The current economic landscape has brought a lot of low points and unpredictability for business leaders and those in the workforce. While the COVID-19 pandemic is a definite curveball, businesses can hedge their bets by being as prepared as possible for the road to recovery.
Part of that preparation is understanding the labor market and how your location and industry are being impacted. Below is how to practically incorporate common economic performance variables into your business-development plans and strategies.
Economic Performance Metrics You Need to Know
Let’s say you’re an employer who has a five-year plan to grow your business. Even in this disruptive economy, you see your business as having enough capital and potential demand to survive the current recession. In the interim, though, you must make tough decisions, so what performance indicators will give you insights to adjust your business model to the present economic conditions?
For a deeper dive into the performance indicators listed below, download our ebook, 10 Indicators to Identify Economic Recovery.
- Job gain provides insight into a location’s economic stability, as it is the number of jobs created over a monthly annualized basis. This indicator reflects if a location is growing and can sustain the employment and revenue needs of a business.
- Job growth is the percentage of change in total employment over a monthly annualized basis. It is influenced by market size or population, so a metro may have a large population, but little job growth. This indicator also impacts wage growth.
- Wage gain is provided for average hourly earnings and includes all private nonfarm payrolls. It is reported monthly. This indicator can be useful when calculating competitive salary ranges for existing job titles or gaining insight into which occupations or industries may be more in-demand. It can also reflect how much disposable income consumers in a location may have to spend.
- Wage growth is the percentage of change in the average hourly earnings of all private nonfarm payroll employees in a metro area. This indicator helps businesses understand supply and demand for an industry or job and also helps determine talent costs.
- Net migration is the difference between the number of people entering an area and the number of people leaving an area, annually. A shift in net migration directly impacts changes in job gain, job growth, wage gain and wage growth. This indicator identifies if a location has a large talent supply and potential customer base.
- Prime-working-age population share is the number of persons in a metro who are between 24 and 54 years old.
- Prime-working-age population share growth is the percentage change in the share of persons who are between 24 and 54 years old. This indicator sheds light on the ease a business will have in finding talent to hire and customers for goods and services.
Other indicators to consider, especially when choosing a metro for hiring needs, are educational attainment, the number of college degree holders, and the college growth rate. Depending on the skills required, you may need a large talent pool of college-educated job candidates.
The Impact on Your Economic Outlook
With a solid understanding of the variables above, businesses can create an economic recovery plan. Metrics like job gain, job growth, wage gain, wage growth, and the prime-working-age population share and growth are useful for businesses looking to expand their customer base into new markets or looking for a stable business partner as part of a supply chain. All of the indicators are useful in identifying metros with large enough populations to meet both a company’s hiring needs and revenue demands.
With a data analytics tool like LaborIQ® by ThinkWhy, businesses can easily access these performance indicators with an analysis tailored to their specific metro that reports on industry, economic recovery, labor market, demographics, and more.
So, for example, let’s say you own a B2B consulting business located in the Austin, Texas metro. Although you’ve been able to keep your virtual doors open through a remote workforce and adapting your services to a digital marketplace, you’re unsure when the economy will bounce back from the pandemic, which affects your ability to expand your workforce, target new markets and launch new products and services.
With LaborIQ by ThinkWhy, you can quickly see how Austin compares to other U.S. metros and how its overall labor market and specific industries are performing. For instance, if your consulting business has clients in the subsectors of the Financial Activities; Trade, Transportation and Utilities; and Professional and Business Services industries, you can view what their 2020 and 2021 employment levels are relative to 2019. So, for these three industries, the comparison of the 2020 and 2021 employment levels compared to levels prior to the pandemic are below.
LaborIQ by ThinkWhy shows that the employment levels of these industries will recover close to the 2019 levels by the end of 2020, which shows that your B2B customers will likely to be stable enough to make it through the current recession.
Per LaborIQ by ThinkWhy, Austin is outperforming the national average for many indicators. Though Austin’s annualized job growth sank to -9.0% as the impact for COVID-19 was felt in April, the metro recovered a significant amount of jobs the following two months and currently has an annualized job growth rate of -5.0% at midyear. Austin is projected to continue recovering jobs through the end of the year and finish 2020 with a job growth rate at -3.5%. While the annualized growth rate will still be in negative territory, the early pace of recovery and near-term forecast are positive signs for Austin business owners, as they indicate an improving job market and the beginning of a rebound in economic growth.
LaborIQ by ThinkWhy also allows users to get more specific about when annualized growth is expected to turn positive. Looking at a quarterly view of job gain, job growth and unemployment, the user can see that the Austin labor market shows a significant jump in Q2 2021, with a noticeable job gain of 86,500 jobs and an 8.5% increase in job growth in Q2 2021. These data points are helpful in deciding when a business should spend on hiring and large purchases, such as property or equipment, or to reduce expenditures.
All of the above information would be useful for any business owner navigating the tough economic landscape during COVID-19.
Knowing Your Market Informs Your Business Development Strategy
Most people would agree this is a strange and possibly scary time to be in business, yet with some planning and keeping up your employees’ morale, you can survive the current economic conditions and live to do business another day.
ThinkWhy continuously monitors and forecasts labor data at all levels, measuring impacts to MSAs, industries, occupations and businesses across the U.S.