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Ep 383: Recruitonomics

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Talent markets are crazy, recruiting is tough, and it can be challenging to get any sort of perspective on what is going on. So how can we make sense of everything and, in a world that feels out of control, what can talent acquisition professionals actually do that will make a difference.

My guest this week is Andrew Flowers, Labor Economist at Appcast. Andrew is combining traditional labor market analysis with Appcast’s unique proprietary data into Recruitnomics. Recruitnomics combines cutting edge insights with real-world business applications making Andrew overview of market trends in this interview a must listen for everyone.

In the interview, we discuss:

• Job market trends

• Data sets and sources

• Key variable and levers

• Wage growth

• The impact of government support

• The continuing influence of the pandemic

• Rising recruiting costs

• Will things ever “normalize”?

• Skinny application flows

• Politics and policies

• Programmatic tools

• Advice to talent acquisition professionals

• Long term trends to keep an eye on

Listen to this podcast in Apple Podcasts.

Interview Transcript:

Appcast (Ad) (0s):
Support for this podcast comes from Appcast, a leading provider of recruitment, advertising technology and services. Appcast helps more than 1500 companies find more qualified candidates using advanced programmatic technology and data-driven analytics. With Appcast you will effortlessly attract the right talent to your open jobs, helping you save time and money. Find out more Appcast at appcast.io. That’s appcast.io.

Matt Alder (Intro) (60s):
Hi everyone. This is Matt Alder. Welcome to episode 383 of the Recruiting Future Podcast. Talent markets are crazy, recruiting is tough, and it can be challenging to get any sort of perspective on what is going on. So how can we make sense of everything? And in a world that feels out of control, what can talent acquisition professionals actually do that will make a difference? My guest this week is Andrew Flowers, Labor Economist at Appcast. Andrew is combining traditional labor market analysis with Appcast’s unique proprietary data into Recruitnomics. Recruitnomics combines cutting edge insights with real-world to business applications. Making Andrew overview of market trends in this interview a must listen for everyone.

Matt Alder (1m 44s):
Hi, Andrew. And welcome to the podcast.

Andrew Flowers (1m 47s):
It’s great to be here. Thanks for having me.

Matt Alder (1m 48s):
And it’s an absolute pleasure to have you on the show. Could you just introduce yourself and tell us what you do?

Andrew Flowers (1m 55s):
Yes. My name is Andrew Flowers. I am a Labor Economist at Appcast. And Appcast is a global leader in programmatic recruitment advertising technology. And as a Labor Economist, I study Job Market Trends in the US and in Europe to help our clients best understand what the recruiting landscape challenges that they face, what those challenges are, and how best to overcome them with our technology but also with insights from data, both public data, but also proprietary data in our database.

Matt Alder (2m 34s):
I know you are focusing on what you call Recruitnomics. So tell us a bit about that, and tell us a little bit more about your role.

Andrew Flowers (2m 44s):
Yes. So, Recruitonomics is a term coined by Appcast CEO, Chris Foreman. And I’ve really adopted it as our kind of lodestar, our guiding light and what we do at appcast economics. And what Recruitonomics is, is the combination of ivory tower, academic labor economics, right? So, all the kinds of insights you would get at a think tank or a university. So that’s half of it though, the labor economics. But the other piece of it is recruiting tactics. So, the real boots on the ground insights that come from talent acquisition leaders, folks who have long experience in the HR tech space.

Andrew Flowers (3m 28s):
And so Recruitnomics combines in my view, the best of both worlds, where you can get cutting edge economic insights from data, but you also get real world business applications. Because so often I find that when I read economic research it’s dry and it’s missing the, so what? Right? It’s missing the, what do I do now? Given this context of the job market, how do we adapt? And so that’s what Recruitonomics is focused on. And at Appcast, we’re producing white papers, blog posts. We’re going on podcasts like this to learn, but also to share our own research.

Andrew Flowers (4m 9s):
And that’s what Recruitonomics is all about.

Matt Alder (4m 11s):
That makes perfect sense and hugely valuable for the people listening to this podcast. I’m sure. What are the key variables within that? What are the sort of the elements the leavers, the things that change the picture within the whole of that concept?

Andrew Flowers (4m 28s):
Yeah. Within Recruitonomics, I like to divide it into two very different camps. One set of variables are things we cannot control, right? So, this is the traditional labor economics side of things, like the candidate demand, and the candidate supply, economic growth, government policy, and so on. That’s beyond the control of any one recruiter or any one company, right? And it’s important to understand what market conditions are like, in what challenges you face, but that’s just half of it. And the other half of it, the recruiting tactics bit is the set of variables you can control. So, think of employer brand, or your apply process at your company, or your sourcing and recruiting practices.

Andrew Flowers (5m 14s):
And of course, the job ad marketing itself from the job description, from the programmatic job distribution platforms you use, if you use programmatic, all these things are part of what recruiters can control given the conditions that they can’t. And so Recruitonomics really marries both of those. So, like the supply demand with the apply process, employer brand, and things you can tweak.

Matt Alder (5m 40s):
So, I’m really keen to ask you about what you’re seeing going on in the market at the moment. Particularly as I had your CEO Chris Forman on the show a few months back. And he was one of the first people to call the challenges that we’re having now in sort of a various labor markets around the world. So, keen to get your kind of updated thoughts on what’s going on in the market. I suppose, before we just dive into that, it would be good to know a little bit more about the data sources that you’re using to generate the insights.

Andrew Flowers (6m 12s):
Yeah, that’s a great starting point. And in terms of data sources I like to first look to public or government sources to just get the lay of the land. So, in the United States, that’s the Bureau of Labor Statistics, and other statistical agencies like the Census Bureau. In the UK, it’s Office of National Statistics. So, in either case, what we find is labor markets are extremely tight. That were tight economists like to use. Basically, is no news for recruiters. It, it means it’s really difficult to hire right now that the demand for candidates is far outstripping the supply.

Andrew Flowers (6m 53s):
So, let’s just start with the US. According to the Bureau of Labor Statistics, we find that the gap between candidate demand, which I approximate by job openings, and candidate supply is over 2 million and it’s never been that big of a gap. And so, the number of job openings in the US is around 11 million this summer, and that’s just an historical high. But while that represents the demand, the supply of potential workers, you could hire a one measure of that is the unemployed people, and that’s drifted below 8.7 million to 8.4 million in the most recent August numbers.

Andrew Flowers (7m 33s):
And so this gap of almost 11 million job openings, less than 9 million unemployed people, this gap of 2 million folks is just a fundamental mismatch. And it’s driving a lot of the recruiting challenges that we know talent acquisition leaders face, and that’s what they just can’t control. And that supply demand mismatch is driving a lot of trickle-down effects such as wage growth. We find that wage growth is accelerating. Since the start of the pandemic in February of 2020, overall wage growth is up 7% to 8%. But it’s, what’s startling to me Matt is it’s really wage growth at the lower end of the spectrum.

Andrew Flowers (8m 18s):
So, non-managers, or what I like to call rank and file workers. These are folks who work in any number of industries from a home health care aids in the healthcare sector, or a cashiers in the retail sector, these workers are seeing wage growth that’s really pretty unprecedented in recent decades, up to 8% to 9% compared to where it was post, pre-pandemic rather. And so that’s the fundamental insight we’re finding is that labor markets are extremely tight. It’s difficult to hire just because of things that are beyond recruiter’s control, and it’s driving wage growth higher and higher.

Andrew Flowers (8m 57s):
Paychecks are arising.

Matt Alder (8m 58s):
In terms of those things that are beyond recruiter’s control, obviously, one of the things that as had a lot of coverage is the impact of various government support initiatives are around the world sort of particularly in the US and the UK. And there was a school of thought a few months ago that they might be keeping people out of the labor market or causing some of the problems. What are you seeing in that area?

Andrew Flowers (9m 21s):
Well, it’s still a little early. And we’re going to get data from these fall months in the months to come. The consensus among a lot of economists who studied this is that these extended unemployment insurance benefits that were rolled out in the US through the pandemic, and really expired this summer in the early fall. That these extra generous benefits had at most a modest impact in holding back job seekers. So, what do I mean by that? Any number of studies have looked at the US states that ended these benefits early and compared them to the states that kept them through the summer. And so, just so that everyone’s aware, around early September they expired nationwide, in the US.

Andrew Flowers (10m 7s):
So, we’ve started to get data in first September and we’re going to get it soon for October. But the picture over the summer was when you compare the states that ended it early to the states that kept it, there really wasn’t much of a difference. You kind of had to squint. The job growth numbers in both sets of jurisdictions were pretty similar, even though one had ended these benefits early. And then tech, just put the cherry on top is the latest numbers in September showed that the labor force that the supply of potential workers in the US actually declined. A lot of folks stopped looking for work. And that’s kind of funny, right? You would scratch your head. If you thought that these extended unemployment benefits, which expired at the start of September, that in September, you would see a surge of new job seekers that were, you know, previously just kind of on the dole, so to speak.

Andrew Flowers (10m 59s):
But we didn’t see that in the data. We actually saw the opposite. We saw that a lot of would be job seekers, in my view, are skittish particularly because of COVID. In the US through the summer we had like many other countries a spike of the Delta variant. And you see it in any number of variables. You see it in terms of job seeker activity on Google, just, you know, people who are looking for job postings on internet, that’s down as the pandemic kind of worsened in the summer months of July and August. So, it’s no surprise in September that the labor supply didn’t rebound as we thought. So, to answer your question, it seems that unemployment insurance benefits that were extra generous that they had maybe a slight modest impact.

Andrew Flowers (11m 44s):
We estimate around 10% to 20% of the difference between the world would have been in versus what we had with the benefits. So, I’m not going to say it didn’t factor in. It’s just that there are bigger variables out there. Like COVID and the Delta variant, or one other thing I’ll mention childcare. That’s a consistent thing we’ve seen in surveys of job seekers, or would be job seekers that aren’t looking for work that they site childcare challenges. And ensure enough in the data, the female labor force participation rate has not really rebounded from where it was prior to the pandemic. So, it’s really childcare challenges in particular for working mothers, plus the concerns around the Delta variant.

Andrew Flowers (12m 26s):
Those seem to be, in my view, the driving force behind this lack of a rebound in the labor supply, in the candidate pool, not so much the government benefits.

Matt Alder (12m 37s):
What is this doing to the cost of recruiting?

Andrew Flowers (12m 40s):
It’s really impacting it. And so, this is where we shift to our proprietary Appcast data. And, you know, just to take a step back and give people context here. You know, Appcast manages at an annualized rate around a billion dollars of media that we manage. And what that means is in our network, our Clickcast database, we have a 1.3 billion job postings that translates into over 10 billion clicks, and almost 2 billion job applications that were submitted. And so that’s just the context I mentioned, because, you know, that’s our database we’re drawing from it. What we find is that the costs of recruiting in many sectors is rising.

Andrew Flowers (13m 22s):
So, the average or the median rather, the median cost per application, and the median cost per click, which was kind of two, you know, benchmark recruitment marketing variables that I know a lot of TA leaders or recruiters they look at. And so, the Cost Per Application, the CPA, and the Cost Per Click (CPC) for all jobs in aggregate have been rising through the year 2021. But what we found in our data is that when you look at COVID sensitive occupation. So, think of healthcare, or retail, or food service. And in particular for gig work or kind of ride hailing companies like Uber and Lyft.

Andrew Flowers (14m 5s):
In these COVID sensitive occupations there’s a really strong increase in the cost of recruiting. It’s just seems that, in our view, there’s some would be job seekers that would be interested in clicking on these job posts, on these job advertisements that are reluctant to because of COVID concerns. And the reason we think that is when you look at non or not as sensitive COVID jobs, like in sales, or in information technology, or in manufacturing where you’re a little more spread out. We’re not face-to-face with customers. In these occupations, the cost of recruitment have not risen as much, either just slightly, or in some cases flat.

Andrew Flowers (14m 50s):
So, we’re looking at the CPA, CPC trends, and we’re finding that the cost of recruitment is going up, but what’s driving that? You know, what’s the so what of that? And it seems that the conversion rates on these COVID sensitive job ads are down, right? The number of applications you get for say per 100 clicks on a job posting. And some of these COVID sensitive positions, those conversion rates are down, and it that’s driving a higher cost per application, a higher cost per click. And until the COVID pandemic fully normalizes, and again, knock on wood cases are declining in many countries, and deaths and hospitalizations are declining from this recent Delta variant peak.

Andrew Flowers (15m 33s):
But until the virus, which is — the really the virus is the boss here. The virus is the boss. And until the virus really normalizes our public health landscape, we’re going to find that recruitment is going to be –it’s hard everywhere, but it’s going to be particularly hard for these COVID sensitive jobs.

Matt Alder (15m 50s):
So, there’s no getting back to whatever normal might look like anytime soon then?

Andrew Flowers (15m 58s):
Yeah. Our forecast is that in Q4 of 2021, and in the early part of 2022, that the labor market is going to continue to experience the supply demand imbalance, and wage growth is going to continue to accelerate. There are risk factors to this outlook for sure in terms of government policy. So, for example, we all know that inflation is rising in much of the US and Europe. And so, interest rates could change to try to stop that rise of inflation, and that could affect the job market. So rising interest rates could change this whole supply demand mismatch.

Andrew Flowers (16m 38s):
But just that put that risk factor aside, our forecast to your point, Matt, is that this really challenging recruiting environment isn’t going away anytime soon. We don’t see the labor market normalizing, and the 3 to 5 million folks in the US who are out of labor force compared to where we were prior to COVID in early 2020. Those folks are going to trickle back, back into looking for work, but not all at once. It’s not going to be an avalanche at once. And so that’s going to make recruiting a challenge in the next few quarters.

Matt Alder (17m 13s):
Talent acquisition is a huge challenge at the moment. Well, what are you seeing that is effective? What would your advice be to recruit in terms of dealing with the markets that we’re seeing at the moment?

Andrew Flowers (17m 27s):
Yeah, this is where Recruitonomics really kind of kicks in and we pivot. So, given that context of a tight labor market challenging recruiting for the next few quarters, that picture is basically keep clear, right? High demand for workers, low supply. So, in this environment, we recommend to recruiters that focus on the things you can control, even if they’re small tweaks. So, call it small ball. But responding to this environment, I can list a number of things. I’ll mention three or four to start. Two things that cost money so that are part of any HR, our TA leaders budget are the wages you offer hires, and the amount you spend in terms of bids on job boards, or your just, your job advertising budget period.

Andrew Flowers (18m 16s):
So, for both of those two kind of budget driver items, we recommend to stay competitive that: number one, you benchmark your wages. So, take stock at a higher frequency. Sometimes I talked to HR leaders who say, “You know, we benchmark our wages traditionally at an annual basis. We’ll take stock of different roles. Well, given how fast wages have risen, we recommend really benchmarking wages that are kind of quarterly basis to stay competitive. So that’s number one in terms of, you know, as your budget allows increased pay to attract talent. The second as your budget allows point is when it comes to job advertisements, right? So, there’s a strong correlation between when you raise your bids on a job board and your placement for potential applicants is higher as more salient.

Andrew Flowers (19m 6s):
So those are two recommendations we have – benchmarking wages, and bidding up your job advertisements. But of course, that’s not costless, right? That comes with actual trade-offs. Now, a few other recommendations we give to recruiters that, while not exactly costless but are huge budget drivers. And so, the two I’ll mention are the apply process and making it more efficient and skinny is what I like to call it a skinny apply flow funnel. Number one and number two, your titles. The titles you use in your job descriptions, and also just writing a good job description itself. So, let me take those recommendations one at a time.

Andrew Flowers (19m 47s):
What we find is that job seekers are impatient. And maybe we all are, maybe I was too when I was applying for jobs. We find that the longer the job application takes, it’s almost a linear decline in your conversion rate. The amount of applications you get for a given number of clicks. So, for example, if it’s under five minutes, if you’re apply flow is what I call skinny. If it’s efficient, you only take the information you absolutely need from your applicant, and you can follow up with other things later. You can do a background check later, et cetera. You don’t ask for the resume to be uploaded as well as the work experience to be entered manually, for example. When you have an apply flow below under five minutes, you have a high conversion rate over 12%, our research finds.

Andrew Flowers (20m 32s):
But the longer that gets say, it’s a 15-minute kinda laborious, clunky application process, well, your conversion rates just going to decline. You’re going to get fewer applicants. And so, if you’re already paying as many recruiters do, when you already pay per click on a job board, you’re paying for that click. You know, that job board is taking your money, is taking your budget. Then if your application process isn’t efficient, you’re just losing, you’re losing potential applicants. So, we help both, at Appcast but also just as a general recommendation. We help kind of encourage employers, and encourage recruiters to have a skinny apply process. And then the second point of that is having the job description, and in particular the job title be targeted, and be focused on attracting the talent pool you’re looking for.

Andrew Flowers (21m 20s):
So, start with the job title, shorter is better. So, we want to use job titles that are the go-to search terms for most job seekers. When you go to a job board, you don’t enter in three to five, to seven words. For a lengthy job title, job seekers typically enter just a few words. And so, having a short relevant job title is key. Both in terms of your performance on job boards, in terms of search engines, but it’s also key in terms of matching what the job seeker is looking for. And then job descriptions, you know, that’s a whole other conversation. But a lot of Appcast research has found as have other outlets who studied this, that writing job descriptions with inclusion in mind.

Andrew Flowers (22m 5s):
So for example, not using gendered language, right, to turn off female applicants. To use kind of male dominant language in the job description is a huge negative in terms of conversion rates, in terms of attracting applicants. That’s just one example. Writing job descriptions that are inclusive and that are engaging for job seekers. So those are the kinds of key recommendations we add. And then the final one I’ll mention is just, you know, how you do your recruitment spend period? We see it just a technological shift happening towards programmatic job advertising. Now, yes, this is definitely where, you know, the Appcast business is, I’m not going to ignore that.

Andrew Flowers (22m 47s):
But you know, the days of manually producing job ads in choosing based upon your own whim where to put them, in terms of what, which job board, and at what bid? We find that those days are kind of fading out. And that a programmatic approach, which says, “Okay, let’s look at 10,000 plus job boards across the entire internet, right? Let’s look at algorithms and data to give us recommendations on what we bid for job advertisements?” That whole programmatic approach, whether you use Appcast or any other provider, that seems to be the, the wave of the future. And so those are our kind of poor recommendations. You know, raise your wages when you can, raise your with bids on job boards when you can, and then focus on a succinct job title and an inclusive job description, focused on efficient apply process that’s not too burdensome.

Andrew Flowers (23m 43s):
And then finally, use programmatic tools to just be powered by data and algorithms as you distribute your jobs.

Matt Alder (23m 50s):
As a final question, I normally ask about the future. But sort of mindful about what we’ve already talked about. I’m going to ask that question to you in a slightly different way. What are the long-term trends that you’re seeing the may be coming out of the pandemic, that maybe have been there already? What are the long-term trends that talent acquisition professionals should be keeping an eye on over the coming months and years?

Andrew Flowers (24m 13s):
It’s a great. But you know I thought about this a lot. It comes up in my conversations with TA leaders and recruiters. And so, there’s three big picture trends that are not just over the next year, but over the next 5, 10, 20 years that I think of. Their demographic trends, technological trends, and political trends happening. And they all impact the job market and recruiting in big way. So, the first one demographics. This is huge. In terms of the labor supply over the long run, you have to look at population growth. And in particular, the growth of the labor force of working age, right? So, the 25 to 54-year-old cohort of potential workers that this is what economists call, prime age employment.

Andrew Flowers (24m 59s):
And in the US, for just one example, in the year 2020 that prime age employment link that labor force growth went negative. It actually declined for the first time ever. And so, this is a big factor in the long run for recruiting. And we see, it’s even more profound in Europe, in Italy, and in Japan that the demographics in our economies are not favorable to recruiting in the long run, because supply is shrinking. You know, newer generations are having fewer kids. Fertility rates are declining. Immigration, particularly in the wake of COVID has been restricted in a lot of European and US economies.

Andrew Flowers (25m 41s):
So, demographics is going to drive labor supply down unless we do something about it. And again, this is where a lot of political points, which I’ll get to in a minute come in around childcare and supporting labor force growth. So that’s the first big picture tray. The second one is technological. And I don’t need to tell anyone this. This is obvious. But how it shakes out is unclear. And it’s really a number of things you can point to. But let’s start with remote work, right? We were forced across the world to do a forced experiment with remote work. Now, I think initial readings are that. It was a success. Like the sheer people who work remotely for at least a few days a week in the US is down from where it was.

Andrew Flowers (26m 22s):
You know at the peak of the pandemic last spring, but it’s multiples higher than what it was pre-pandemic. Previously, it was 3% or 4% of the labor force who worked from home. Now, on a given week it’s 13% to 15%. So, it’s definitely shifted how we work, just the rise of Zoom, and Teams, and Google Meet, all these tools were remote work is going to change, how people do work, and where they do it? That’s a huge impact. And another side of this technological shift is programmatic, right? Driving your job advertisements with data and technology is changing, how job seekers look for work and how recruiters hire?

Andrew Flowers (27m 2s):
So, a big picture trend that’s it’s hard to forecast. I don’t want to lie to you Matt and say, I have a crystal ball, and I can tell you how technology is gonna impact a recruiting, but it’s definitely changing it in dramatic ways. And then the third and final point that is just unavoidable. You know, even in the business world, we have to pay attention to politics. And I think in the US in particular, but also in some European capitals, you’re seeing a political shift after a few decades where median wages in many wealthy countries were stagnant, and the labor share of national income was maybe declining. You’re seeing a kind of rebound a boomerang effect in the opposite direction back towards empowering workers.

Andrew Flowers (27m 47s):
And this is on any number of fronts, whether it’s raising minimum wages or, you know, competition policy towards breaking up monopolies, or just greater social welfare benefits in the US which is being debated right now around child tax credits, or universal childcare, which doesn’t exist in the US. So, these political shifts that are happening, that are directed at the labor market, and frankly just on a bipartisan basis in the US at least directed towards a full employment economy. So, whether it’s the current presidential administration or President Joe Biden, or previously with a President Donald Trump.

Andrew Flowers (28m 29s):
Both appointed federal reserve chairs, or both support a federal reserve policy that drives interest rates down that runs the economy hot, and that creates this tight labor market. I think that’s like the one kind of last political consensus issue is that we should have really strong economies in labor markets that make it frankly challenging for recruiters. And I just don’t see that political shift going away anytime soon. And that’s just something recruiters should start to adapt to. That workers are feeling empowered and government policies is backing them up.

Matt Alder (28m 56s):
Andrew, thank you very much for joining me.

Andrew Flowers (28m 60s):
Thank you so much for having me.

Matt Alder (29m 2s):
My thanks to Andrew Flowers. You can subscribe to this podcast in Apple Podcasts, on Spotify, or via your podcasting app of choice. Please also follow the show on Instagram. You can find us by searching for Recruiting Future. You can search all the past episodes at recruitingfuture.com. On that site you can also subscribe to the mailing list to get the inside track about everything that’s coming up on the show. Thanks very much for listening.

Matt Alder (29m 58s):
I’ll be back next time. And I hope you’ll join me.

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