firms reported that needing skills not possessed by their current staff was their most important factor; it was cited as the second most important factor by 23 percent.

Still, a tight labor supply and a skills gap continued to hamper hiring, according to respondents. Nearly half of all firms reported that being unable to find workers with the required skills was the most important factor restraining their hiring plans. By contrast, about 10 percent of respondents indicated that low expected growth was the biggest restraint on hiring, with a similar share citing a desire to keep costs down. About a fifth of businesses noted either high labor costs or uncertainty about government policy as the second most important restraint on hiring. One in eight firms reported no sources of difficulty hiring.

Given solid hiring expectations and tight labor markets, it might be expected that employers are raising wages to attract new workers, and that appears to be the case. Of firms that are hiring either to increase headcount or replace turnover, nearly half reported that they were raising starting salaries or wages for most job categories, and an additional third said they were raising pay for some (but not all) jobs. Still, about one in six firms that were hiring said they were not raising starting wages.

Additionally, some firms were taking steps to hang on to existing employees. More than a third of all respondents (including those who weren’t actively hiring) reported increasing pay for most existing employees at a faster rate than in recent years in order to retain them. A slightly higher proportion indicated they were raising pay at a faster rate for some, but not all employees.

Businesses also reported some other strategies outside of wages. Of respondents who were dealing with hiring difficulties, 55 percent reported they were hiring less-qualified workers in the hopes of training them on the job (Chart 2). Nearly half indicated they were increasing advertising of open positions. And more than two in five of these businesses said they were investing in technology to reduce the need for new hires.

chart 2
Joe Mahon
Director, Regional Outreach

Joe Mahon is a Minneapolis Fed regional outreach director. Joe’s primary responsibilities involve tracking several sectors of the Ninth District economy, including agriculture, manufacturing, energy, and mining.