Chris Nace — who’s done such work for the past decade — says that after years of searching for business, companies are now constantly approaching his small firm that focuses on hires in the technology sector in New York City.
“Demand is the highest I can remember having,” said Nace, whose firm’s fees include one-time payments based on a percentage of the recruited worker’s salary. “Companies are telling us they’re willing to pay $25,000 or $30,000 fees for people who are one or two years out of school. That’s fairly atypical.”
While headhunters can get lofty retainers for executive positions, a 16-year low unemployment rate and a record-high number of job openings are turning workers across all sorts of industries — from construction to trucking to software engineering — into hot commodities. The need is so dire that employers are handing out large signing bonuses, giving second looks to people with blemishes on their resumes and reaching out to professional recruiters more than ever.
The numbers show why that’s the case: There were 1.17 unemployed job seekers for every vacancy in April, the second-lowest ratio in data going back to 2000. That compares with a post-recession peak of 6.65 people per job opening in July 2009. Revenue for U.S. search-and-placement services rose to $21.9 billion in 2016, almost triple the level in 2009, according to estimates from the American Staffing Association
“It’s a candidate-driven market and companies are scrambling,” said Jennifer Pearce, vice president at City Staff, a Washington-based firm that places about 400 new hires a year, including people who work in international development and at non-profit organizations. “It’s now become equally important for a company to keep employees interested and challenged to keep them from getting bored and accepting other offers.”
The tight job market means employers are hiring at a slower pace, albeit still a solid one. U.S. employers are estimating a payrolls increase of about 177,000 positions in June, after 138,000 in May, based on the median estimate in a Bloomberg survey ahead of Friday’s Labor Department report. For the full year, economists project an average monthly increase of 167,000 jobs, down from 187,000 in 2016. The unemployment rate is estimated to have held at 4.3 percent.
Wage gains probably accelerated in June, rising 0.3 percent from the previous month, according to the median estimate. That would match the fastest pace in 2017, though year-over-year pay growth forecast at 2.6 percent remains below the 2.9 percent peak of the eight-year expansion.
“We’ve got a tight labor market and job growth will slow this year because businesses are finding it difficult to hire,” said Gus Faucher, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “At some point businesses are going to be forced to raise pay as they see their workers leaving for somewhere else.”
Discouraged by meager pay raises, workers are changing jobs and finding it’s paying off. Federal Reserve Bank of Atlanta data show job switchers enjoyed 3.9 percent higher pay than a year earlier, according to a three-month average of median wage growth as of May, while people who remained in the same job saw only a 3 percent increase.
Glenn Murphy, partner at recruiter Bamboo Talent in New York, says there’s “so much work to go around” that technology companies — who once would offer the firm retainer fees for only the highest level of talent — are now offering to pay upfront for a variety of roles, from chief technology officers down to vice presidents, directors and engineering managers. A strong engineering candidate can probably get a dozen messages a day from recruiters and companies on LinkedIn, he said.
Those headhunters are finding more and more success. The number of Americans voluntarily leaving their jobs — for opportunities such as a new job or going back to school — is close to its high for this expansion. The quits rate, as it’s known, was at 2.1 percent in April, compared to 1.3 percent at the start of 2010.
“To some extent, the labor shortage is a function of employers having unrealistic expectations of what they can get,” said Steven Berchem, chief operating officer at the American Staffing Association in Alexandria, Virginia. “They have to realize you have to open their pocketbooks to get the talent that they really want.”
That makes the outlook for recruiters sunny — if they can find people to do the recruiting.
“The economy is, if not at full employment, very close,” said Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, “It’s going to be harder and harder and it’s going to take longer and longer to fill positions.”