Looking Back, Looking Ahead
Welcome to another edition of BlueSky’s year-end point of view. 2021 hasn’t been in the rearview mirror for long, but let’s give it a quick look before we get a read on what 2022 might have to offer.
Investors kicked off 2021 in a flurry of activity with the market reaching record-breaking highs in the first few days of January. That sense of cautious optimism we talked about in this same piece last year seemed to be making its presence known. While Wall Street revved up the market in early January, most people were keeping an eye on the presidential transition set to take place later in the month. Political tensions were palpable. Those tensions boiled over on January 6th with the events that took place outside, and then inside, the Capitol building. The fallout from the events of that historic day is still happening a year later. But this isn’t a political commentary, so we’ll leave it at that. Investors didn’t blink, and the market shook off the sense of domestic unrest without much impact. In fact, the stock market was especially bullish throughout 2021, with many public companies beating earnings per share by double points. The only fly in the financial ointment was the slow but steady pressure of inflation. This across-the-board increase in the cost of goods and services were compounded by a deteriorating supply chain. Many retailers worried those same supply chain issues would bring down holiday sales. Consumers proved them all wrong, with holiday spending in 2021 up to the tune of double-digit increases in some metrics categories.
The global pandemic continued to impact nearly everyone’s life, every single day in some way, large or small. Once again, our hearts go out to those who were part of the human tragedy that was 2021. More people died of COVID this year than last. That sad statistic is somewhat offset by the flurry of activity around rolling out the vaccines, and the hope the rollout generated. Once the vaccines became available, we made appointments, waited in line, and finally got what we thought might be a glimpse of the beginning of the end of this pandemic. Then Delta came along and crushed that kind of thinking. Suddenly, we seemed to be moving backwards even though people were getting vaccinated and taking precautions. The sharp bite of Delta was replaced by the milder Omicron variant as fall turned into winter. Not much has changed since then with regards to the pandemic.
Talent in the Driver’s Seat
Another aspect of 2021 that created a lasting impact was the phenomenon now referred to as “The Great Resignation.” Workers quit in droves, and almost overnight, many retail and service sector companies were scrambling to find workers to fill open positions. Despite the high unemployment rates, many of these businesses faced significant hiring challenges. At BlueSky, the team saw a surprisingly strong year on the recruitment front. While we see inflation and shipping challenges as transitory issues that will improve over time, 2021 also saw an across-the-board wage appreciation that is both significant, and definitely not transitory. There was a period in early June of 2021 when we noticed a strong shift in the hiring market, with power tipping in favor of employees. This led to a recalibration of the value of talent. Most BlueSky clients are adjusting wages up because people are simply not changing jobs for anything less than a 20% or more increase. The bottom line on 2021 – it was a positive year for business, and the economy remained vigorous, despite the headwinds created by COVID and social discord. But hiring the best became a lot more expensive and competitive.
OK, enough about last year. Let’s move on to the crystal ball portion of this article and see if we can get a read on what 2022 might have in store for us.
Our Crystal Ball: The Economy of 2022
We see the temporary supply chain and inflation issues reaching their peak in Q1 or Q2, and then starting a slow crawl back to normal. These same supply chain issues that began in 2021 have also increased demand for technology innovation and digital delivery. As we enter the year, Omicron is forcing many schools and businesses to close temporarily because so many people are getting sick. This recent return to remote work and learning is also driving the demand for digital delivery of everything from K-12 homework assignments to at-home access to key corporate tools and systems. We see the tech and digital trends continuing, probably even accelerating, well into the new year.
We expect to see inflation settle at around 4% and our GDP to remain stable. We may not see the US dollar getting stronger, but we don’t see it getting significantly weaker either. There are two looming issues that could keep things interesting. The first is the potential for increased taxation. The impact new taxes might have on business and consumer spending could play out any number of ways. The second issue is an additional infrastructure bill that’s on the table. That could create a big splash as well, but the specific impact is hard to predict. There are two things, however, we are certain about on the business front. It won’t be business as usual until late 2022, if at all. And, the underlying economy will remain strong and stable, almost as if it’s detached from the social and political instability that surrounds it.
Workplace of the Future: Bottom Up & Remote
In the world of hiring, the pandemic and the WFH approach has each had a major impact on the employment landscape. Talent is firmly in control and calling the shots in 2022, and it will be a year that savvy companies will learn and adapt to this change. The Great Resignation has left many businesses struggling to find employees to fill empty spots. That situation is unlikely to resolve itself anytime soon. We expect the heavy competition for talent to continue, and that employees will maintain leverage in the process. This, in turn, will likely drive another increase in wages in some industries and sectors, making talent acquisition even more competitive and expensive in the year ahead.
Because of this rising cost of talent, smart employers will be investing time and effort into keeping the talent they already have. This translates into a workplace that will be increasingly focused on maximizing the value of human capital by moving away from institutional expectations about employee growth and towards a more personalized plan for growth and success that addresses each person’s unique goals and needs.
The key phrase that describes this future state of the workplace is “bottom up.” On paper, it looks like an inverted corporate pyramid, but with much flatter layers. In tomorrow’s workplace, there isn’t as great a need for middle management. Authority is rapidly shifting to the people who are closest to customers and products. This direct relationship between decision makers, products and customers creates more autonomy for employees while delivering greater attribution and accountability for the executive suite. It’s a win-win. In tomorrow’s workplace, time is best spent creating value, rather than doing status update meetings, so there is simply less need for additional layers of middle management.
This transition we are seeing in the workplace represents a unique and dynamic period, one that marks a clear departure from many traditional ways of managing a workforce and doing business. We see these workplace transitions continuing in 2022 with much of this change being driven and led by employees.
Remote work is here to stay as far as we’re concerned, and we firmly believe that it has increased productivity. Tactically, it creates many efficiencies that are hard to beat with the traditional office-based model, especially when it comes to crowded metro areas where a daily commute to the office can soak up hours of time each day. The recruiting process provides another example. The old model required candidates to fly to another city to interview in person, costing significant time and money with no guarantee of success. Today’s recruiting process allows candidates to review remotely, speeding the process and saving everyone valuable time and money. It also means that smaller, less geographically desirable companies can now compete for the same talent as big city brands because location is no longer an issue.
Companies that don’t recognize this shift away from tradition, and who force an office or a specific geographic location on employees, will have an uphill battle when it comes to recruiting and retaining top talent. Not all industries are on-board with the WFH approach, however, the reasons are sometimes more complex than it might appear at first glance. For instance, the financial services sector is one industry that has traditionally been particularly reticent about shifting away from an office setting, but that might have more to do with their corporate real estate holdings and maintaining the health of that investment rather than anything else. The bottom line is that the winners in 2022 will be nimble and flexible enough to quickly adapt their hiring process to the ever-changing employment landscape.
2022: the Year of Resilience & Adaptation
Finally, we see 2022 as a year of growing resilience. Thematically, this sense of resilience applies to many different aspects of life in the year ahead. Our economy and the market are performing well despite the uncertainty and doubt that the pandemic introduces into the equation. Our transitory supply chain and inflationary issues should ease up and provide some relief. Our response to the pandemic is also adapting and changing to become more effective. And we as people are becoming more resilient – to COVID, to social discord and to the ups and downs that come with life during a global pandemic.
From all your friends at BlueSky, stay safe and we hope 2022 is a successful and healthy year!