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February 02, 2007

Richard Florida

Talent wars are spiky

« Maps don't lie | Main | Two Americas »

Paul Kaihla one of the most prescient business writers around shows how spiky the talent wars have become.  Over at his blog, he dubs this, "the War for Talent 2.0."   As Harvard's Ed Glaeser and others have shown, talent is concentrating in a relatively small number of metros.  And, now the talent wars are heating up again.  Sure, housing may be expensive in these spiky "means metros," but this can be offset by other tangible benefits --  higher salaries, more challenging work, and more flexible work situations fed by increased competition for people; thicker labor markets offering more choice in jobs; more robust employment networks which boost the prospects for future earnings, and of course greater housing appreciation.  Here's how Kaiha puts it.

The consensus estimate for tomorrow's jobs report from the Labor Department is that the U.S. economy added a net 145,000 jobs in January, according to the economists polled by Bloomberg.  ... I'm going to guess that the payroll report is going to have a number at the high end of the range: 175,000.

But these monthly payroll reports showing national aggregate figures are not the ones we should be watching right now. Instead, a true topographic picture of the hot spots and dead zones in the national jobs market was exposed in the Metropolitan Area Employment report that the Bureau of Labor Statistics released on Tuesday. It shows that even with lackluster GDP growth this year, employers are in for misery in a dozen major metros when it comes to hiring high-priced help. This 'war for talent,' version 2.0, has already been raging in places like the DC area for years, thanks to the Bush defence spending splurge.

But now it's spread across all of the metros economist Richard Florida and observers like us have christened as creative class capitals. Look at how tight the job markets have become in cities like:

San Francisco                         3.8 % unemployment (Dec/06)
Bridgeport-Stamford          3.3 %
Raleigh-Cary, NC                  3.4 %
Austin-Round Rock, TX      3.2 %

To put that in perspective, the lowest that national unemployment ever got at the peak of the Clinton-Dot.com-New Economy boom was 3.9 %...Currently, the national rate is hovering at about 4.5 %.

These are not places like Vegas and Phoenix and all those cities in Florida that had their job markets puffed up by the housing boom, and are now going to see more bodies looking for work because of the bust. Instead, these hot spots are driven by high value-added sectors like finance, tech and advertising.

My favorite micro example of this round two of the war for talent is the online advertising firm, Organic. It currently has about 100 openings that managers are scrambling to fill. That's up from about 40 last summer. The headcount of the whole firm is only 300!

You can't build a booming business unless you have the bodies to staff it, and I predict that pricing-power in the job market will shift even more to workers this year in specialty sectors in these cities.

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