Private companies see a rosy 2015 – but is this a jobless recovery?

Commentary: Privately held companies are upbeat. They’re more positive about the nation’s economic activity than they’ve been in nearly a decade, and 73% of the private company executives surveyed for PwC US’s quarterly Trendsetter Barometer Business Outlooksurvey describe the US economy as growing. Revenues are up, collapsed oil prices are reducing cost pressures, and low interest rates are sparking investments that should sustain growth. While the outlook is a bit gloomier for companies with operations abroad because of a comparatively weaker global economy, general optimism about business prospects abounds. So, for employees and prospective employees of these companies, 2015 should be sunny, right? Not entirely. 

Findings taken from PwC’s most recent Trendsetter Barometerindicate that these executives are still struggling to find employees with the skills they need. If this talent gap persists, it could inhibit future growth, they feel. Already, the operating capacity at some of these companies is strained, making demand difficult to meet. Consequently, more companies appear to be working close to their permanent staffing and operations limits. The barrier for many companies that anticipate geographic expansion in the future over the next five years is ultimately finding the right employees and training them.

In the last quarter of 2014, the hiring picture changed very little, a calm that belies an important story. If private companies looking to hire aren’t able to find qualified workers, where is the talent to fill the jobs? This is the major question, since 56-to-60% of executives said they planned to add full-time equivalent employees in each of the past four years, yet the actual size of that increase continues to shrink. Net hiring rose only 1.7% in 2014 and that growth is predicted to slip to 1.6% in 2015, despite stronger revenue forecasts and significant profit gains.

Also see: Attraction and retention in 2015: What employers need to know

Private employers say they simply can’t find the right people – and it’s become a chronic problem. Fully one-third of Trendsetter companies were unable to fill open positions over the past year. They tended to be the larger, faster-growing businesses surveyed. Sixty percent of the executives listed targeted hiring on their 2015 to-do list, but experience shows that there simply aren’t enough qualified workers to go around.  

Wages stagnant

Wage increases remain basically flat, too. On average, companies are budgeting hourly wage increases of 2.76% for 2015, which is negligible given that, over the past four years, wage-increase forecasts rose an average of 2.55%.

For the most part, companies are looking to hire more experienced workers. For example, 42% said they would hire professionals – employees with technology/engineering, financial and sales/marketing skills. This is the highest rate in four years. In contrast, just one in eight said they plan to hire semi-skilled and unskilled workers, a rate that has stayed remarkably consistent.

Here’s the rub: When businesses can’t find qualified job applicants, certain work just doesn’t get done. Companies already have squeezed employees as much as they can, productivity-wise. At this point, when jobs go unfilled, business will find it difficult to achieve growth goals. Certainly, many have adapted somewhat by turning to automation, such as factory floor robotics, to make some unfilled positions obsolete. But that only goes so far and worker obsolescence has a big social and economic cost.

Also see: Implementing a DIY fix to the skills gap

Private companies are seeking solutions. Some are partnering with community colleges and offering on-the-job training to create the skilled workforce they need now and in the future. Obviously, however, all companies – both public and privately held – must tackle the talent gap to prosper in today's generally improving economic and business conditions. So, will more than half of private companies fill their demand and hire full time employees in 2015, or will the skills gap prevail, extending the jobless recovery? Only time will tell.

Ken Esch is a trendsetter partner sponsor in PwC’s Private Company Services practice.