Nationwide Employment Moderated by Talent and Wage Pressures

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Private sector employment experienced healthy growth across the U.S. last month, according to the ADP Research Institute® August Regional Employment Report (RER). The West and the South regions experienced the strongest growth numbers, with 53,000 and 75,000 positions added, respectively. The Midwest also added 31,000 positions, but the Northeast lagged behind with just 19,000 private sector positions added.

While positions did not decrease in any of the major regions or key states, growth fell slightly below six-month averages in many areas. California's 27,790 jobs added was 2,810 jobs higher than the state's six-month average, whereas four out of five in the Northeast experienced less-than-typical growth compared to the prior six months.

Economists, however, are not viewing this slowdown as being entirely negative. "The American job machine continues to hum along. Job creation remains strong, with most industries and companies of all sizes adding solidly to their payrolls. The U.S. economy will soon be at full employment," said Mark Zandi, chief economist of Moody's Analytics, in the ADP Research Institute® August National Employment Report.

Here are some key takeaways from the August Regional Employment Report and their potential impact on your organization.

Should the Northeast's Numbers Be a Cause for Concern?

Looking at the national level, Ahu Yildirmaz, VP and head of the ADP Research Institute®, stated in the release of the July National Employment Report that much of the recent slight slowdown relates to pressures on small business, "As the labor market continues to tighten, small businesses may increasingly face challenges when it comes to offering wages that can compete with larger businesses." But could this explain the slight slowdown in the Northeast? New York's August growth of 6,680 private sector positions added was 3,410 lower than the six-month average, while New Jersey's increase of 3,190 was 1,480 lower than prior months.

The New York Times reports that, despite lingering difficulties in industries affected by oil, there's been a positive increase in hiring even among low-wage workers. With a recent job openings rate of 3.9 percent or 5.9 million nationwide according to the U.S. Bureau of Labor Statistics, Northeast employers could simply be suffering from talent shortages and wage pressures impacting small businesses nationwide. With average wage growth for job switchers at 5.1 percent, per the ADP Research Institute® Q2 Workforce Vitality Report, private sector employers in the Northeast may be simply struggling to afford new hires.

Florida and California Project Confidence

California's remarkable health in August and Florida's 15,220 positions added are certainly a mark of confidence. These two states can be taken as a broader indication of the U.S. economy, per Yildirmaz. The Federal Reserve Bank of Atlanta's "nowcast" prediction of Q3 U.S. GDP growth is another vote of confidence for continued private sector hiring in the future, predicting a blistering 3.6 percent increase in gross domestic product at the time of writing. With this consistent level of growth, full employment could actually become a reality in the not-too-distant future.

HR leaders at organizations of all sizes are wise to prepare for increased talent shortages and wage pressures in the months to come, based on positive economic outlooks. U.S. Department of Labor research advises organizations to consider improved training programs and non-wage compensation as tools to improve recruitment in times of labor market tightening. By using smart data to gain insight into your workforce, HR leaders can actively work to improve employee engagement and satisfaction, reducing their voluntary quits and the need to fill vacancies.

Looking to the Future of Regional Employment Trends

Despite minor slowdowns in hiring in the Northeast and select states, analysis of the August Regional Employment Report contains plenty of reasons for continued optimism for workers nationwide. While oil-affected industries and goods-producing organizations are suffering slightly, turmoil in international markets has yet to have any significant impact on U.S. service-providing businesses.

HR leaders should look toward their smaller counterparts for insight into the future, and prepare for potential increases in wage pressures and hiring vacancies. With job growth continuing to outpace talent entering the market, if you haven't done so already, it's high time to strengthen your recruitment and retention strategies.