Hiring on the Margins

July employment numbers (U.S. and Canada) came out last week and analysts were happy. Analysts are always happy when they predict something and it actually happens. But while the news was good for the economy in general, it may be pushing housing and its supply chain closer to a point of no return.

The official U.S. unemployment rate fell to 4.3% in July. Nonfarm employment grew by 209,000: 205,000 in the private sector plus 4,000 government jobs. Money magazine pointed out that “you’re less likely to be laid off today than at any time since 1967."

The story was much the same in Canada, where unemployment fell to a nine-year low according to Bloomberg: from 6.5% in June to 6.3% in July, with 10,900 new jobs created. Canada measures unemployment differently than the U.S. 6.3% is comparable to 5.4% in the U.S.

Critics found fault, of course. They noted that more jobs were created in the last six months of the Obama Administration than in the first six months under Trump. But we were bound to reach a point of diminishing returns someday. We’re there now. At 4% unemployment, pretty much everyone who is actively looking for work will find a job. In the latest state-level data (June), the unemployment rate was below the national rate (4.4%) in 28 states, and under 3% in five.

This isn’t going to help relieve the shortage of skilled construction labor. The number of employed framers is still 57% below its Jan 2006 peak. It is still possible that the hole will get filled if wages rise enough. But “enough” in this case looks to be at least a 50% increase. The current median wage for a framer is $21.59 per hour—less than any other trade except siders ($19.61) and painters ($21.50). Fifty years ago (adjusted for inflation), framers made $36 per hour.

In lieu of journeyman framers, the alternative is prefabricated components that can be built and installed using semi-skilled labor. It’s hard to see how this doesn’t lead to a permanent shift in the way homes are built—and by extension, what suppliers do for a living. If builders can build with fewer skilled framers, that reduces demand for framers. It’s the same dynamic that is driving automation everywhere.

Obviously it won't happen everywhere—or all at once, or completely. We’ll still have journeyman framers; they’ll just migrate toward the high end of the market where more complex designs require their skills. At the entry level, designs will get dumbed down to accommodate the limitations of factory-built structures. Those limitations will recede as the technology evolves, but that’ll be a process, too.

There's nothing inherently bad about all this. But it is a major shift that will require a corresponding shift in employers' staffing strategies.

As it shakes out, the workforce of the future looks to be a lot of warm bodies plus a few highly-skilled software jockeys who will control the workflow. Think McDonald’s, where an overhead computer screen tells the kid behind the counter you want fries with that—or Kimal Lumber & Hardware in Venice, Fla., where Alpine/ITW software guides workers through each roof truss setup.

If you build trusses, that changes your recruiting strategy. Most of your employees will be unskilled workers who come and go, but whose work will be managed much more closely than it is today. Managing them will require a core of career professionals—maybe fewer than today as a percentage of the total, but probably higher paid. They’ll need deep industry expertise but also specialized software skills, so they’ll be in demand.

The interesting part will be getting from point A to point B. Right now your drivers have GPS. Your salespeople may or may not use CRM, but if not, the next generation will. You can control load building and inventory with Majure Data's warehouse management system (WMS), and production cutting with iN4 Solutions’ CutBuilder.

But there are still holes that could be filled, and none of those systems is tied together—yet.

Futurists gush about robots and drones, but a recent study of automation and the future of work conducted by the McKinsey Global Institute differentiates between predictable and unpredictable physical work. The former is relatively easy to automate—or if not now, it will be as the technology develops. The latter isn’t. At least for the foreseeable future, those jobs require human beings.

But as software-controlled production evolves, they won’t necessarily need to be skilled human beings. Maybe not even highly motivated.

Slackers and Packers

Everyone knows the official unemployment rate (called U3) doesn’t include everyone who isn’t working. July's 4.3% represents roughly 7 million people who told the Bureau of Labor Statistics they’re actively looking for work but haven’t found it.

Next you’ve got marginally attached workers, as BLS calls them: 1.6 million as of July. Roughly a third of them are considered discouraged workers, defined as “persons not currently looking for work because they believe no jobs are available for them.”

That’s called U4; it brought the unemployment rate up to 4.7% in July.

The other two-thirds of marginally attached workers say they want a job and have looked for one in the past 12 months, but not in the past four weeks. That’s U5; it brings the total to 5.3%.

Finally there’s the highest rate, U6. It includes 5.3 million people who are employed part-time but say they want full-time work. In July, U6 was 8.6%.

All in all, that’s nearly 14 million people available and looking for work—or so they say. BLS reports what it is told but has no way to verify that they’re really actively looking for jobs.

A lot of people don’t believe they are. Some are convinced the U.S. is overrun with slackers: “makers vs. takers” as many put it. It’s no secret that a percentage of the population works only because they can’t find another way to fund what they’d rather be doing—whether it’s bass fishing, rock climbing, or just eating three meals a day.

But it’s always been that way, and it’s the same everywhere in the solar system. The difference today is that they no longer get eaten by bears because the rest of us chip in to support them.

Some are lazy, of course. Most are hard-working people who got whacked by circumstances beyond their control. Some are marginally attached to the workforce in the fullest sense of the term. They’ll work hard when they're on the job, but their real ambitions lie elsewhere—rock climbing or bass fishing or whatever.

So far, the LBM channel has viewed software-controlled production mostly as a way to compensate for a lack of know-how. A touchscreen tells you what to cut so you don’t have to be able to optimize saw cuts in your head. A handheld tells you what to pull so you don’t have to know the difference between a crown mould and a chair rail. But the software is also a tool to monitor and manage productivity.

That’s exactly how Amazon uses its WMS to manage the warehouse packers in its fulfillment centers. Which is not to say everyone likes it. The pace is anything but leisurely; critics describe it as a “relentless need to ‘make rate’” (Gawker). Amazon is famously anti-union, which the World Socialist Web Site calls “an atmosphere of intimidation to prevent workers from speaking out against poor working conditions.”

By all accounts, nearly anyone can get hired at Amazon. As you might imagine, the company can’t afford a lot of trust as a result. Its warehouses are blanketed with security cameras and workers pass through scanners at all exits to prevent theft. Throw in the WMS-controlled workflow and the physical demands of the job—be able to lift 50 lbs. and “walk between seven and 15 miles every day”—and Gizmodo is convinced that warehouse work at Amazon Fulfillment is an “unspeakably awful” job.

To some people, maybe. The physical demands are par for the course in a lumberyard. Amazon pays $11 to $14 per hour. It provides health insurance, a 401(k) plan, and a tuition plan that reimburses up to 95% of costs. And if you really really don’t like the job, Amazon will pay you a bonus of up to $5,000 to quit, according to VentureBeat. “An employee staying somewhere they don’t want to be isn’t healthy for the employee or the company,” says Jeff Bezos, Amazon’s CEO.

Glassdoor, a job matching service that posts employee reviews of employers, gives Amazon Fulfillment 3.2 stars out of five possible. That’s not good compared with, say, Google (4.4 stars), but it still beats 84 Lumber (3.1) and blows the doors off Builders FirstSource (2.5).

The notion of hiring workers who may have a sketchy work ethic sounds foreign if not counterproductive. But given the unpopularity of physical work—just 3% of young workers are interested in the trades and LBM isn’t on their radar screen at all—it could be a viable strategy.

In effect, you’re aiming for quantity over quality. No one grows up wanting to work in a lumberyard. Instead, they fall into the business by accident and realize only after the fact that the work is challenging, satisfying, and often lucrative. The more people you expose to the business, the more likely you are to find a few who will thrive in it.

Making it work does require the tools to manage productivity more closely than LBM dealers do today. That doesn't mean you have to do it like Amazon, where literally every step workers take is monitored. You can use the software to guide and support rather than take total control.

But we are in an environment where jobs are plentiful and workers are scarce, and in an industry that has long been lampooned as a career of last resort. Finding the people you need and making them productive will take more creativity than it has in the past.