The times they are a changing, to paraphrase a classic Bob Dylan tune.
Some of you may remember when blimps were an entertaining sight in the skies over major American sporting events. Today, we have Chinese "weather" balloons floating across the country before being shot down off the coast of South Carolina. Preliminary analysis by the FBI indicates it was capable of sophisticated electronic intelligence gathering.
The skies aren't quite so friendly anymore.
The whole episode inspired me to do a little "flyover" of the economy and this industry that we depend on for our livelihood, along with some intelligence gathering courtesy of the Bureau of Labor Statistics (BLS). How do the recent trend-lines look in terms of the macroeconomy and the tire industry specifically? Is the hiring picture rosy or bleak?
Let's start with a blimp's eye view of the economy.
Things don't look too bad in terms of real gross domestic product (GDP), the most watched indicator of macroeconomic health. After declining in the first two quarters of 2022, it rebounded in the second half to finish with 2.1% growth for all of 2022.
But the employment picture remains strange.
On the one hand, many economists and CEOs are expecting a genuine recession in 2023. This makes sense, given that the Federal Reserve has been raising interest rates to counter inflation.
On the other hand, job growth remains remarkably high and unemployment historically low. January 2023 saw 517,000 new jobs added, far above expectations, and an unemployment rate of only 3.4%.
In the past, there have been periods of strong economic growth but high unemployment, things sometimes called "jobless recoveries." It seems possible that this year we could see the opposite: a "job-rich recession," which would be a real unicorn, economically speaking. From a hiring perspective, it might mean layoffs happening while many other positions go unfilled.
Part of the problem is that labor force participation has still not recovered from COVID. It rose slightly (on a seasonally unadjusted basis) to 62.4% in January, but this is still below the 63.3% of February 2020 and well below the levels above 66% routinely seen before the Great Recession of 2007-2009.
No one knows for sure why a smaller proportion of today's Americans work or seek to work than in the past. What we do know is that it makes hiring a challenge, requiring more "give" by employers on perks like flexible schedules and paid leave to be competitive. A recession in 2023 might shift some of the bargaining power back to employers, but probably not all of it.
And what about inflation?
The latest Consumer Price Index (CPI) numbers from January show a rise in prices for consumers of 0.5%, after a 0.1% rise in December. Over the past 12 months, prices rose 6.4%.
The takeaway is that while inflation has moderated, it is still with us, and that means more Federal Reserve interest rate hikes ahead, which will hopefully bring the CPI figure down further.
In the meantime, January's year-over-year wage growth of 4.4% undershot inflation. The resulting decline in real wages might discourage some from seeking jobs. Yet our industry still requires willing workers.
The most recent employment numbers from the BLS, for December 2022, indicate 59,200 employees in tire manufacturing nationwide. This was up from 58,800 in November and well above the 55,300 pandemic low in February 2021.
Looking ahead, a recent report from IBIS World forecasts a 0.3% drop in U.S. tire industry employment for 2023, so essentially a flat trend-line. Like many forecasts, this one might not hit the mark exactly, but it seems likely that we won't see huge changes up or down in employment for the coming year.
With that let's bring this flyover in for a landing. The economic landscape we've viewed is not exactly like any we've seen before. It's unsettling but interesting, and likely to be full of both pitfalls and opportunities, something that never changes.
If we do see a recession in 2023, it may force firms to operate leaner than they'd like to for a while. Most of the firms we work with or have worked with operate quite lean already, so I don't know how much more there is to cut within our industry.
To counteract this, hiring managers will need to make every effort to win good candidates before the competition gets them.
Don't just put out an ad and wait. Recruit! Know your brand's story and sell it. Be flexible and offer the perks today's candidates want. Whatever the economic landscape looks like a year from now, one thing we know is that there will be winners and losers. To be the former you've got to hustle and play the game.
Mike Cioffi is founder of Tire Talent, a boutique recruiting agency dedicated to the tire industry. You can reach him directly at [email protected].