Help wanted: as the economy heats up, experts expect surplus labor to disappear and human resources issues to stay on the front burner

Prosales, April, 2003 by Chris Wood

Hopefully, you've got all of your key positions filled this year because economists and LBM job market watchers are predicting another labor crunch as the economy recovers from recession over the next year. Some experts warn that the impending personnel shortage could make dancing through the labor squeeze of the late '90s look like a cakewalk in comparison.

According to an analysis of the current job market conducted in December 2002 by Watson Wyatt, a Washington, D.C.-based human resources (HR) consulting firm, the amount of surplus labor available during this economic recovery is at the lowest level it has been over the past 10 recessions. Surplus labor traditionally is defined by economists as the number of unemployed workers above a "natural" unemployment rate of approximately 4 percent, plus new entrants into the job market.

Roughly 2.9 million people were unemployed in February 2002, the month considered by Watson Wyatt researchers to be the low point of the current recession. With college grads and other job force entrants factored in, that translated to a 3.7 percent surplus labor rate over natural unemployment. Surplus labor percentages in the 1990 and 1982 recessions were 4.7 percent and 9.6 percent, respectively. "There's very little slack in the system," says Syl Schieber, director of research at Watson Wyatt, who holds a doctorate in economics. "When the economy heats up, that slack will be taken up quickly, and we will be right back to tight labor markets."

When surplus labor is quickly siphoned off, companies can enter into a competitive hiring frenzy that turns the corporate process of hiring "quality people" into a skin game. "Anyway you look at things, we are facing extremely tight job markets once the economy picks up steam," says Schieber.

"That's what all the forecasts say," concurs Steve Pearson, senior vice president of human resources for San Francisco-based Building Materials Holding Corp.(BMHC). "Everything you read in terms of job growth and demographic projections says that we are going through a short-term period where it is easier to find qualified employees. Nobody expects that to continue once the economy gets back to normal."

Band Together

To help meet this challenge, BMHC and other progressive dealers nationwide are utilizing the Lumber and Home Center Industry HR group, a roundtable founded in 1978 to collectively solve industry-wide HR dilemmas. Pearson himself has been an active member since 1987 when his company broke off from Boise as BMC West. "For 25 years the group has been meeting in some fashion to address human resource issues facing the industry," Pearson notes.

According to group chair and membership coordinator Lynn Guillory, currently there are 23 members ranging from large, semi-national players like Dallas-based Builders FirstSource and BMHC to independent powerhouses like five-trait Scherer Bros. Lumber, based in Minneapolis, and 16-unit Kennesaw, Ga.-based Leeds Building Products. "It's a really good mix of pro-contractor yards, both independent and non-independent," says Guillory, vice president of HR for Dallas-based Foxworth-Galbraith Lumber. "We also have some members closer to the retail hardware side like Westlake Ace Hardware." Guillory hopes outreach efforts and open recruiting can pump membership to 40-plus companies over the next 12 months (for information, contact lguillory@foxgal.com).

Annual meetings usually feature a presentation from an employment attorney on top HR issues, in addition to an extended open roundtable. "It's a group where obviously many of us do compete, so we're cautious," Pearson stresses. "We keep the subjects to general HR topics and respect any legal and competitive issues." Subject matter has changed in recent years from low unemployment and how to attract quality people to handling immigration legalities and discussions on various national and state employment regulations. "Benefits are a huge issue this year as everyone is experiencing the same kind of cost increases while trying to put together a good package for employees," says Pearson. Especially when faced with dwindling labor reserves, "probably the biggest issue and goal [for pro dealers] is to be the employer of choice [in their markets]," he says.

Silver Lining

Some pro dealers, however, look through the rear window at labor issues of the past and see a cloud with a silver lining. So says Gary Farber, COO for Daytona Beach, Fla.-based Dunn Lumber. "The labor squeeze obviously was a problem [for the industry] a few years ago, but it can be a nice problem to have because it means that we are all doing well." At Dunn, winner of the NLBMDA's 2002 award for human resource excellence, signs of a labor shortage are not even a blip on the horizon. "We are not seeing that at all or any indication that that is coming up," Farber says. "I wish it was coming, because it [traditionally] means that everybody's business is cooking."

But Farber does agree that employee benefit costs will continue to be one of the top issues facing pro dealer HR execs. "We have been facing [double-digit increases] over the past five years," Farber says. "So far, every year we have swallowed hard and absorbed the increases in medical benefits. But there has to be an end to [large increases] fairly quickly or it is going to be impossible [to offer these benefits]." Dunn is taking the proactive step of instituting a company safety program to both alleviate costs and decrease injury rates. "We've ingrained safety into the fabric of our culture," Farber says.