Earlier this month the headline that many were commenting on was \”U.S. Hiring Slowed Dramatically in May; Jobless Rate Falls to 4.7%\”. The story emphasized that non-farm payroll was up only 38,000 jobs and that March and April data were revised downward. In other words, a weak jobs report and outlook. While the jobless rate fell it was felt that this was due to individuals deciding not to look for jobs. (Plus the unemployment rate is a separate calculation derived from a survey.)
What does this have to do with the electrical industry?
- This report came on the heels of DISC\’s May FLASH report that shared that the industry is expected to contract by about 1.5%, on average and nationally. This also accounts for the decline due to commodity price.
- We also hear from distributors who are either not in metropolitan areas or are in the industrial segment that business is flat / not good.
Could there be a correlation between jobs and electrical industry performance?
We reached out to individuals to gain some insights. Feedback included:
- The acceleration of eCommerce, especially in the retail space, could be affecting employment. When retailers close stores, many become unemployed, however, Amazon (and others) are not hiring at a comparable rate and the economic value of those roles differs (salespeople and store managers vs warehouse personnel). This issue will eventually expand more into the B2B segment.
- Many publicly-held companies have not invested during the \”recovery\” as they seek to make their profitability objectives based upon cost-cutting / efficiency. Revenues for many companies, in many industries, are essentially stagnant and senior management needs to make the numbers for shareholders (who may be institutions and may or may not have John Q Public as a shareholder.)
- The impact of consolidation. The individual who shared this wasn\’t necessarily talking about electrical industry consolidation (although there potential could be a small part) but when companies like Dell and EMC merge, how many accounting, HR and other support personnel do they need to keep … the combined number of the two companies? Inevitably there is attrition / reduction.
- The electrical industry is a very localized industry. Distributors, and individual branches, are impacted by local issues, rarely macro issues. Most branches have limited staff … enough to support the business (or perhaps growth plans) but they typically are not significantly over-staffed.
- The one segment of the industry where jobs, and much else, has impacted the electrical industry is the oil / gas segment, however, many feel that that industry has already gone through much of its reductions and, for the most part, is stabilizing (albeit at a low level.)
Two electrical industry recruiters share their insights:
From John Salvadore, GRN Coastal Recruiters – We have seen very little decline. We are seeing a number of progressive companies seeking top, experienced talent. These companies are seeking to take share and enter into new markets. We see a lot of movement in the lower level positions…..inside and outside sales in which people are making moves for less than 10% increases. LOTS of bodies shuffling in local markets. The reasons vary but in many cases it is confidence in their company / leadership and for opportunities to expand their responsibilities.
We see more execs sniffing around as their companies tighten up. Business is strong across multiple industries and sectors. And the opportunities for talented people are with electrical manufacturers and distributors, but not solely with big companies. And many companies are seeking outside assistance that understands the market so that they can quickly fill positions rather than wait and have service fall off.
Our industry isn’t going through the big changes and challenges of companies like EMC ,Dell and HP ( storage related). I think for once, being a pretty vanilla industry helps. There will always be buildings going up, houses being built and factories being upgraded, thus there will always be new opportunities. There may be fewer but stronger competitors but there is business to be had for aggressive distributors and manufacturers. Performance will drive success. Talented people want to work for winners.
Companies cant sit still , they have to innovate, change the status quo and take risks….every day.
John also shared this tidbit regarding the macro employment figures:
According to Glen Louthan, the president of GRN (franchisor), \”Our economy has 5.8 million open jobs, and the unemployment rate for a person with a bachelor’s degree edged down to 2.4% while more unemployed people are opting out from looking because their skills don’t meet the employers’ demands.” Louthan continues, “Companies can’t find the talent they need and have constant pressure to produce better results
And from Ted Konnerth, Egret Consulting – This is an aspect of macro-economics; with no drill down. The U-3 unemployment rate for college educated people is LESS than 3%. The rate for unskilled labor is the key driver to macro numbers; and that subset of employment has been declining for decades, we’ve lost over 10M unskilled labor positions and most are not coming back; it’s productivity, offshore sourcing, automation, and now Additive manufacturing.
It should be a great year for college recruitment and engineers are in very high demand.
As for the industry… the trend is to require more highly skilled and educated workers, not fewer. Technology is impacting the industry in ways unseen… EVER. I don’t really believe our industry is ‘slowing’.. and I read the Eaton and global corp reports about ‘headwinds in construction, etc.’ Construction is robust, it could easily change with uncertainty due to the election… but I just don’t see any significant issues ahead. I’m more worried about global economic forces than US domestic forces. (now THAT’s Macro!) So, I think construction is solid, I know that new markets, channels and companies are growing rapidly (end-user, energy focused retrofits)., and the tech influences will change our industry forever. Change is good.
So from my chair…, I see good things.. Baby Boomers heading into the sunset, technology growth requiring new skills and expanded channels and markets, a creativity spurt that I’ve never seen in my career… I’m upbeat.
- Yes, we know the general economy is slow, as is the industry.
- Yes we know that there are companies, especially industrially-oriented ones in the electrical industry (distributors and manufacturers), that have, and continue, to trim their workforces
- But we know contractor-oriented companies (and some industrial distributors seeking to diversify) have hired staff / specialists
- And we know companies that are going through generational personnel changes and hence are hiring people … and some companies have management training programs and are hiring for them (these companies are investing for tomorrow and stockpiling talent like sports teams stockpile draft choices and/or add to their farm systems.)
- And now we have more college students entering the workforce from recent graduations (and yes, my daughter is part of this as a newly graduated chemical engineer and we know others in the industry who have children that have recently graduated.)
So, what do we think is driving this low employment? I know it is a net number, but to relatively quickly decelerate? What do you think this means for the construction / industrial trades? Is this the result of automation efficiency (plant, facility, online tools / ordering, etc)? Something else?
I was just pondering as I was drinking coffee and waiting for a client conference call.