How does the unemployment rate affect workforce planning?

[cookiezookie]

I no what the local rates are but i just don't no how it affects workforce planning
I've already searched on google and it doesn't really give me an answer other than a lot of PD-F's which i went through and still didn't give me an answer.

[Liz]

A high unemployment rate in my area means that there is talent around that is currently not being utilized. I can dump under-performing employees and make a move cheap to better my firm.

[Brad H]

Hey there,

You're asking a pretty vague question, but I'll try to answer as best as I can.

As a general statement, as unemployment changes, so will your ability to recruit. If unemployment goes down, your candidate pool is going to shrink, and you're going to have a harder time filling job requisitions.

On top of that, a decreasing trend in unemployment generally speaks well of the economy and means that companies, including your competitors, are hiring. This will cause a two-fold effect. One, your turnover will likely go up because there are more opportunities for unhappy or underpaid employees to leave, because more people are hiring. Two, because a lower unemployment rate means a smaller candidate pool, your competitors will likely become more aggressive in hiring, and potentially come after your employees, which will also increase turnover.

There are tons of nuances and other factors involved here, but as a general statement, as unemployment decreases, turnover will rise and hiring will become harder. Time-to-fill a job will usually increase. For rising unemployment, it's the opposite.

HOWEVER, some companies might be less vulnerable to this than others. One example would be if you are paying above average market rate, your increase in turnover in an improving economy will likely be less than a competitor who is paying below market rate.

Anecdotally, when the economy improves, there is an exodus of all of your employees that were unhappy or wanting to leave, but just didn't have the opportunity because nobody was hiring.

Depending on where you are, it might help to look at your internal trends.In the states, unemployment has decreased steadily for the past two years. So you could analyze your turnover (voluntary turnover is more relevant than involuntary) over the past two years and see if it is increasing (it probably is). Your internal trend is a good barometer of how external factors like unemployment are affecting you, and if unemployment continues to drop, you can expect the trend you're seeing to continue.

If you'd like to talk further, you can email me at brad@orcaeyes.com

Brad Hilbert
CTO
OrcaEyes - http://www.orcaeyes.com
Blog: http://orcaeyes.com/blog/?author=4
Twitter: @BradHilbert