Andrew Flowers is the lead labor economist at Appcast, today he’ll discuss the results from the 2023 Recruitment Marketing Benchmark report, the current labor market and how hiring professionals can use this report to overcome another rough year for recruiting.
INTERVIEW TRANSCRIPT
Hey again, RecTechies, welcome to the only podcast that helps employers and recruiters connect with more candidates through technology-inspired conversations. Recruiting technology is the key to hiring great talent, that's why this show exists. Andrew Flowers is the lead labor economist at Appcast. Today he'll discuss the results from the report, the current labor market, and how hiring professionals can use this report to overcome another rough year for recruiting. Andrew, welcome to the show.
Andrew Flowers (00:53):
Hey, thanks for having me, Chris. It's a pleasure to be on RecTech.
Chris Russell (00:57):
Definitely. You're dialing in from Boston here, so enjoying the warm weather as we are in the New England area?
Andrew Flowers (01:04):
Yeah, it's unseasonably warm. I feel almost guilty about it, but I did go for a run yesterday, enjoyed it.
Chris Russell (01:11):
Nice, I went for a bike ride. Yeah, I'm in Connecticut, we've literally had no snow other than a few dustings. What about you guys in Boston, anything measurable?
Andrew Flowers (01:18):
Not much. We had this freakish cold snap two weeks ago where it was three below wind chill, but other than that two-day period, it's been super warm.
Chris Russell (01:28):
So yeah, your report, I look forward to it every year. I think I've had Chris Formant on a number of times to discuss the numbers, but let's dive right into it. What would you say are the key takeaways from this year's information?
Andrew Flowers (01:43):
The key takeaway is that it's still hard to be a recruiter in America. In 2022, recruiting costs, although they eased a bit from the sky-high rates of 2021, they're still elevated. And what that reflects, frankly, is that if you're in recruiting, if you're in talent acquisition, if you're, frankly, an HR leader, you have to reckon with the strong, tight, labor market. So what we had in 2022 is, yes, decades-high inflation. Yes, we saw really rapid interest rate increases to combat that inflation. But despite all the worries about a recession, the job market was just powering along really robustly. So when you think about a tight labor market, which means it's hard for recruiters to fill their open positions, what that means is, the number of unfilled job openings, compared to unemployed people, it's high, and it's elevated, and sure enough, it's almost two to one right now.
(02:46)
And what that means is, there's basically two open unfilled jobs for every one unemployed person. So, given that macroeconomic context for TA leaders, for people who use recruiting technologies, in 2022 they had to reckon with the fact that recruiting costs were still elevated. Now they eased almost 20% according to our measures, but they're still well above their pre-pandemic high. So, this is kind of a nuanced story where we tell our recruiters, our employers that we are connected with, we tell them the story that, in 2021, the year before last, there was just this very strange confluence of factors. We had vaccines that hit the US economy. We had a rapid reopening, super strong GDP growth, tons of hiring, and that's what pushed up recruiting costs to sky-high levels in 2021. And then, last year, we saw some kind of beginning to re-normalize, a beginning of a new normal in the labor market.
(03:49)
So, recruiting cost, and the way we think about it at AppCast is cost per application, right. How much do you have to spend in terms of job ads to actually get an applicant in your system, that declined about 20% last year. And so, on the surface it looks like, "Oh, that's something recruiters should celebrate", but think about it, it went from roughly $30 per application in 2021 to $25 per application in 2022. And while that's good that it eased, it's still almost double the level that it was pre-pandemic. And so, again, the force that we all have to reckon with, the force that's beyond any one recruiter's control is the fact that the macro-economy is situated very favorably for job seekers and that makes recruiting quite a headache.
Chris Russell (04:40):
About the labor market, Andrew, I've heard some people talk about this as sort of a white collar recession, if you will, with all the tech layoffs. But at the same time, all the hourly job, companies are still hiring. I've never seen something like this in my lifetime, I've been through three recessions, at least. What do you make of this, just how this kind of topsy-turvy labor market is shaping up?
Andrew Flowers (05:03):
Yeah, the last two years has really been a reversal of the last 40 years, that's how to think about this. So, for the last 40 years, what has the US economy seen? It's seen pretty weak, almost anemic, median wage growth. We've seen rising inequality. And so, what that means is, over the last four decades if you worked in a so-called white collar professional and business services position, if you're in an occupation that probably requires a college degree, over the last 40 years, you've generally seen strong wage growth and plenty of job opportunities. But for folks who are on the lower end of the wage spectrum, who maybe don't have a college degree, it's been a really tough labor market for the past 40 years.
(05:45)
And guess what? The last two years has flipped this script quite considerably. We've seen notable wage increases across the board, but particularly, for the kind of lower end of the spectrum. You mentioned leisure and hospitality, so you think of restaurant workers, hotel workers, even retail workers, add that group of workers to the pile of workers who work in warehousing, logistics, and transportation. And over the last two years, you've seen a huge increase in both job openings and that means those workers have many opportunities. That's driven a lot of the quitting, the so-called great resignation, is largely because these low-wage job earners have plenty of opportunity to quit and have a better offer elsewhere.
(06:32)
So, we've seen a reversal over the last two years and economists are drawing attention to this notion of wage compression. So, you know how I mentioned there's been inequality rising over the last 40 years, over the last two years, inequality has started to kind of narrow. Now it's still a gap between the haves and have-nots in the US, but what we've seen is that there is quite a tech specific white collar recession happening. I wouldn't call the US economy as a whole as being in recession. And actually, outside of tech, there really hasn't been much contagion with layoffs. But those tech workers, those high skilled white collar workers, are suffering a tough labor market. But the lower-wage workers, the hourly workers, so-called blue collar workers, have a very strong job market to face.
Chris Russell (07:17):
Totally. Yeah. My daughter just got a restaurant job, she's just doing takeout orders, she's making over 22 bucks an hour with tips. That's pretty good for a 19-year-old. But, anyway, so one of the key metrics you guys analyze in our report every year is apply rates, Andrew. You define apply rate as the number of people who actually completed job application after having clicked on a job represented as a percentage. It's inverse as the candidate job off rate. I'm reading from the report here, audience. Overall, the immediate apply rate increased to 4.34% from 4.05% previous year. So, it went up, which, while welcome news, means almost 96% still do not finish their online job applications. That's pretty good news. It actually went up finally, but what do you think is in causing that increase, just the number of new people in the job market?
Andrew Flowers (08:10):
Yeah, you nailed it, Chris. So, my thesis, when I think about rising apply rates in 2022, I map that onto labor force participation. If you think about apply rates or conversion rates, it's basically a measure of job seeker interest and willingness to kind of convert a click, which is shopping around for a job to an actual application showing you're really interested. That increase in apply rates. For most of 2021, apply rates were below 4%, and you're right, 96% of job clicks are kind of wasted, quote-unquote, in the sense that people don't apply. But that below 4% apply rate, really improved notably, it's almost near 4.5% early in 2023.
(08:56)
Now what drove that, and when I map that onto these public labor market data, I see that the labor force participation rate, especially for prime age workers, really rose last year. Now, prime age workers, when I think about these folks, these are 25 to 54-year-olds. These are a cohort of workers that exclude younger folks who are maybe in higher education or people near or at retirement age. And, again, this is to just smooth over the effects of the baby boomer generation, which is at a demographic inflection point. And so, when we look at prime age workers and we see that their labor force participation really rose considerably last year, that tells us a story. If you remember, the year before last, in 2021, how much hand wringing there was about how nobody wants to work. What this does is the data tells us a story that actually people do want to work, and frankly, they're attracted by the tight labor market. They're attracted by the strong, at least, nominal wage growth we've been seeing. Now, by nominal wage growth, I mean wage growth not adjusted for inflation.
(10:01)
We've seen, historically, in a given year, wage growth around two to three, three and a half percent. Well, recently, it's been 7-8% at its peak, early last year. It's down a bit, which is good, in the sense of, we want to control inflation, but it's only down to 5-6%. 5-6% wage growth is super red-hot. And when you look at these hourly kind of service sector occupations like leisure and hospitality, they're very elevated. At some point, they were hitting 15% year-over-year wage growth because restaurants, hotels, the travel industry, was just doing everything it could to attract workers.
(10:40)
So, to sum up the apply rate uptick last year, that's really important and the apply rate does correlate with labor force participation. So, the more we have people engage, whether it's through actually looking for work, whereas, just totally disinterested, in addition to actually actively applying and then not just perusing job opportunities, but being an active applicant, when you see high wage growth, when you see lots of job opportunities, that pulls people in off the sidelines and that's what drives the higher apply rate.
Chris Russell (11:15):
Look at the CPC rates, they stabilize, according to your report says in the fourth quarter of 2022. The median CPC, Costs Per Click averaged a $1.07 compared to $1.10, same period in 2021. And if I look at the graph on this report from, let's say, March 2020, it was around 60 cents. So basically, you've added another 40 cents, in what, three years, to the cost book click rate, anything you want to touch on there?
Andrew Flowers (11:40):
So, just as the apply rate, I think maps onto labor force participation, and so that mapping is kind of a measure of job seeker activity or labor supply. Just as that's labor supply, the cost per click is labor demand, because the way job boards in America and most of Europe, frankly, work is on a pay-for-performance basis, you're bidding just like you would for Google AdWords, you're bidding for job ads, you're bidding by click. And so, an elevated cost per click, which we saw a huge escalation as you mentioned, Chris, and cost per click throughout 2021, as the labor market started to reopen. When I think about the labor demand, I think of cost per click, that's a good barometer for labor demand. And it correlates just as apply rates correlate with labor force participation, cost per click correlates with job openings. So think about it, the reason that cost per click rose so fast in 2021 was job openings rose. There was lots of competition. Other employers were bidding against you on the job board. They were bidding it up.
(12:48)
But what happened in 2022, what happened last year was that CPC bids stabilized, like you said, between $1, $1.10 throughout the year. Now that's still up considerably. Again, I'm going to sound like a broken record. There's a consistent story here, which is that, yeah the labor market has eased a bit recently, but it's still hard to recruit, especially compared to pre-pandemic times. And this is correlated, this high, but plateaued CPC chart, this trend is correlated with the job openings figures. So we have 11 million unfilled jobs in America right now, that's near a record high, and it's almost 50% above the pre-pandemic level. So just as CPC bids have risen, so have open jobs, CPC will go up and down with how much competition there is in the labor market. And right now, employers really want to hire and so they're going to bid aggressively on job boards to find those candidates.
Chris Russell (13:45):
Yeah, totally. Going back to the apply rate thing, it just struck me too. One of the other factors of apply rates being so low is the fact that employers do a poor job at that apply experience on their ATSs, their career sites out there. How much do you get into that at all? If not, I mean, I don't know, it's possible that number could be doubled if they actually streamline some of these processes. That's just my guess, but any thoughts on that?
Andrew Flowers (14:11):
It's a huge factor. So employers can't control certain things. If you're a recruiter at a company and you're trying to hire people, you can't control the macro-economy, inflation, interest rates. You can't control how much competition you have with other job openings in your industry. What you can't control is how you write your job ads. And of course, potentially you can control what wages you offer. And so what we find in terms of job ad copy, the best practices is when you have a streamline and very clear succinct job ad, your conversion rate's much higher.
(14:47)
When your apply process, so not just the job ad, but the entire process of submitting an application, if it's filled with lots of friction and for example, if it takes more than 15 minutes to complete the application, you're going to see a huge nose dive in your apply rate, it's going to go down. Whereas on the opposite side, if you have a very skinny apply flow, if you have a very streamlined apply process, to your point Chris, it dramatically improves or raises your apply rate. So if it's be below five minutes to complete an application, we see apply rates above 15%. So that's like...
Chris Russell (15:20):
15? Wow.
Andrew Flowers (15:21):
Yeah, that's triple the average, if you can get your apply rate below five minutes. And there are plenty of examples of this in the recruiting world where companies really reassess their apply process and they cut out unnecessary pain points frictions, whether it's asking for a social security card or social security number or whether it's asking for lots of references, if there's background check information, if there's other things that you could potentially capture later in the apply funnel, do that and just capture that applicant to just submit. What we find, and I think this speaks volumes to the general application processes, especially on mobile, if there's any friction points beyond five minutes, people just lose interest. And so I think kind of keeping a streamlined apply process, cutting out unnecessary clutter in your job ad and keeping it simple, is really going to improve conversion.
(16:20)
And to take a step back, Chris, what I find when I talk to enterprises in recruiters is a lot of recruiters have lost the muscle memory of recruiting and a tight labor market, because frankly, it's been since the late 90s that we've had a labor market anything like this where it was favorable to job seekers. And so for the last 20 years, we've seen employers add kind of barnacles, they've add layers to their application process. They've made them more complicated. Why? Because when people were desperate for work in say 2010 or 2011, when there were four or five unemployed people for every one job opening, there were people willing to go through all this laborious process and submit an application. Not today. Not today, when they have all these options, when there are two job openings for every one unemployed person.
(17:10)
Today, when it's a job seeker market, you have to refine that muscle memory. Maybe if you've been in the industry long enough, but since the late 90s where you can say, "Okay, this is a job secret market. I got to cut down what I'm asking. I got to make the apply process short."
Chris Russell (17:26):
Yeah, good. I have to keep preaching that message, Andrew. It's something that many employers still don't get, so preach, brother. Let's get into some more strategies here. Talk about short job titles and what that does to getting people to apply.
Andrew Flowers (17:43):
A job title is the main framework job seekers use in their job search in the mechanics of their job search. It's not always the most important decision making factor, like salary, for example, is a huge variable, location employer brand, but when job seekers go about their job search, they start typically at a job board and they type in a job title. And what our research has consistently found is your search engine results page, when you feed the job seeker, the results of their job search, really is dependent on having a crisp, succinct job title. So we find that shorter job titles that aren't laid in with fluff that kind of get to the point.
(18:31)
So a classic example would be senior sandwich artist, just make it cashier. Or we've seen really creative, almost kind of strange job titles, especially in the tech space around software engineers, keeping it very clear, software developer, not having too much hierarchy. There's sometimes there's senior software developer or junior software developer, keeping job titles shorter and to the point, has a higher engagement track record with job seekers. They just want to keep it simple, stupid. They want to cut to the chase, find the job title that they're looking for, and then evaluate perhaps based on salary or pay or employer brand, whether they apply, but to just get them in the door with a click, simple job titles are key. Don't overly complicate your job titles and make them long.
Chris Russell (19:26):
Yeah, you do say in the report though about job titles. Job ads without paying information in the job title can cost employers an average $2 to $2.03 a click. So companies should put salary in the job title and give me an example of that, for instance.
Andrew Flowers (19:43):
So think of a forklift driver as a job title on the job ad versus forklift driver $28 an hour. So if it has the actual wage offer in the job title, it's going to get more engagement. And of course this is conditional on what the wage is. If it was minimum wage, it would probably not get the same engagement. What our research has found is conditional on the pay offer, being at or above market, you're going to get far more engagement with your job ad, especially if it's in the title.
Chris Russell (20:16):
Yeah.
Andrew Flowers (20:16):
This is based on actual performance of the job ad, meaning you're able to pay less, you're able to bid less in your cost per click and get the same engagement if you mentioned pay in your title versus a job ad that doesn't. Why? Because surveys consistently show salary or pay is one of the biggest factors people look for in their job search. So being clear with job seekers upfront about what your offer is, even if it's a range, I think is key. This movement and we've seen it legislatively towards pay transparency is really reshaping the whole recruiting funnel conception. And particularly for hourly or so-called blue collar work, high volume hiring, it's a distinguishing factor for recruiters to offer pay upfront, and if it's at or above market, you're going to get higher engagement.
Chris Russell (21:06):
Yeah, totally. Let's talk about timing. So there's some new foreigners here for the highest volume of job applications. Which days are now the highest volume there, Andrew?
Andrew Flowers (21:16):
It's really midweek. Tuesday, Wednesday is a great window to try to attract job seekers, avoid the weekend and beyond just time of week. There's also day of month, and what we find is, it's pretty interesting, there's more clicks normalizing each month's job seeker activity to first day of the month, second day of the month, so on. We find that there is more job seeker activity earlier in the month as well.
Chris Russell (21:45):
Interesting. Okay. I never heard that.
Andrew Flowers (21:47):
Yeah, I would say optimize your job ads in terms of visibility for job seekers in midweek and earlier in the month. All things equal. I mean, sometimes we have kind ongoing evergreen positions that we're just trying to fill always. Of course, you're kind of recruit later in the month, but for whatever reason, maybe it's because of pay staggering in terms of paychecks, earlier in the month, sometimes job seekers are more willing to shop around. We see a little bit higher clicks ratio earlier in the month.
Chris Russell (22:18):
That's interesting. Yeah. So if you're from a practice standpoint, post your jobs on Monday, that Tuesday and Wednesday are the biggest volume days there, the you should do a little bit better there.
Andrew Flowers (22:27):
Exactly.
Chris Russell (22:29):
Which jobs are still the most expensive to recruit for, Andrew? Give me a sense of some of the industries here that still clean that top spot.
Andrew Flowers (22:36):
There's two types of jobs that are really expensive. Either jobs that are really hard to find people with the skills to do, so think of nurses, a lot of healthcare positions, healthcare has very high cost per application cost for recruiters. So there's just a shortage of trade nurses. You have to have the credentials, the training, and so there's fewer people who apply to those positions, and it's a skill shortage. So that's one kind of job that has high recruiting costs.
(23:06)
The other is jobs with low desirability or just difficulty to fill based on the just lifestyle of the job. A classic example here would be like a CDL driver, like a long haul truck driver in the transportation space. Transportation actually has some of the highest recruiting costs. I would say nurses, long haul truck drivers are some of the hardest jobs to fill based on recruiting costs. Whereas on the other side of the spectrum, you see really, really low recruiting costs for desirable jobs, jobs that mentioned work from home or any kind of amenities with flexible schedules, those types of positions, it's easy to find people who are interested in those.
Chris Russell (23:52):
Yeah, I'm looking at the apply rate by job function and looking for the most, who has the best apply rate in terms of industries. I think it's gig 6.31%.
Andrew Flowers (24:03):
Yeah.
Chris Russell (24:04):
That and food service too. Okay.
Andrew Flowers (24:06):
Yeah. Some of those high volume service sector jobs, typically lower wage jobs, entry level positions that just, "Hey, I want a job, I just want a job." Maybe it's gig, maybe it's at a fast food restaurant, they'll have higher apply rates, right. Now, these same industries, their Achilles' heel is turnover, right, with the highest quits rates. They have lots of problems being plagued with the great resignation, especially nowadays when maybe I'll work at Amazon warehouse, it may $10 more an hour or a different position that is more flexible with my schedule. But those types of hourly, frontline retail food service jobs do have higher apply rates because they're always filling positions and they're entry level, so they'll take anybody who's basically willing to do the job.
Chris Russell (25:01):
You get me gig, that's the new safety net for making some money, quick money, right?
Andrew Flowers (25:06):
Yes.
Chris Russell (25:06):
That's probably why it hasn't. I think it's good that number's going to grow I think over the years here as the more people just gravitate towards that, I think, and as a, it's a quick source of income. So let's see here. Talk about geographic trends. It looks like I think Georgia has the best apply rates by any state, 40.47%, next to Texas, we're pretty similar there. CPA by state, I thought this was interesting, New Hampshire has the highest CPA for states out there. It's $33 and 56 cents, something like that. That was interesting. Next one will be Washington State, $32 78 cents. All the northern tiers here looks like have a higher cost per application rates, and the southern states are all in the green there around 20 bucks.
Andrew Flowers (25:59):
Yeah, there's a kind of chain reaction here where the lifestyle factors of a given area drive the kind of demographic transition, which drives the recruiting cost. So...
Chris Russell (26:11):
More recruiting cost equal means going south.
Andrew Flowers (26:14):
Yeah, exactly. So what do I mean by that is people like sunshine and they like cheap housing. And so there is a migration away from high cost of living cold areas like Washington or Oregon or New Hampshire towards cheaper cost of living in sunny areas like Texas and Georgia. This is just a demographic phenomenon we've well understood, but it's continued especially during the pandemic. People who wanted more residential space, particularly maybe they were going to try to work from home. So we saw kind of an influx of cities during the pandemic, and we've seen this for a few decades now, migration from the northeast and the Pacific Northwest to the Sunbelt.
(26:57)
So part of the demographics here of why Georgia has a high apply rate is they're seeing an influx of people both in-country migration of Americans, but also of immigrants in terms of their destination. They're also areas that have plenty of job rich metro areas. So think of Dallas, Fort Worth, Houston, Austin and Texas, or think of Atlanta in Georgia. These areas are attracting lots of jobs and lots of in migration, so there's plenty of people to convert, right. They're going to have high apply rates, they're willing to just take a job.
(27:34)
The other states that have the lower apply rates that have the high CPA costs, they're typically older states that are having stagnant or declining population. So think of the upper Midwest plains or the kind of mountain west states that are more rural as well as New England, especially Maine, Vermont, New Hampshire. These areas typically have high housing costs and they have unfavorable demographics that they're older. I mean, I don't mean to be ageist, but in terms of a recruiter perspective, there's just less of a labor pool to draw from.
Chris Russell (28:10):
Definitely. Yeah. Well, Andrew Flowers from Appcast, we appreciate your time today. Thanks for dropping all the numbers on us here. I guess my last question is just in three years, where are we? What's your, just take on the labor market, recruiting costs, put your economist hat on there and tell us where we're going?
Andrew Flowers (28:28):
Yeah, we're in a great tug of war in 2023, about whether we can maintain this full employment economy, this tight labor market, which is good for workers even though it gives recruiters gray hairs. The tug of war is whether we can continue this in an environment of high inflation. In other words, whether the fact that it's hard to recruit is driving some of these price increases in terms of wages feeding through labor cost into high prices.
(28:55)
And so three years down the road, the two trends I'm really going to watch is whether we can sustain this kind of labor market that works for everyone as well as have price stability. That's the first thing I'm going to track over the next three years. And the second thing, the phenomenon that's new, that's just we're an uncharted territory, is what I mentioned earlier regarding pay transparency laws. That's a whole game changer for the whole recruiting funnel. It's going to twist the dynamics of how many people apply for a job when they can see the pay up front. It's going to change how we set pay internally among existing employees. There's going to be a reckoning, and it's going to start this year as California and New York implement their pay transparency laws. I think recruiting is going to be really different in the years to come.
Chris Russell (29:39):
Awesome. Well, we'll put a link to the report in the show notes for everyone, so I'll be sure to click on that to quick fill in a quick form there to get your report. And again, it's one of my favorite reports every year, Andrew, so appreciate you joining us today and talking us through the numbers
Andrew Flowers (29:53):
Hey, thank you, Chris. It's great to be on RecTech and thank you all.
Chris Russell (29:57):
All right, that will do for this episode of the RecTech podcast. Be sure to follow us on the socials, Facebook, Twitter, LinkedIn, via the at RecTech media handle. See every podcast video vlog we publish. Thanks for listening everyone, and remember always, be recruiting.