by Samuel Mbaki | Jun 3, 2023 | Learn
Key Points
- A tight labor market occurs when there are more job opportunities than available workers
- A tight labor market could see an inflation spike and a consequential rates hike
- Recruiting in a tight labor market doesn’t have to be that hard.
What does a tight labor market mean?
A tight labor market is a market cycle with plentiful vacant jobs and scarce workers. This usually happens when an economy grows super fast, and most employers are looking to expand their workforce.
However, a tight labor market can also occur when there is a decline in labor force participation resulting from a rise in economic inactivity. While it is generally accepted that fewer workers cause market tightness, it is also accurate that workers participating in fewer work hours could also result in a tight labor market.
The COVID-19 pandemic saw most markets tighten due to employees having to work from home. That resulted in some cutting their working hours. As such, the number of new hires started to spike till the pandemic slowed down, and the national economies were revealed to have been heavily impacted, which led to massive layoffs.
Though there are still layoffs, the U.S. is showing an increase in new hires, with an average of 341K per month for the past 12 months and positive hire reports for the past 25 months. This data comes when the U.S. economy slows down due to inflation, a debt ceiling crisis, and a banking meltdown.
These labor reports show that something happened during the COVID-19 work-from-home era that made people reconsider their work ethics and recalibrate their work-life balance toward working fewer hours. If this trend represents a permanent shift keeping the labor supply low, the country will likely face a tight labor market as its economy rebounds.
Most factors behind the formation of a tight labor market are short-term. However, structural economic changes can also be to blame. Some factors that may lead to market labor tightness include:
- Accelerated retirements
- Widening skills gap
- Geographic imbalances in the labor pool
- Too fast economic growth
- Working population decline or immigration
Consequences of a tight labor market
Tight labor markets mean that the production targets of an economy may go unmet as the available workers may not be willing to overwork to hit the set quotas. Here are some of the consequences of labor market tightness in an economy:
- This can lead to a crunch in supply chains as production is hampered by shortages due to unmet quotas.
- This can lead to increases in the relative bargaining power of working people leading to a rise in union pay demands and or an increase in production costs.
- It can lead to cost-push inflation as employers pay higher rates to hire and maintain their key staff.
- It can result in embedded inflation rates that could affect the economy adversely. As such, it directly leads to interest rate hikes to control the embedded inflation risk.
Recruiting in a tight labor market
A tight labor market is one of the hardest times to acquire a star-studded team. However, that doesn’t mean you cannot build one. Here are some tips that you can use to build a great team during seasons with labor shortages
1. Tailor the hiring process to favor candidates
Ensure that your hiring process favors candidates by aligning it with a candidate’s point of view. Throughout the process, ensure you do not lose top candidates due to adjustment and negotiation times delays.
2. Market your organization
Develop attractive landing pages for your organization and explain all perks to employees well to give you an edge over other employers.
3. Develop an employee referral program.
Give incentives to employees who refer others to your organization
4. Focus on the active and passive candidates
Improve the working environments of the present candidates and workers to ensure that they will stick with you and develop a sense of loyalty.
5. Talk about Salary early.
Negotiate salary in the initial stages of discussion to align with the worker. However, be aware of making the hiring process lengthy as the worker may get a counteroffer.
6. Always be recruiting
Keep your recruiting window open to attract top performers to your organization and increase your chances of getting more employees.
7. Be prepared for counter offers.
Be prepared that some top workers and candidates may be given counter-offers to move away from your organization. Introduce bonuses and competitive salaries/ work environments.
What to avoid when developing a star-studded team in a tight labor market
- Underpaying/ being out of touch with marketplace salaries
- Not being realistic about temp-to-perm options
- Not maintaining contact with candidates throughout the process
by Samuel Mbaki | Jun 3, 2023 | Finance
- Non-farm U.S.A. jobs increased in May by 339,000, which is much higher than the 190K that Dow Jones estimated.
- The employment rate in the country spiked to 3.7% in May compared to the 3.5% recorded previously. The unemployment rate is the highest recorded since October 2022.
U.S.A. jobs increased at a higher-than-expected rate, and so did the unemployment rate
The U.S.A. has been battling a declining economy for several months with record-high inflation rates, debt ceiling crises, bank meltdowns, and job market shakedowns. A Friday report from the government shows that U.S.A. jobs in May increased by 339,000, better than Dow Jone’s estimate of 190K.
While non-farm U.S.A. jobs are increasing, unemployment is also higher than anticipated. It is at 3.7%, the highest figure recorded since October 2022. The growth in the number of U.S.A. jobs indicated in the Friday job market report marks the 29th straight month of positive growth.
The average hourly earnings, a key inflation indicator, rose by 0.3% in the month, in line with expectations. On an annual rate basis, wages increased by 4.3% in May, which is 0.1% below the estimate. The report also shows that the average workweek fell by 0.1 hours to 34.3 hours.
The U.S.A. jobs report was received well by the markets, with Dow Jones Industrial Average rising by more than 400 points in early trading. Treasury yields followed suit and rose as the market digested the report and developments behind the Senate passing the debt ceiling bill.
“The U.S. labour market continues to demonstrate grit amid chaos – from inflation to high-profile layoffs and rising gas prices,” said Becky Frankiewicz, president, and chief commercial officer of Manpower Group. “With 339,000 job openings, we’re still rewriting the rule book, and the U.S. labour market defies historical definitions.”
May’s hiring rate was almost at par with the 12-month average of 341K, which is great for an economy slowing down. The highest net hires came from Professional and business services, with 64,000 hires. The government also had a significant hire by adding 56,000 new jobs, while the healthcare sector contributed 52,000 new hires.
Other notable sectors were leisure and hospitality, which contributed 48,000 new hires, as construction contributed 25,000, and transportation and warehousing, followed by 24,000 new hires.
The U.S. had highly anticipated this labour report as it will be key in the decision-making process of the Federal Reserve regarding the next move in interest rates. The uptick in the unemployment rate remains a genuine sign of weakness in the market, with a rise in wages signifying that inflation could stick if not acted upon with urgency.
Keep watching Fintech Express for updates on the U.S. economy and Fintech-related developments.
by Samuel Mbaki | Jun 2, 2023 | Banking, Finance
Key Points
- The U.S. Senate has passed the debt ceiling bill preventing the U.S. from defaulting on its debt which would have been the first event of its kind.
- The bill won with a landslide 63 vs. 36 votes within 48 hours after the House passed.
- European stocks have turned around positively following the news that the U.S. wouldn’t default on its debt.
- Economists and on-lookers have shown mixed reactions on Social Media regarding the debt ceiling deal and its effects on the U.S. economy as de-dollarisation plans spread globally.
U.S. Senate prevents a possible debt default
The U.S. Senate has passed the Fiscal Responsibility Act that allows the U.S. to have no cap on the debt ceiling until January 2025. The bill had a landslide win with 63 vs. 36 votes on Thursday night, a day after the House of Representatives had barely passed it.
The new bill will be signed by the U.S. President soon ahead of the June 5 deadline that the Treasury gave as the final date that it would be able to pay its bills. While this bill has helped the nation avoid the first-ever debt default in its history, it has received mixed reactions.
The bill has been projected to allow the printing of $4T more whilst no significant spending cuts have been seen, which has made several lawmakers react with financial experts condemning it since international domination of the U.S. dollar remains in jeopardy now more than ever.
E.U. stocks rise as the U.S. Senate averts a debt default crisis
European Stock markets are headed in a positive direction as they opened higher on June 2, 2023, following news that the U.S. Senate had voted in favour of a bill that would see the nation not defaulting on its debt.
The ongoing debate to deal with the debt ceiling crisis has been going on for the past two weeks but never without influencing global stock markets though slightly. Though it has been settled now, it has just dealt with a minute issue in the U.S. economy as a recession could be possible as it’s reliant on the decisions the federal reserve will make regarding the progression of interest rates.
Recent comments from officials show that the federal reserve may choose to skip the interest rates hike in June as some prospects of the market, like jobs data, are coming out stronger than expected. However, it’s still a difficult decision as the market is sending mixed signals; mortgages are up, but the housing sector has yet to kickstart a price meltdown. Today will see the release of a closely watched labour report that may influence the decisions of the Federal Reserve in June greatly.
Though there is a possibility of rates pausing in the U.S., the ball will most likely roll differently in the U.K. ECB president Christine Lagarde has commented on the current 6.1% inflation rate that is haunting the nation, saying it’s still way too high to suspend interest rate hikes. ECB officials have also been giving signals that interest rates will continue being hiked until the bank closes near the 2% inflation rate target.
Investors, financial experts and on-lookers weigh in on the U.S. debt ceiling deal
The ongoing tension between U.S. and BRICS economic bloc has caused several investors, financial experts and observers to condemn the recently passed Fiscal Responsibility Act. The U.S. is set to go into a money-printing frenzy without a debt ceiling cap until 2025, which concerns several experts.
While it is significant that the U.S. will not default on its debt and cost over 8 million jobs sending millions more below the poverty line, some experts like Balaji feel that the current situation in the U.S. economy will most likely be a liability in the long term.
In his argument, Balaji says that the U.S. dollar will still be in a crisis as international investors are not buying treasury bonds but prefer gold and its financial products. He says that the collapsed banks were buying the Treasury bonds only to realize later that they were interacting with the “new toxic waste.”
Other Representatives of the House had aired their thoughts on the bill condemning it and saying that they wouldn’t vote for it. Though it passed, they felt it would not serve the country well.
Hilariously, one citizen posted a cartoon reaction that depicts poor leadership as the reason behind the financial crisis in the country. He sarcastically thanks President Biden for passing the bill in the U.S. Senate.
by Samuel Mbaki | Jun 1, 2023 | Blockchain
Key Points
- Rocket Pool announces that it’s deploying on zkSync Era
- Users to stake ETH on zkSync Era by holding rETH in their wallets
- $rETH will continue to accrue staking rewards automatically, similar to what happens on Mainnet and other Layer 2’s
Rocket Pool is coming to zkSync Era
On June 1, 2023, ETH staking services provider Rocket Pool announced that it was deploying on zkSync Era. This development will allow users to start staking their ETH on Era by holding rETH in their wallets. Additionally, like on ETH mainnet and other L2s, $rETH will automatically accrue staking rewards.
Rocket Pool is yet another integration coming to the fast-growing zkSync Era’s zkEVM DeFi ecosystem that has been taking the internet and crypto industry by storm since its launch two months ago.
Rocket Pool will benefit Liquid stakers with Era’s faster speeds & lower transaction costs, secured by zkSync’s zero-knowledge proofs upon capital deployment with them. The staking provider says this development is yet another step in its mission to lower barriers to entry & ensure anyone can participate in Ethereum’s proof-of-stake system and benefit from it fully.
In a press release, Rocket Pool said:
“As Ethereum’s most decentralized liquid staking protocol, we’re also researching how zero-knowledge proofs can be used in other parts of the protocol to provide decentralized security.”
Since its launch (March 2023), zkSync Era has seen a tremendous spike in its network activity, recording the highest levels ever reached by any Ethereum scaling solution in a short period. As recently highlighted by Messari, the adoption of zkSync Era has also rapidly grown in terms of Total Value Locked (TVL) and transaction volume.
These developments foreshadow the growing interest and faith in innovation, which may see even more projects adopting it. Keep watching Fintech Express for updates on these developments as soon as they happen.
by Samuel Mbaki | Jun 1, 2023 | Banking, Finance
Key Points
- Eurozone inflation has fallen faster than anticipated a month ago, easing living costs.
- U.K. house prices are falling at the fastest annual rates since 2009
- Former U.S. Treasury Secretary Larry Summers says Brexit was a “historic economic error” that has hurt the U.K. economy, driving up inflation.
Eurozone inflation falls further than anticipated easing pressure on the U.K. economy
The inflation rates in the Eurozone have fallen faster in May than previously anticipated resulting in lower energy prices and a drop in core CPI (Consumer Price Index.) The zone’s CPI slowed to 6.1% in May YoY (Year over Year) vs. the expected 6.3%, a significant drop from the 7.0% rise recorded in April.
The Core CPI also dipped to 5.3% in May vs. 5.5%, which was expected, a significant drop from the 5.6% recorded in April.
The fall in the inflation rates takes the annual inflation closer to the European Central Bank’s (ECB) target of 2%. However, the prices are still rising three times fast as the ECB is aiming for. The inflation rates in commodities are as follows:
- Food, alcohola& tobacco +12.5%
- Other goods +5.8%
- Services +5.0%
- Energy -1.7%
European stock markets are rising from their lowest level in two months
The FTSE 10o index has gained 48 points/ 0.65% to 7494, following news that the U.S. House of Representatives had passed the Fiscal Responsibility Act n Wednesday. Investors are taking this news well, sending the U.K. stock market into greener zones, last recorded two months ago.
U.K. house prices fall at the fastest pace since 2009 while mortgage approvals fall
The prices of houses in the U.K. are falling fast at an annual rate last seen in 2009. The prices of houses decreased by 3.4% in the past 12 months ending May 2023, the biggest drop since July 2009, when an annual fall of prices by 6.2% was recorded.
A report from Nationwide indicates that house prices had remained flat over the past month after seasonal effects had been considered. Now they stand at an average price of £260,736 which remains 4% below the peak last seen in August 2022.
Though the prices are falling, Robert Gardner, the Nationwide chief economist, has warned that headwinds to the housing market will most probably strengthen over the coming months. He says investors should prepare to acquire mortgage deals for fixed rates above 5% as the government may keep increasing interest rates.
“If maintained, this is likely to exert renewed upward pressure on mortgage rates, which had been trending down after spiking in the wake of the mini-budget in September last year.”
The housing market is still unstable in the U.K. economy as the number of mortgage approvals has fallen as buyers return. A report from the Bank of England shows that there were 48,690 new mortgages signed off in April, down from 51,488 recorded in March.
The new mortgage figures are also 26.0% lower than the average numbers recorded between 2018 and 2019.
Brexit was a catastrophic economic mistake; Larry Summers
In an interview with Radio 4, Larry Summer, a former U.S. Treasury Secretary, said that Brexit was a historic economic error that pushed up inflation and will go down as the event that reduced the competitiveness of the U.K. economy globally.
When asked why inflation is haunting the U.K. in a significantly bigger way than the U.S., Summers said:
“I think Brexit will be remembered as a historic economic error that reduced the competitiveness of the U.K. economy, put downward pressure on the pound and upwards pressure on prices, limited imports of goods, and limited in some ways the labor supply. All of which contributed to higher inflation.”
Reports have found that Brexit food trade barriers have cost the U.K. economy 7 billion Euros. As such, it has made the inflation rates more menacing, pushing citizens to the corner. When asked about the possibility of a recession, Summers said he would be surprised if two more years passed before the U.K. entered a recession.
Keep watching Fintech Express for updates on finance, banking, and other FinTech-related developments.
