No One Left to Hire

The unemployment rate has quietly fallen to minuscule levels in a host of surprising regions, creating critical labor shortages that are forcing firms to rethink their hiring strategies.

Michele Capra

Vice President of Client Services, Talent Acquisition

Employers in Austin likely would be thrilled if the unemployment rate there was 4.4%, the level nationwide—and close to a generational low. But unemployment around the Texas capital is just 3.3%.

Hiring in Birmingham, Ala., and surrounding areas? Good luck—the unemployment rate there is also 3.3%. And pity any firm trying to find workers around Indianapolis. The unemployment rate there is a minuscule 2.2%, making it the nation’s tightest job market. Essentially, for every 1,000 people living in or near Indiana’s state capital who want a job, 978 already have one.

Firms of all sizes know full well that the nation is facing a labor shortage. But a Korn Ferry study reveals a fierce battle for talent in a wide range of locales. Of the country’s 51 metropolitan areas with a population of 1 million or more, 25 have unemployment rates below 4%, according to the latest government data. With more than 11 million job openings out there, experts say companies need new strategies to have any hope of hiring in these regions. “Things have been low before, but this is just a fundamental shift in the market,” says Juliana Barela, vice president and general manager for Korn Ferry’s Recruitment Process Outsourcing and solutions business in North America.

Surprisingly, the tightest job markets aren’t in the traditional hot spots—New York, San Francisco, Chicago, and Boston—all of which have unemployment rates either at or above the national average. It’s mostly midsized metropolitan areas where hiring is the hardest. After Indianapolis, the tightest markets are in Salt Lake City, Oklahoma City, and Nashville. All have unemployment rates below 3.0%. Only Phoenix, with a metro population of about 5 million, and the Atlanta area, with a population of about 7 million, have comparable unemployment rates—3.2 and 3.3%, respectively.

The worker shortage stems in part from the tech boom. Salt Lake, for instance, has had an organically growing technology sector for the past decade. That—along with the fact that relatively few businesses closed during the COVID-19 pandemic—has made the area one of the toughest places to recruit workers, experts say. The unemployment rate there, as of January, was 2.4%.

Other regions have been more overt in their attempts to attract businesses from other parts of the country. For instance, both government officials and private boosters in Austin have been trying for years to convince tech companies to relocate there, or at least establish new presences. Tesla, Apple, Amazon, Oracle, and others have plans to expand in the area, or have done so already. Those big moves, in turn, have increased demand for restaurant workers, nurses, mechanics, and nearly every other type of employee.

Firms also have been chasing lower costs by building satellite offices or smaller outposts in these midsized metro areas instead of in high-cost cities, says Michele Capra, a Korn Ferry vice president of client services for talent acquisition at Korn Ferry. Now everyone in those areas has been struggling to find talent.

In some of these regions, employers anticipated a job slowdown last fall. Between summer and October of last year, the number of jobs advertised in North Carolina’s hottest job market—the so-called Research Triangle, encompassing Raleigh, Durham, and the surrounding area—fell by several thousand. The local unemployment rate was 3.7%; state economics forecasters said the next few months could get rocky. Instead, job growth continued nearly unabated. The area’s unemployment rate has fallen to 3.1%, tied with Minneapolis and Birmingham, AL, for the fifth-tightest job market. As of January, the Raleigh area had more than 31,000 job openings and only 5,500 unemployed people.

Experts say recruiting in such tight markets requires companies to adjust their tactics. Higher pay and more development opportunities have become “table stakes,” Capra says. To win over candidates, companies will have to consider offering flexible scheduling, hybrid work options, and other benefits.

Firms also may want to consider making the application process easier and more convenient. Applications for some jobs can take hours to complete. And asking candidates to go through numerous interviews—common enough before the pandemic—is now outdated, Barela says. She helped one client reduce their interview rounds from six to two, and the client saw their job acceptance rate increase by 20%. “I don’t think this problem is going away,” says Barela. “It’s not a temporary condition.”