Subject Matter Expert: Kathleen Rose, CRE®
Everyone, everywhere, in nearly every sector
is reporting that it is difficult to find skilled,
willing and able workers. Layering on top of the
worker shortage are a series of trends that are
changing requirements for both workers and
employers.
Despite some signs of softening in the wake of
Fed rate hikes, the labor market remains
incredibly strong. The monthly Job Openings
and Labor Turnover Survey (JOLTS) report
consistently shows more job openings than
there are available workers. As of August, there
were approximately 1.8 available jobs for every
unemployed person, with the unemployment
rate remaining low at 3.8%. The biggest factor
contributing to the labor shortage is the aging
population of baby boomers that are moving
out of the workforce. That labor shortage was
accelerated during the pandemic with more
people who left the workforce with the Great
Resignation.
Employers are struggling to not only find
workers to fill jobs, but also keep up with a
dynamic labor market that is moving at a fast
pace. Over the last five years, the American
workforce has not stayed static. Data from the
National Occupational Employment and Wage
Estimates put out by the U.S. Bureau of Labor
Statistics (BLS) tracks the fluctuations in the
labor market[i]. In 2022, the U.S. population
stood at 333 million. Of that, roughly 60% were
employed in various jobs, positions, and
sectors in the U.S. economy.
The labor market has and will continue to shift,
and the change is accelerating faster than the
data can keep up. The dislocation in the
workforce goes beyond just demographics to
include changes in technology, migration
trends and changes in worker behavior.
Game changing trends
The pandemic was a game changer. At its
peak, 62% of all office workers were working
remotely, which introduced new virtual ways of
working. Many of those workers are continuing
to demand more remote work options. They
like the convenience and flexibility, not to
mention saving time and cost on a tedious
commute. The office has relocated to the home
or apartment, and the downtown office markets
have been pummeled by this dynamic.
Technology also is changing work beyond just
the traditional office worker. For example,
telemedicine allows virtual visits with doctors
and other health professionals. Self-service
kiosks are reducing the need for workers in the
hospitality and service industries, while
automation and robotics are replacing human
capital in assembly, warehouse and distribution
facilities. Looking at what’s ahead, AI is the big
elephant in the room, and it is not yet clear how
AI and machine learning might impact how
work is done, job growth or declines across
different industries and skills that will be
needed in the future workforce.
Jobs follow the people
Although the job market has been holding up
under economic pressure, the bank failures
that occurred early in 2023 are a warning sign
that the Fed was slow to react to inflation and
then perhaps overcorrected with its rapid
interest rate increases. The question now is
whether the U.S. will experience a soft landing
or a hard recessionary landing. Labor markets
often lag, and layoff announcements have
started to emerge across many sectors,
particularly tech. The labor market has
significant downstream implications for real
estate. Pure and simple, jobs drive demand for
real estate, and populations also shift to where
jobs are located.
Employers are following the people and paying
close attention to migration shifts. Traditionally,
older generations set up their lives around
where their job was located. Younger
generations, including Gen X, Y and Z, are now
taking a different approach. They’re reversing
the order, choosing their lifestyle and where
they want to live first and the job second.
Younger workers also have a different mindset
as it relates to remote work and contract work
versus full-time employment. They tend to be
more entrepreneurial, and they might work two
or three jobs. So, in addition to tracking the
availability of labor, employers need to
consider the shifts in attitudes, behavior and
skillsets that are reshaping the workforce.
