Hiring and Retention in a Tight Labor Market

Oregon’s economy is continuing to recover and change rapidly. We’re 17 months past the initial pandemic recession downturn, and we’ve regained nearly two out of three jobs lost in spring 2020. In the first six months of 2021, Oregon employers added about the same number of jobs as in the 22 months leading up to the pandemic. For reference: when we were 17 months into the Great Recession, we hadn’t recovered at all. The job losses were still mounting. The speed and shape of this economic recovery looks different and has been happening much faster than what we’ve seen in the past.

While many businesses have done a lot of hiring, many others are having a hard time adding as many workers as they'd like right now. Their difficulty is made up of two general parts: competition due to widespread hiring, and a relatively low supply of available workers.

Both Oregon and the U.S. saw a record level of job openings in recent months. In Oregon, private businesses reported 98,000 job vacancies at any given time between April and June. That’s nearly 50% higher than we’ve ever seen in the eight-year history of our job vacancy survey. That spring hiring was happening in all sectors of Oregon's economy, and across more than 240 different types of occupations.

This record hiring demand also comes at a time when there's a relatively low available workforce.  Oregon’s unemployment rate was 5.6% in June. That’s relatively low by historical standards; the long-run unemployment rate has been 6.8% in Oregon.

There are also still many people who are having a hard time taking part in this recovery. There were 32,500 Oregonians between April and June who had a COVID-related issue that prevented them from looking for work. That could be their own underlying health conditions, or those parents who are in a bind finding child care or waiting until fully in-person school returns. While this trend has improved, in recent days the COVID-19 Delta variant has been on the rise.

Taken together, the strong hiring, relatively low unemployment, and barriers keeping some workers on the sidelines are creating a tight labor market. Employers have responded to tight labor market conditions in a number of ways.

Wages
For one, employers have raised wages. Real (or inflation-adjusted) average starting wages rose by more than 2% in Oregon over the past year. Businesses have raised their wages for existing workers too. Real average hourly earnings for all workers also rose by more than 2% compared to the pre-recession level.

Benefits and Perks
Not every employer can raise wages. Some have found other ways to recruit and retain talent. The labor market was also tight prior to the pandemic. In 2018 we surveyed private employers to ask about the benefits they offered employees. Three out of five offered health benefits, and half offered retirement benefits. One out of 10 of employers offering health insurance, and one out of five offering retirement benefits, cited worker hiring and retention advantages related to those offerings.

Half of Oregon's private firms offered paid holidays, and half offered paid vacation days. One-third offered at least one of the following: flexible work schedules, production or performance bonuses, paid professional development training, and life insurance.

Relaxing Experience Requirements
When the labor market has been tight in recent years, some employers have loosened their previous work experience requirements. This spring, about half (53%) of all job vacancies required previous work experience. Nearly 19,000 of the 98,000 job vacancies this spring required less than one year of prior experience. The largest number of these job openings requiring less than one year of experience were for restaurant servers, retail sales staff, nursing assistants, restaurant cooks, and food prep workers. When it doesn’t pose a safety risk, and employers are able to, loosening previous experience requirements can increase the number of people who qualify for their job openings.

Recruitment Intensity
In tight labor markets, employers tend to layer help wanted signs with other efforts such as referral incentives, signing bonuses, posting with online job boards, and working with recruiters outside of their immediate geographical area. This includes listing job openings with WorkSource Oregon, where tens of thousands of workers have been registering in the job matching system.

Any layering employers can do with their hiring and retention strategies can help them find and keep more workers in a tight labor market.

 

Why Oregon's Labor Market is Tighter Than You Think

We've been hearing more in recent days about employers' challenges finding workers. Over the past week, we've teamed up with the Office of Economic Analysis to publish a summary of reasons Oregon's labor market is tighter than you might think.

The pandemic recession -- just like all economic downturns -- is unique. During this recovery labor demand remains strong. At the same time, several simultaneous factors are constraining the supply of labor for those job openings. They include:

1. Concentrated Nature of the Shock
Last spring, many businesses with similar labor pools shut down overnight. The economy experienced record-setting job losses and the unemployment rate increased nearly 10 percentage points in April 2020 alone. Those who remain unemployed are also largely on temporary layoff. In the previous recessions, the job losses were largely permanent, and the economic nadir did not occur until more than two years into each cycle, so businesses hiring during the recession and recovery had excess labor supply for a while. During this recovery the jobless numbers have dropped much faster.

Oregon’s unemployment rate matched the nation’s at 6.0% in March, below the average of 6.8% over the past two decades. Currently, hiring employers are facing a typical or slightly lower-than-typical available labor pool for their job openings. The available labor force is not evenly distributed either. While all sectors lost jobs in the initial COVID downturn, some have bounced back rapidly or hit new employment highs (such as transportation, warehousing and utilities, and professional and technical services). Depending upon the types of jobs employers are hiring for, there may be no excess labor. 

2. Pandemic Concerns
The unemployment rate doesn’t include would-be workers who are out of the labor force, meaning they neither have a job, nor are they looking for one. Supplemental information from households in the Current Population Survey shows an estimated 45,000 people in Oregon said they were prevented from looking for work due to COVID-related reasons during the first quarter of 2021. While vaccinations have accelerated, only about half the adult population has received at least one vaccine dose for COVID-19 as of mid-April. COVID case counts are also rising in many areas of Oregon again this spring.

3. Lack of In-Person Schooling
Heading into the pandemic, one out of every six Oregonians in the labor force had kids, worked in an occupation that cannot be done remotely, and also did not have another non-working adult present in the household, according to research from the Office of Economic Analysis. As of mid-April, three-fourths of Oregon’s K-12 schools have students learning remotely from home either part- or full-time, according to Oregon Department of Education records.

Even with the anticipated return of full-time, in-person learning for the 2021-2022 school year, child care slots, which were already too scarce in most areas of the state prior to the pandemic, and summer programs will likely continue operating with reduced capacity for some time. These constraints limit workforce options for some parents of younger children.

4. Federal Aid and Unemployment Benefits
Total personal income in Oregon today is about 15% higher than before the pandemic. Strong federal fiscal policy response via recovery rebates alone added $12 billion to personal income in Oregon. Although this has brightened the overall economic outlook, a stronger safety net where incomes are higher today than pre-COVID can temporarily reduce labor force participation in the short term for some workers. 

Federal Pandemic Unemployment Compensation (FPUC) adds $300 onto weekly unemployment insurance benefits through September 4, 2021. In the first quarter of 2021, the weekly regular unemployment (UI) benefit has averaged $370 per week. With the additional $300 FPUC payment, that adds up to an average payment of $670 per week. That’s roughly the same as earning $16.75 per hour for someone working full time. During the first quarter of 2021, that has also represented full wage replacement (between 100% and 104%) relative to regular UI claimants’ pre-pandemic earnings on the job. 

Some perspective here: earning $670 per week, working year round would total $34,800 in gross earnings for a worker. By comparison, the median earnings for full-time workers in Oregon in 2019 was $50,712. With “Now Hiring” signs in many business windows and stronger wage offerings as employers compete for available workers, it’s unlikely that this benefit, in itself, is keeping a vast number of workers on the sidelines.

 

Furthermore, unemployed workers cannot refuse job offers or a recall to their previous job (if temporarily laid off) because of their unemployment benefit amount. Refusing work solely due to weekly unemployment benefit payments would be considered fraud. The Employment Department provides ways to report job refusals.

Last but not least, Oregon has a long-running record of adding labor force through net in-migration of workers from other states and areas. While Oregon continued to attract migrants in 2020, net migration fell to its lowest level since 2013 in Oregon, and was 20% lower at 28,600 than in 2019.  

More information on Oregon's current labor market dynamics can be found in the full article and OEA blog post, written by State Economist Josh Lehner and State Employment Economist Gail Krumenauer.

Employment Among Oregon's Veterans

In 2019, the unemployment rate for veterans in Oregon was 4.5 percent, according to the American Community Survey. Overall, Oregon’s unemployment rate was 4.8 percent in 2019. Across the U.S., veterans had a lower unemployment rate of 3.7 percent.

About 264,000 veterans lived in Oregon in 2019. Among veterans 18 to 64, 75 percent were in the labor force, slightly less than the 77 percent labor force participation rate among non-veterans. This may be because veterans tend to be relatively older. According to the American Community Survey, more than half of Oregon’s veterans were age 65 years or older and served in the military at least four decades ago: Vietnam War (99,655 veterans), Korean War (17,278), and World War II (6,694). Gulf-War I and II veterans totaled 93,846.

In 2019, Oregon’s veterans earned a higher median income ($41,693) than nonveterans ($32,134). Veterans earn a higher income despite being less likely to have a college degree. Among Oregon veterans ages 25 years and older, 29 percent have a four-year degree or better, compared with 35 percent of nonveterans. Alternatively, about 4 percent of veterans don’t have a high school diploma, while 9 percent of nonveterans don’t have a high school diploma.

Female veterans, who represented 9 percent of Oregon’s veterans, earned a median income of $37,002, less than male veterans’ median of $42,213, but higher than female nonveterans’ income of $27,177.

Veterans are more likely to have a disability, but less likely to be in poverty than the general population. Among veterans of working age, more than 8 percent live below the poverty level, noticeably below the 12 percent poverty rate among non-veterans. Of the Oregon veterans living in poverty more than half report having a disability. Among working-age veterans living above the poverty line only 20 percent have a disability.


Only 7 percent of Oregon veterans are under age 35, compared with 30 percent of non-veterans. The older age profile of veterans may explain most of the higher income and higher disability rates among veterans.

Read Workforce Analyst Christian Kaylor's full article at QualityInfo.org.

Disparate Impact: COVID-19 Job Losses by Sector and Gender in Oregon

Every recession is unique, with varying impacts on workers in different parts of the economy. The dot com recession in 2001 hit high-tech harder than other sectors. Construction bore the hardest brunt of job losses during the Great Recession. Eight months into the COVID-19 downturn, we're seeing yet another unique set of disparate impacts in Oregon and nationwide.

Initial Impact
In March and April, Oregon’s total nonfarm payroll employment dropped by 271,900, or 13.8 percent. That equates to one out of every eight jobs in the state – a stunning and unparalleled rate of job loss over such a short period. Oregon regained nearly half (45% or 122,100) of the spring losses by September. 

Three of the state’s service-based sectors lost even larger shares of jobs. Leisure and hospitality (hotels, restaurants, and theaters) shed 118,700 jobs (more than half its employment) in March and April. Other services (automotive repair, barber shops, and beauty salons) dropped one out of every five of its 65,800 jobs (-22.3%). Private education services also saw sharp declines (-6,000 or -16.0%) as schools shuttered in the spring. While recovery is underway in each of these sectors to some degree, they remain a combined 73,600 jobs below their February level.

Second Wave of Job Losses
While most sectors are rebounding from the initial job losses, others are starting to see additional declines as COVID-19 and its economic impacts linger. The state’s corporate headquarters companies, local government, and manufacturing each had lower rates of job loss than Oregon overall in March and April. They’re still on the downward slide though. 

From May to September, manufacturing lost another 3,400 jobs, for a total decline of 8.2 percent since February. Similarly, local government – roughly half of which is K-12 and higher education – dropped by 13,600 jobs (-5.9%) in spring, and lost another 3,600 jobs since then. The large corporate management of companies sector initially lost 2,200 jobs (-4.3%), and lost another 600 since May, for a total drop of 5.5 percent.

Effects on Women
The disparate impact to sectors where more women have jobs – especially education, where women hold two out of every three jobs – is reflected in unemployment rates. Since the COVID-19 recession began in Oregon, the unemployment rate for women has consistently been 2 to 3 percentage points higher than for men. In September 2020, the unemployment rate for women was 9.6 percent, compared with 6.7 percent for men.

In addition to higher unemployment rates, women have also exited the labor force in higher numbers than men. Nationally, the Bureau of Labor Statistics reported women left the labor force at four times the rate of men in September 2020. Oregon has seen a similar trend to the nation, with significantly more women than men departing the labor force, particularly since the summer.

Get more information about the disparate impacts the COVID-19 in the full article, written by State Employment Economist Gail Krumenauer. 

Oregon's Beveridge Curve Shows Less Efficency Finding Jobs

Last Friday, we shared details about summer hiring demand in Oregon. With two quarters of Job Vacancy Survey data in the COVID-19 recession, this seemed a good time to take a look at Oregon's Beveridge Curve.

The Beveridge Curve shows the relationship between the job openings rate (vacancies/labor force) and the unemployment rate. Note the labor force includes all those ages 16+ who are either employed, or out of work but are available and able to take a job if offered to them, and have actively sought work in the past four weeks.

At first glance the Beveridge Curve is just a messy squiggle. That squiggly line does generally tend to move in predictable ways though. When the curve moves up and to the left over time, that means the unemployment rate is low, and there's strong hiring demand relative to the size of the labor force.

The curve gets more interesting if over a longer period of time it moves out to the right and also stays high. This could lend to the narrative that those who are unemployed are not finding jobs as well, when there seem to be plenty of vacancies. 

Oregon doesn't have as long of a series as the Bureau of Labor Statistics (BLS) does for their curve, which actually did shift to the right during the Great Recession, before moving back up and to the left during the last recovery and expansion.

From our quarterly job vacancy series starting point in Oregon (Winter 2013), the BLS and Oregon curves are remarkably similar, and like what you’d expect: lower hiring demand relative to labor force size when the unemployment rate is high, and higher job opening rates when the economy is strong and unemployment is low. In recent months though, Oregon and the U.S. have had high job opening rates relative to their high unemployment rates. 

What does that mean?
Well, it appears that something is out of whack (← technical term) with the labor market. This looks like the type of situation where those who are unemployed are not finding jobs as efficiently, when there seem to be plenty of vacancies. Usually we’d expect the spring 2020 point on the Beveridge Curve to look more like the Winter 2013 point. This spring and summer though, while unemployment remained relatively high, there were also a lot of “help wanted” signs posted on storefronts and online.

Why the relative inefficiency finding jobs?
There are plenty of anecdotes and data points to grab onto around this (none of which paint a complete picture…). Here are a few possible explanations for greater inefficiency, with supplemental data provided where possible.

• People were staying home, mostly on temporary layoff, and not looking for another job if expecting to go back to their current employer. Temporary layoffs accounted for the bulk of COVID-19 job losses, and don't require active job search with other employers to be counted among the unemployed.
  

• Lower-wage earners were more likely to be laid off, meaning those who earn more were more likely to still be employed (and still spending). People who earn more are more likely to still have jobs, and are buying stuff, and a different mix of stuff (e.g., home goods rather than vacations). That kept up the hiring demand to make and/or deliver that stuff, even with higher unemployment. Here's a look at all jobs in Oregon where the person had worked in both 4Q2019 and 1Q2020. Of those jobs, the lower-wage jobs declined by almost double the rate of middle-wage or high-wage jobs. What’s more, of the lower-wage jobs that remained in 2Q2020, the median number of hours worked fell by 19 percent. For the middle- and high-wage jobs, the number of hours remained essentially the same. 

•  The extra $600 in Federal Pandemic Unemployment Compensation for the unemployed bolstered their spending in spring and summer. Many who lost jobs had temporary full wage replacement (or more) through the end of July with the extra $600 from the CARES Act. Research from the Office of Economic Analysis shows total personal income up by 10 percent in April. Research from JP Morgan Chase shows saving and spending trends among unemployed people who have bank accounts with them. It shows spending by the unemployed increased by 22 percent upon receipt of unemployment benefits and declined by 14 percent in August. This would help keep hiring demand up for making and delivering goods and services too. Of course, the extra $600 is three months in the rear view mirror (at least in terms of effective date), and the $300 lost wages assistance is mostly distributed now in Oregon too. It will be interesting to see how things change heading from fall into winter.

• Child care issues: even with heightened teleworking, national data show only about one out of four jobs being teleworked. For those with kids at home, may be looking for work that accommodates summer camp/day care closures and/or distance learning. (Reminder: if someone left or permanently lost a job, and is not available and able to take a job offered to them, or hasn't actively sought work in the past four weeks, they are no longer in the labor force.)
  

• The extra $600 and waived work search requirements for Unemployment Insurance benefits could have been disincentives to search for work while unemployed.

More information about job vacancies in Oregon can be found in the Job Vacancy box on the publications page of QualityInfo.org. You can send questions on Oregon's Beveridge Curve to Gail.K.Krumenauer@oregon.gov.