Why Are Businesses Still Hiring?
Well, for one thing, companies that are still struggling to get fully staffed may be reluctant to lay off employees even in a recession.
Here are today’s highlights:
The salary-transparency movement is gaining steam.
What would happen if you gave your employees a three-day weekend every month?
The latest consumer spending numbers suggest the recovery was still on track in August.
For some in Silicon Valley, investing in a friend’s startup is roughly the same as following them on Instagram.
Why are companies still hiring? “In Eau Claire, Wis., Jim Fey normally buys five to eight new buses each year for his privately owned school bus service. He doesn’t plan to purchase any in 2023 because high inflation and interest rates have put the price of a bus out of reach. He worries about a recession. ‘There’s going to be a lot of hurt,’ he said. Yet Mr. Fey is looking to add about 15 more school bus drivers to his staff of roughly 185. He and some of his office employees have had to drive routes since the start of this school year due to a shortage. ‘I can’t have my office staff out driving every single day,’ he said.”
“Some economists say the scars of the past year’s shortages—including the huge expenses of hiring and recruiting, combined with high employee turnover—could leave companies more hesitant to lay off workers if the economy falls into a mild recession.”
“They contend that companies never fully met their hiring needs during the recovery and that businesses will likely pull openings, which are at historic highs, before they resort to cutting jobs.”
“Even employers not seeking to raise head count have to keep hiring to fill vacancies caused by historically high rates of turnover. In July, 2.7 percent of workers quit their jobs, up from 2.3 percent in February 2020, when the jobless rate matched a half-century low.” READ MORE
More companies are sharing what they pay: “California, with its roughly 19 million workers and some of the biggest U.S. companies, Tuesday became the latest state to join a quickly growing nationwide salary transparency movement. Just a year ago, only Colorado required employers to list salary ranges on job postings. In November, a similar rule in New York City will go into effect followed by another in Washington state early next year. With California joining, companies like Alphabet, Meta Platforms, Walt Disney, and Wells Fargo will have to comply by January 2023.”
“Even in places where it’s not required, employers have started listing pay information on job ads — with more likely to follow.”
“A recent survey of executives from Willis Towers Watson found that 17 percent of companies already voluntarily list pay ranges and another 62 percent of organizations are planning to do the same or are considering it.”
“‘We’re approaching the point at which a job posting without pay will be like going through a supermarket and not seeing a price on your can of soup,’ said Scott Moss, director of the division of labor and statistics at the Colorado Department of Labor and Employment.”
“Job search portal Indeed earlier this year said 75 percent of new postings to its site include salary expectations; LinkedIn reported a 35 percent increase in the phenomenon in the first half of this year.” READ MORE
Suppose employees got a three-day weekend every month? “At Highspot, we decided to offer something that would make a bigger impact than perks alone. We implemented a monthly company-wide, three-day weekend for all employees. Each month we asked all employees to take a designated Friday off, adding 12 extra days off to the existing unlimited PTO policy. The impact was bigger than anticipated. We immediately saw a shift in productivity, energy, and morale, which continued throughout the year. Our annual company-wide survey validated this shift as results showed nearly a 10 percent improvement in response to ‘Highspot motivates me to go beyond what I would in a similar role elsewhere.’”
“We also saw a 5 percent increase in our employee engagement, a measure of people’s connection and commitment to the company and its goals – 3 percent higher than the industry benchmark for new tech companies.”
“The difference an extra day made for our employees’ well-being was clear. What started as a temporary pandemic tactic has since become a permanent part of our company culture, called recharge Fridays.” READ MORE
Drought-stricken farmers are looking to diversify: “New Mexico farmer Nathan Jurva has rented out RV hookups on his land, sold some of his water to oil-and-gas companies and recently agreed to lease a parcel of his property for a proposed solar farm. Any extra income will help, the 45-year-old farmer and rancher said. The lack of rainfall this year has left him unable to plant 20 percent of his planned crop on his land in the southeastern part of the state about 30 miles from the Texas border. ‘If I relied solely on farming, we would live below the poverty line,’ said Mr. Jurva, who has a 200-acre alfalfa and cotton operation and manages his grandmother’s farm. ‘Diversification is critical to our business plan.’”
“Nancy Caywood, a retired teacher, is trying to hold on to her family farm in Pinal County, Ariz., a stretch of low desert and mountains between Tucson and Phoenix, by offering tours. Last year 2,000 people bought the $10-$15 admission tickets for the tours, she said, which include hayrides, exploring the cotton farm, and listening to Ms. Caywood play the fiddle.”
“Between income from those crops and this year’s farm-tour visitors, Ms. Caywood hopes she will have enough to pay their annual water-assessment fees and land taxes on the farm, which has been in her family for five generations. If they are unable to pay those fees, they could lose their land, she said.” READ MORE
Americans earned more and spent more in August: “Consumers haven’t shut their wallets completely, proving particularly willing to shell out for travel, dining, and other services that they missed out on earlier in the pandemic. Spending on services rose 0.8 percent in August, while spending on goods fell, reflecting the gradual shift back to normal of consumption patterns that were disrupted during the pandemic.”
“The strong job market is providing a boost. Wage and salary income rose 0.3 percent in August and is up 8.6 percent over the past year as more people have gotten jobs and competition for workers has driven up pay.”
“Americans, in the aggregate, are also still sitting on a large stockpile of savings built up earlier in the pandemic. That could allow consumers to keep spending even if the job market cools or inflation re-accelerates.” READ MORE
With inflation slowing used-car sales, CarMax posted a steep drop in profits: “Prices for preowned cars and trucks have ballooned in recent years amid a pandemic-related shortage of new vehicles. The rise has a ripple effect throughout the car business, giving owners more equity in their vehicles and boosting trade-in values. But it has also pushed many budget-conscious buyers out of the car market, stoking wider concerns about affordability and whether used prices might come crashing down after hitting a peak. CarMax, a used-car retailer, saw profit drop by more than 50 percent in its second quarter as sales rose 2 percent, the slowest pace since a rush in used-car purchases earlier in the pandemic.”
“A survey of U.S. dealers in the third quarter showed that sentiment was weakening, and worries about the economy and rising car costs, such as those pushed up by interest rates, are weighing on the overall outlook, according to research firm Cox Automotive.” READ MORE
Some prices are unlikely to fall even once inflation abates: “The prices of some items, such as gas, are flexible, rising and falling on a regular basis, albeit with some wider swings. The average price of a gallon of gas shot above $5 in June, falling back down to $3.76 this week, according to the AAA. Prices for some other items, such as rent, change more slowly, and mostly in one direction. And when those prices go up, they tend to stay up. Other examples of some sticky-priced services include haircuts, which have risen 4.4 percent from a year ago, or car repairs, which are up 11 percent, according to the Labor Department’s August consumer-price index.”
“On the Atlanta Fed’s sticky list: household furnishings, baby clothes, alcohol, education, public transportation, and medical care. On the flexible: fresh fruits and vegetables, clothing, and shoes.”
“Many sticky prices are likely to remain elevated, and bigger-ticket items, such as furniture, which is up 7.1 percent over the past year, and appliances, which are up 3 percent, according to the CPI, won’t be falling in price soon—and could get more expensive.” READ MORE
Angel investing has become a casual pastime in Silicon Valley: “Maia Bittner is an angel investor, and she has a lot of friends who’ve founded startups. Sometimes they ask her if she wants to put money into their companies. Bittner used to feel prickly about it—she didn’t want them to assume she’d write a check just because they’re friends. At some point, however, she realized that being buddies with someone was a great reason to write them a check. ‘The fact that they are my friend means there’s something cool and interesting about this person,’ says Bittner, who’s founded two companies of her own: Rocksbox, a jewelry rental service, and Pinch, a fintech startup.”
“For someone she considers a good friend, she’ll sometimes invest blindly, without knowing what the company does, because she trusts their judgment. ‘Investing in my friends is super cool,’ she says. ‘I get to support them. If they do well, I do well. If not, I’m helping them be entrepreneurs.’”
“Angel investing has long been a fixture of Silicon Valley funding. Historically, wealthy individuals used the structure to take long-shot bets on young startups. Most fail; some produce spectacular returns.”
“The process has been made radically simpler in recent years by improved software tools. AngelList, a tech investing platform that helps connect investors, founders, and job candidates, has increasingly focused on managing the often painful amount of paperwork required to raise funding.”
“‘When my friend asks if I want to invest, of course I’m going to kick in $10,000—it’s a way to stay connected, an excuse to get updates,’ says one startup founder, who angel-invests on the side and asked not to be named to avoid offending friends. ‘To me it’s very similar to Instagram. You follow each other.’” READ MORE
THE 21 HATS PODCAST
‘It’s a ticking time bomb’: This week, Shawn Busse, Liz Picarazzi, and Hans Schrei debate the merits and risks of taking outside capital. Clearly, it makes sense for some businesses. But what are the right circumstances? What are the alternatives? And what do you need to understand before going to the dance? For example, what are the dynamics of the entrepreneur-investor relationship? Are the entrepreneurs hoping the investors will bestow an opportunity upon them? Or is it actually the entrepreneurs who have an opportunity to offer? And who pays for the coffee? Plus: What do you do on those days when no one seems to be following your lead and the entrepreneurial loneliness sets in?
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Thanks for reading, everyone. — Loren