How does today’s runaway inflation — which represents the single-largest decrease in real buying power since the early 1980s, with consumer goods retailing for eight percent more than they were at this point last year — impact the hiring outlook for manufacturing and logistics employers?

From the latest trends in the job market to emerging salary pressure, here’s what you need to know.

inflation and the job market

The underlying drivers of inflation — and the resulting price increases — are notoriously difficult to untangle. What’s clear at the moment, though, is that ongoing supply chain disruption, climbing energy prices, unforseen demand spikes and geopolitical instability have been among the contributing forces.

Causes aside, there are also some things that are undeniably novel about the present moment — for example, the fact that price increases today are more heavily weighted toward goods than services. (Of course, that’s something many manufacturers may be all too aware of.) But this weighting represents a significant reversal of the inflationary trends seen prior to the pandemic, when price hikes were more closely associated with services than goods.

Meanwhile, the manufacturing hiring market has remained steady despite the economy having added just 263,000 jobs in September. Factory jobs in particular are surging, with 67,000 more people working in the sector than there were just before the pandemic.

Unfortunately, however, that doesn’t change the core dynamics of the manufacturing and logistics workforces. In both cases, talent remains largely hard to come by. While job growth is slowing down overall, the unemployment rate has dipped in equal measure. The current rate today sits at 3.5 percent — a return to its 50-year historic low from just before the pandemic. So while decreased job creation means fewer competing opportunities for employers, the amount of available talent to match has also decreased.

inflation and wage pressure

Turning from the job market to earnings, how is inflation playing out in terms of compensation? Is its usual corollary — so-called “wage inflation” — taking effect?

Broadly speaking, the answer is yes. Average compensation is going up. In September, hourly pay climbed by 0.4 percent for all workers, a five percent increase from the average in September 2021. In the past year, what’s more, workers in fields like leisure and hospitality have seen their hourly earnings grow faster than at any point in decades, according to research.

Of course, in an environment where consumer costs continue to rise, that’s an especially good thing, and it shouldn’t be particularly surprising.

This high-level trend — upward pressure on compensation levels — certainly has not been lost on manufacturing and logistics employers. In fact, one SHRM survey found that manufacturers are considerably more concerned about the downstream impacts of inflation than their counterparts in most other industries.

Despite that, however, there’s also evidence that wages may be stagnating at many manufacturing and logistics employers, as inflation eats away at recent gains in pay. That suggests it may be time to recalibrate wages for manufacturing and logistics employers across the board. The urgency for doing so becomes clear when you consider the following factors:

  • As mentioned earlier, both the manufacturing and logistics workforces are plagued by ongoing talent shortages (with close to 2.5 million roles at risk of being left unfilled by 2028).
  • Most manufacturing and logistics employers are struggling simply to hire and retain the essential talent they need.

It’s also worth calling attention to the demonstrated upside — and documented ROI — associated with increasing wages for manufacturing and logistics employers. Check out these bite-sized case studies for proof.

As for the extent to which wages are going to increase among manufacturing and logistics employers in the near-term future, only time will tell.

key takeaways — and what’s next

The net impact of inflation on hiring is something of a paradox, as we have seen. A few key takeaways in summary:

  • While the job market is showing signs of slowing down, sourcing qualified talent isn’t getting any easier for manufacturing and logistics employers.
  • In light of existing workforce challenges, manufacturing and logistics employers would be wise to recalibrate their compensation offerings to ensure they’re getting it right.

In this context, it stands to reason that organizations that act now to strategically recalibrate wages may well gain a competitive advantage. Get in touch with Randstad to learn how we can help your organization not only stay ahead of the latest economic trends, but leverage them for maximum benefit.