Ninth District businesses open up about hiring woes

It’s not exactly news that employers are reporting difficulty finding workers right now. News stories about the phenomenon abound and, here in the Ninth District, Minneapolis Fed business conditions surveys have consistently found tight labor markets since the middle of 2020. But exactly why firms are having a hard time filling positions isn’t as clear, especially given elevated unemployment levels.

In late August, while reporting for the September Beige Book, the Minneapolis Fed conducted a brief ad hoc poll of Ninth District firms about their hiring experience over the summer to find out a little more. The questionnaire got 64 responses from across the district, not a huge sampling, but rather a quick pulse of employers from a range of industries.

Hiring challenges weren’t quite universal, as 11 percent said they had been able to hire without difficulty since May. Additionally, 17 percent said they had no difficulty simply because they haven’t had any job openings since May.

Among the strong majority of firms that reported having difficulty hiring for one reason or another, the most common reason given, cited by 52 percent of all respondents, was a lack of qualified applicants, a familiar refrain predating the pandemic (Chart 1). However, more than a quarter of applicants said they were having hiring difficulties “because applicants are not willing to accept the compensation levels we are offering.”

Among other reasons cited for hiring difficulty, several commented that applicants didn’t show up for interviews—“Just applied to satisfy unemployment requirements,” as one firm noted—or, having been offered a job, didn’t show up for work. Others pointed to a competitive labor market, where candidates were receiving multiple offers.

Since employer complaints about tight labor markets have been ongoing for some time, the survey also asked how the situation has changed since May. On that score, businesses generally agreed that it was the same or worse. Aside from the 17 percent with no job openings, only an eighth of respondents reported that the number of applications they’ve received for open positions has not increased since May. The largest share—44 percent—said the number of applicants has decreased, with the balance saying it was the same (Chart 2).

While much commentary has focused on the role of enhanced or extended pandemic unemployment benefits on labor force participation, the survey results appeared inconclusive on that score. The largest share of respondents were located in states that had retained enhanced benefits at the time of the August survey (likely Minnesota and Wisconsin, which remained in these programs until their federal termination); about one-third said all their employees were located in states that terminated their participation early (likely Montana and the Dakotas, which terminated their involvement in June), with the balance having operations in both.

Responses did not differ much based on the availability (or absence) of enhanced benefits. In fact, firms whose employees were solely located in states that had cut benefits were slightly less likely to have reported an increase in job applications compared with the rest.