Two indicators of the nation’s economic strength are colliding: demand for employees at a time when the labor pool is almost dry.
Buoyed by optimism in the broader economy — including expectations of increasing revenue, profits, and capital spending — more companies plan to hire in the next 12 months, according to a survey of finance decision-makers released Thursday by the Association of International Certified Professional Accountants. Companies also need to retain existing staff to keep expansion plans on track.
But there’s a hiring hurdle. The nation’s unemployment rate was 3.9% in April — its lowest point since 2000. With less available talent, companies might need to spend more time and money to compete for employees.
Thomas Sign & Awning Co. illustrates the point. The company, which designs, manufactures, and installs about 6,500 commercial signs each year, recently experienced a boost in volume from repeat customers and new business. As a result, the Clearwater, Fla., company has accelerated its hiring efforts in recent months.
“We are always recruiting,” said Charles Copp, CPA, CGMA, the company’s CFO. “We’re looking for welders, fabricators, salespeople. We are trying to be proactive and increase [pay rates] to keep people that are good.”
Thirty percent of respondents to the second-quarter Business & Industry Economic Outlook Survey say they don’t have enough workers and plan to hire. That’s up from 24% in the same period last year and 19% in the second quarter of 2016.
At the same time, availability of skilled professionals registered as respondents’ top challenge for the fourth consecutive quarter. Employee benefits and costs, the top challenge a year ago, ranked third. Staff turnover, which didn’t rank as a top challenge two years ago, ranked seventh in the latest survey. Regulatory requirements/changes ranked second.
Among businesses of all sizes, 43% say they need to add workers, but some are hesitating to do so. Businesses with annual revenues between $10 million and $100 million are the most likely to add staff; 33% of that category said they planned to hire in the next 12 months. About half of companies say they have the right number of workers.
Of course, if companies were more worried about the economy, they might be retrenching or shelving expansion plans. And the hiring conundrum might be less of a concern. That was the case in 2012, when respondents ranked domestic economic conditions as their top challenge in the survey. During that year, the availability of skilled talent ranked no higher than their eighth-biggest challenge.
But these days, finance decision-makers maintain a positive view of the economy and, as a result, are planning for growth.
It should be noted that the CPA Outlook Index (CPAOI), a nine-component measure of economic sentiment, did decline slightly from the previous quarter. But all nine components — including elements such as revenue, profit, capital spending, and employment expectations — were higher on a year-over-year basis (see full chart below).
The latest CPAOI is 79, two points lower than the previous quarter’s record high for the 11-year history of the index. A CPAOI reading above 50 indicates positive sentiment.
Fanimation Inc. is another company forecasting growth. The Indiana-based distributor of ceiling fans expects its revenue to increase between 10% and 12%, which is in line with the company’s annual growth over the past eight years.
“We are optimistic that consumer confidence and buying patterns are positive and seem to be improving,” said Jay Boughner, CPA, CGMA, the company’s controller. “For our business, that means continued sales growth.”
The company could add slightly to its staff of 49 people later this year, he said.
But there’s that hiring problem again: Five years ago, the jobless rate in Indiana was 8.1%; the most recent rate is 3.2%, lower than the national average.
— Neil Amato (Neil.Amato@aicpa-cima.com) is a JofA senior editor.