The Road to Recovery: What it Means for Employers
See why our experts believe a labor market recovery is coming faster than expected, and why it could mean more competition in hiring, wages, and benefits by year end.
What does the road ahead for employment and wages look like?
Morgan Stanley Wealth Management Chief Investment Officer Lisa Shalett and the company’s Global Investment Committee see things differently than many policymakers and investors right now. They’re forecasting an economic expansion that’s more intense but shorter than those of past years, with rapid recovery in the U.S. labor market and a burst of wage growth.
Let’s look at five reasons Lisa and her team feel confident in their outlook, and what this recovery means for employers as they plan hiring strategies and compete for skilled talent in the coming months.
The current economic slowdown was spurred by an unexpected and unpredictable event: the global pandemic. The enormous monetary and fiscal policy responses helped curb the usual high rates of bankruptcies and credit defaults, which typically lead to company restructuring and permanent job losses.
9.7 million Americans remain without jobs, and the lowest earning workers in the most devasted industries have been hit especially hard. However, we’ve seen massive job growth in a short span, with the U.S. unemployment rate falling from 14.7% to 6% according to the latest official data from May 2020 – May 2021 —much faster than in past recessions.
According to the latest monthly survey from the National Federation of Independent Businesses (NFIB), small businesses with job openings reached a high of 42%--that’s 20% higher than the 48-year average. Why is this important? NFIB data tends to lead the U.S. unemployment rate by six to nine months, suggesting that the labor market could reach full employment, where everyone who wants a job can get a job, by year end.
Manufacturing has led the recovery, with high rates of new orders and large backlogs. And the construction and housing-related industries are also contributing significantly to new job creation. In the recovery following the 2008 financial crisis, both of these sectors lagged, which ultimately weighed down growth.
Private sector wages and salaries have already surpassed their pre-pandemic peak and are set to accelerate. March non-farm payroll exceeded expectations with 916,000 jobs created. Several more months of a million or more new jobs created could mean full employment by the end of 2021.
Several reliable indicators point to a recovery in the labor market that’s stronger and faster than many expected. That means employers will need to prepare for a surge of competition in hiring and wages.
To attract the best talent in this environment, employers may seek to differentiate themselves with employee benefits including equity compensation, retirement, and financial wellness programs. With expertise in each of these areas, Morgan Stanley at Work can help employers navigate this road to recovery with confidence.
This post includes data from Lisa Shalett’s Global Investment Committee weekly report from April 12, “For the Love of Labor”. You can also read Lisa’s article and listen to the audiocast based on this report.