In tight labor market, businesses practice “strategic retention”
Weekly jobless claims came out today from the Labor Department. New claims ticked up but still remain low, historically. As we keep saying again and again… it’s still a fairly tight labor market. Tightness that’s actually led to some cases of what economists call “labor hoarding” where companies keep workers on staff “just in case.”
In the latest beige book, the Dallas Federal Reserve mentioned scattered reports of said “labor hoarding.” Dan Kaplan at organizational consulting firm Korn Ferry prefers a different term: “I would say it’s strategic retention,” he said.
Strategic, because companies facing short-term slumps in revenues see that immediately cutting staff may do more harm than good.
“You have the natural cost of the layoff, the severance payments,” Kaplan said. “And then you have the cost of having to pay (an) agency to refill (the) position.”
Not to mention the lost revenue when business suddenly picks up and you need to hire someone, like now.
“It wasn’t that easy for many companies to hire back workers after the mass massive layoffs during the pandemic, right. You know, a lot of industries are still feeling the heat,” said economist Selcuk Eren with The Conference Board.
Especially sectors like food and beverage and hospitality, said Luke Pardue with payroll firm Gusto.
“They’re actually still the least likely to let go of their workers and in those sectors we’ve seen termination rates fall the most over the past year,” said Pardue.
Businesses are also holding on to consulting and tech talent, said economist Julia Pollak with ZipRecruiter.
“The big consulting firms and the big banks are in many cases hanging on to their Ivy League graduate new hires, who don’t have that much work on their plates,” said Pollak.
Because for firms who are looking to hire now it’s tough.
“A typical story is said employer posts the job, they get a ton of applicants, but the applicants are not qualified,” said Mike Steinitz with talent firm Robert Half.
And the ones that are qualified are, as they say, entertaining other options.