Hiring perspectives from the CPG industry

As recruiters in the consumer goods industry, my colleagues and I have the opportunity to speak with professionals who manage sales, analytics and supply chains for the leading companies providing products to the country’s largest retailers. The conversations can give interesting insights into the economy. Now more than ever, we are being asked our perspectives regarding the current employment market, as well as any observations we have noticed relating to CPG companies and what the future may hold.

Some encouraging news in the CPG industry is that companies are still hiring for vacant positions and critical head counts. Our firm, thus far, has experienced a little less disruption than we expected from the immediate stoppage of the world economies. That said, since mid-March, almost 20% of our active searches were placed on hold or canceled due to COVID-19, so hiring sentiment is definitely starting to decline.

As we dug deeper to study the trends of our searches, we noticed the first wave of search cancellations came exclusively from suppliers of apparel, technology or general merchandise product lines, and each client had supply chain exposure to China. The more recent cancellations have been a mixed bag and affected other products. Still, the takeaway from companies and job candidates is that anxiety over job security is much higher among general merchandise suppliers. That makes sense because their products typically have more complex supply chains, longer lead times, a more discretionary purchase and higher dependence upon store traffic to drive sales.

Another observation is that food and consumables suppliers generally see strong sales at retail. Employees have confidence in their job security near term, so we assumed CPG food suppliers might anticipate large bonuses in 2020, which we’ve learned isn’t wholly accurate. The reason being, and what candidates have pointed out, is that a primary factor for most bonuses is overall company performance, not just sales at retail or accounts they may be responsible for, such as Walmart or Kroger.  For food companies, it’s common for 40-60% of sales to come from their foodservice business (schools, hotels, restaurants), which is shut down or operating at a fraction of historical sales. So, while pantry shelves are stockpiled with a product, that isn’t a guarantee companies are doing as well as may appear.

The rest of the year, there is no crystal ball. But we are preparing candidates for a challenging job market short term. The unemployment rate of 18% is the highest since 1938, with projections to pass the rate at the height of the Great Depression (24.9% in 1933). Despite those figures, we are optimistic about our chances for a sharp rebound (return to single-digit unemployment) by September, if not sooner. The reason being is it appears the COVID-19 pandemic has caused a labor crash more similar to that sustained from a natural disaster and will emulate that type of economic recovery more closely than that of the Great Depression.

The Great Depression was a product of reckless speculation followed by critical errors in government support and intervention policy, resulting in a snowball of debt and unemployment lasting 10 years. Fast forward to 2020, and the U.S. economy was performing well through February, bank balance sheets were strong, the crash wasn’t caused by economic mishap, and global governments have been supportive in softening the fall.

Most importantly, and unlike the Great Depression, there is a near consensus solution to economic recovery. But we don’t know how soon we can move. The catalyst for improvement will be when our service industry, which makes up 67% of the U.S. GDP, can return to regular activity.

The economy can bounce back quickly from short periods of high unemployment, but it will collapse under prolonged periods of high unemployment. Getting our service industry back to work (when safe) is our most critical task in rescuing the U.S. economy.

Scott Crossett is a senior partner at executive recruiting firm Cameron Smith & Associates in Rogers. He recruits nationwide for CPG supplier teams supporting grocery and mass retail. The opinions expressed are those of the author.