Knowing your labour markets

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What’s going on out there? Is it tough? easy? a seller’s market? a buyer’s? Are good talented people unable to find work because a) they can’t find the right job, or b) any job?

Knowing what is happening outside your building is important. Such questions are not limited to the labour market, it can be legal reform, political shifts, union trends, and so forth.  But the labour market(s) is a good example of the importance of getting you head up, looking outside of the company and beyond. 

Here are some things you should know ‘roughly’ what the current situation is- not hard evidence and data, but a broad understanding of it, if someone asks in a meeting.

The general labour market signs you can see from your data

Let’s start with the general labour market, and a few definitions. The labour market is marketplace in which people buy and sell labour, a loose conglomeration of workers (supply), jobs (demand) across a diverse range of occupations, locations, employment types, and industries.   Although there are many differing groups, actors and behaviours within this group, it pays to keep track of three things, unemployment, inflation, and your number of applications.   Some HR metrics packages include tracking the number of applicants, which is also a useful yardstick of the size and ‘health’ of the market you are tapping into, especially if you have regular recruitment drives for common position.

Unemployment and structural unemployment

What is the unemployment rate? this you can look up yourself- anything I publish will be out of date pretty soon. But now, what does this number mean? is it good or bad?

first we need to think about structural unemployment. Structural unemployment is natural churn- people between jobs, geographically separate from the demand, too old, too young, that sort of stuff. There is no zero unemployment because the labour force is a gigantic crowd of people, moving around, joining leaving.

There is not hard and fast number, but economists generally accept structural unemployment to be about 4-5%. It can below, but this means labour is hard to find, and wages will go up as a consequence of needing to get people. More than 4-5%, we are into what we typically think of as unemployment- people looking for work, able to work, motivated to work, but there is not enough work available for everyone. People are missing out.

The local labour market

In addition to the wider, national labour market, it’s important to have sense of what is happening in the local market.  ‘Local’ can mean the town or city you’re in, or even the part of the city you are in, especially if proximity is a significant reason people seek employment with you. 

There are a number of factors you could keep an eye on, so I can only list different types of examples. These could be the situation of local competitors (e.g. a new megastore being built down the road, a comparable factory shutting down in a month), how the transportation links are going, is the town growing or shrinking, how is the housing market, are you seeing as increasing in migration to the area?

Core competency markets

This is a little complex, because need to consider the ‘core competence’ of the organisation.  We do cover this elsewhere, but to recap- core competence is what your company does, and needs to do well compete in the industry.  If you’re a law firm, you need good lawyers.  Yes, you need accountants, but the quality of your lawyers is business critical.

Understanding that specific market is important, distinct from the general market.  It can also be hard to know what specifically is going on, as reliable data sources are rare.  Sometimes an industry has specific news sources such as magazines or professional associations.  Sometimes it’s just word on the street.  Often my sources for this information is people within the organisation from those vocations, who read and are attuned to the industry, and recruitment agencies who specialise in the industry.  If you’re paying agency fees, always extract some free information from them on their read of the current market.

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