Lessons From Pandemic-Induced Recession
February 5, 2021
Some were hit harder than others during the recent economic downturn - what lessons can be learned to create a more resilient business moving forward? Catch our newest TrendsTalk episode with ITR Economist and Speaker Lauren Saidel-Baker to learn more.
Transcript by Rev
Hi. I'm Lauren Saidel-Baker, and welcome to this episode of ITR Economics TrendsTalk. Now, I know it's not very fun to focus on vulnerabilities, especially as we are here in early 2021, expecting an imminent recovery trend to take hold across the industrial economy. That's the good news, so we should be looking ahead.
But I want to just take a step back today, just for the next few minutes, and focus on a few, key areas where many businesses were hit the hardest during this pandemic-induced recession and to see what lessons we can get from those areas of vulnerability. What can you use from those changes to make a lasting impact going forward and create a stronger and more resilient business? The two areas I want to focus today are, first of all, on your employees and, secondly, on your supply chain, I think you'll agree, these were two areas that really saw unprecedented change during the pandemic.
So, let's start with employment. Obviously, we are all in a very different employment situation than we were just a year ago, working from home or otherwise having distributed workforce. Even those folks who are still located in one central building are taking different precautions, social distancing. Maybe you have folks calling out sick, either ill themselves, taking care of an ill family member, or just quarantining because they've had a COVID contact. That's all a big change.
And I'm hearing more frequently from clients. I'm having the same conversation. They're saying, "If the unemployment rate is so high, if it rose during the recession and is still elevated, where are these unemployed folks, and why can't I find them and hire them?"
Well, I hate to be the bearer of bad news, but even though the unemployment rate is still a bit higher than it was this time last year, the rate has come down very significantly since the worst of the pandemic. So, from those double-digit rates of unemployment, our current unemployment rate is somewhere around 6.5%, which, yes, is still slightly elevated.
But the critical factor for me is looking at the reabsorption rate, how quickly that rate went down as unemployed folks went back to work. That rate itself is nothing like historical precedent in other recessions. It has been so much quicker, as we reabsorb those people into the workforce.
So, yes, you are not alone. I hear you. Many companies are having difficulty hiring anyone, let alone that skilled labor, the particular skills, that they need to fill. So, what can you do if you can't hire exactly who you need? Well, my advice is to be flexible. That might mean flexible in location. We're all learning how a distributed workforce still can be productive.
And, if not in location, also in hours. Many, especially younger workers, are really looking for that flexible work situation. Maybe that means you can hire it from a new talent pool, either a physical, different location, maybe in a different state, even a different time zone. Tap into that talent pool that you previously couldn't access, when all of your workers needed to be co-located. Use this new normal to your advantage and see if you can hire some top talent who maybe isn't located near your home office.
And my second bit of advice. These are the rhymers: train and retain. That's going to be critical, going forward, through the coming growth trend. You need to be ready to have your people ready to meet this increasing demand as the economy recovers, as we grow outright from here. So training is going to be critical.
Now, there are a few ways you can do this. I certainly recommend, especially if you're having trouble with the hiring side, that you cross-train your people. Have redundancies built in. That will help you if you need to meet any of those temporary quarantine or illness-type outages, but also in the event that someone does leave the firm. Have redundancies, and you'll be better off in the future.
Training is also a critical thing right now. First of all, because you need your people to be more efficient. If you can't hire as many, do more with less. Be able to produce more with your existing workforce. And, finally, it ties into that next one, which is retention. A more skilled workforce, if individual employees see their skill set building, that breeds personal satisfaction, and they're more likely to stay with you.
Retention efforts will be crucial this year. I talked about the competitive talent market, and you are not the only one fighting for those people. So, identify your A-team and do everything you can to retain them, because I can guarantee you this year, it's going to be so much more expensive to find a replacement, to hire that replacement, to train them up to where this productive employee had been operating. Really, you'd be better off if you had just kept your productive employee in the first place.
But let's pivot now. Let's talk about the supply chain. This is another critical buzzword this year. There have been unprecedented disruptions to the global supply chain, and we're seeing a few trends. The first one is near-sourcing. A lot of companies were concerned they couldn't get their raw materials from overseas, from wherever they had been sourcing. And, so, they're looking to bring that production closer to home, closer to where they will be using those materials.
Now, this can be a great opportunity, especially if you're a domestic manufacturer. Look down the supply chain. See if some of your potential customers, maybe folks who had been going overseas to your competitors, maybe they're now in the market. Look for those opportunities. The issue with near-sourcing is that you have to be willing to have potentially higher costs, but the good news is you'll have that resiliency built into the supply chain. Something like this won't happen again.
And that brings me to my second point on the supply chain. Know your suppliers. Build those relationships. If you can improve your relationship with your suppliers, if there are shortages, if there are delays, you'll be the first on their list. So, build yourself that relationship, and it can only benefit you in the future. We're already watching higher costs. Check out ITR On Demand, our trends report for our producer price index forecast. But, generally, we are seeing industrial commodity prices rise this year.
So, budget for those higher costs and be aware that some materials, there just will be shortages, especially delays in things like shipping. So if you need something today, be in touch with your supplier. Know that they're aware. Know what their position is, if it's just a higher cost position, or if you can get these materials at any price right now. As long as you have that open conversation, that open dialogue, and, certainly, that strong relationship, you will know. You'll be able to plan, and hopefully they'll be able to help you out.
Now, the recovery, as I mentioned is coming here in early 2021. So, look ahead. Build these redundancies. Build this resiliency into your business because you're going to need it, going forward in 2021. Thank you so much for joining me. I'm Lauren Saidel-Baker, for this episode of ITR Economics TrendsTalk. Let's talk again soon.