Recruiting in a Tight Labor Market | Richmond Fed – Federal Reserve Bank of Richmond

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The unusually tight labor market has generated a wide range of challenges for employers attempting to hire workers. A survey conducted jointly by the Richmond Fed and the Richmond Society for Human Resources Management in June 2022 continues our series on recruiting methods and practices. There is little doubt that recruiting effort for each open position has intensified in the last year, and firms have had to engage new and different techniques to attract candidates and fill open positions.
By standard measures, the U.S. labor market has been remarkably tight in the past few months, despite slowing aggregate economic growth. The unemployment rate has returned to its pre-pandemic level, and the national job posting rate has now hovered around 7 percent (compared to a long-run average of about 5 percent) for over a year.
These numbers are striking but say little about the underlying mechanisms driving this unusual tightness in the labor market. The Federal Reserve Bank of Richmond’s Survey of Employer Recruiting Behavior (SERB) — conducted jointly with the Richmond chapter of the Society for Human Resources Management (Richmond SHRM) — provides timely insight into current labor market dynamics. In this Economic Brief, we continue our research into recruiting methods and practices and leverage June 2022 SERB data to highlight changes in the hiring effort that employers put forth during the past year. We find that employers spent more time and used a wider range of recruiting channels to find new employees, but they still faced challenges attracting qualified candidates. The biggest hurdles for employers after finding a suitable candidate were offering sufficient compensation and accommodating the candidate’s desired level of job flexibility and remote work.
From June 1 to June 17, the Richmond Fed and Richmond SHRM surveyed 155 in-house recruiters and HR professionals from a variety of industries and firm sizes. Although the sample focuses on the southeastern U.S., we find remarkable parallels to aggregate labor market conditions.
For instance, the average local job openings rate was 6.6 percent during the survey period, which matches the June national job posting rate of 6.6 percent computed from the Job Openings and Labor Turnover Survey. Similarly, the job hires rate in the U.S. was 4.2 percent in June, while a comparable measure calculated using data from the SHRM survey was around 3 percent.
Our first finding relates to recruiting efforts by employers seeking to fill open positions. In the past year, employers have undertaken substantial increases in recruiting intensity, with more organizations reporting increased recruiting efforts in the past year and compared to pre-pandemic levels.
Most respondents explicitly reported exerting more effort to recruit candidates for open positions. The increase in effort did not vary in a systematic way by industry, firm size or the job’s skill requirements, suggesting that this is a broad-based phenomenon. Additionally, of the jobs that were open in May, well over 60 percent had been open for more than 30 days, with little difference in vacancy duration along the skill requirements dimension.
The reported increase in time and effort spent recruiting has intensified since earlier waves of our survey. About 60 percent of firms surveyed in June 2020 and March 2021 reported that their hiring efforts had stayed the same as before the pandemic. In comparison, less than 30 percent of respondents between June 2021 and June 2022 reported unchanged hiring efforts. Those who did report hiring challenges in the earlier survey waves named COVID-19 concerns and competing with increased unemployment insurance as obstacles to hiring. In contrast, when asked why recruiting effort increased during the June 2021-June 2022 period, most respondents instead described more competition for a smaller pool of candidates.
Recruiters report a lack of qualified candidates for both high-skill and low-skill positions. Although it was more common for mid-skilled and higher-skilled workers to reject the offered compensation, recruiters hiring for lower-skilled positions might not have even had the opportunity to make an offer. These recruiters were much more likely to report being “ghosted” by the applicant, with the applicant dropping out of the hiring process without communication. Almost 70 percent of respondents reporting having been ghosted when trying to hire lower-skilled workers. In comparison, ghosting occurred among 59.2 percent recruiters hiring mid-skilled workers and 32.4 percent of those hiring high-skilled workers.
Coronavirus concerns continued to be prevalent in lower-skilled hiring, although it was much lower for high-skilled hiring and played a role in just 17.7 percent of the cases among mid-skill workers.
When asked what changes they made to recruiting practices, respondents most commonly reported that they increased wages. This response was particularly common for those trying to hire low-skilled workers, while respondents were more likely to use signing bonuses for mid-skilled and high-skilled workers. For all workers, recruiters reported reaching into previously untapped or underutilized pools, such as engaging organizations that work with military veterans and individuals with disabilities.
It is not just about wages. One of the biggest differences in hiring higher-skilled versus lower-skilled workers was the ability to offer flexibility in work arrangements and hours. For example, 43 percent of respondents reported allowing more remote or hybrid work than they did a year ago. On the other hand, not offering such arrangements was an obstacle to hiring in about 40 percent of cases for higher-skilled positions and 25 percent of cases for lower-skilled ones.1
Not surprisingly, almost half of employers reported expanding their geographic scope. This possibility to work remotely and recruit in a wider geography is more common among higher-skilled jobs. (This rise in remote work among certain populations could have an effect on wage growth and its distribution (PDF).)
What methods did firms use to fill job openings? Although firms reported using tried-and-true techniques to find applicants (such as job ads and social networks), recruiters also relayed using novel methods or old techniques in new and different ways.
For example, firms might be using social media more proactively, recruiting through new organizations or online platforms, targeting different job fairs, or holding virtual career fairs. One respondent reported starting an internal database of possible candidates (including past candidates), while another reported building more relationships with local high schools. A few instituted new referral programs and platforms. Indeed, some respondents reported efforts to hire more recruiting personnel!
Employers also reported increasing their use of all of these strategies over the last year, indicating that recruiters and hiring managers are indeed working harder to fill the positions they need.
In conclusion, the SERB data suggest that tightness in the labor market manifests itself both with an increased number of open jobs per unemployed worker and heightened employer recruiting effort per vacancy. Employers take longer to recruit, use a wider variety of recruiting channels (some in new, creative ways) and change hiring standards and requirements. These changes are broad-based and affect workers of all skills. They represent yet another aspect of an ever-changing labor market in the post-pandemic economy.
Claudia Macaluso is an economist in the Research Department and Sonya Ravindranath Waddell is a vice president and economist in the Regional and Community Analysis unit in the Research Department of the Federal Reserve Bank of Richmond. We thank Aubrey George for excellent research assistance, Jason Kosakow for helping to develop and execute the survey and Steven J. Davis for comments and suggestions both on the text and the underlying survey questions. We also thank the Richmond chapter of the Society for Human Resources Management for its partnership in developing the survey and implementing it with their members.
An earlier article explores the difference in remote work by job type.
To cite this Economic Brief, please use the following format: Macaluso, Claudia; and Waddell, Sonya Ravindranath. (September 2022) “Changing Recruiting Practices and Methods in a Tight Labor Market.” Federal Reserve Bank of Richmond Economic Brief, No. 22-36.
This article may be photocopied or reprinted in its entirety. Please credit the authors, source, and the Federal Reserve Bank of Richmond and include the italicized statement below.
Views expressed in this article are those of the authors and not necessarily those of the Federal Reserve Bank of Richmond or the Federal Reserve System.
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