The Great Talent Vanishing Act: Understanding the Professional Labor Gap

By Stuart McLendon, Zweig Group

Ever feel like finding a unicorn would be easier than finding a top-notch professional these days? You’re not alone. In boardrooms and virtual happy hours alike, the echo is the same: from CPAs to attorneys, HR managers, and administrative assistants – good people are hard to find. But it’s not just water cooler talk. The stats from the U.S. Bureau of Labor Statistics tell a tale that’s hard to ignore, especially in the professional and business services industry. We’re not just reminiscing about a bygone era; data for the last decade and forecasts for the next point to a very real talent crisis.

The Professional and Business Services supersector, a fancy term for the collection of NAICS codes 54, 55, and 56, is the primary industry group for credentialed pros like accountants, lawyers, engineers, and the managerial crew. Picture this: in 2022, this sector employed about 18% of all workers designated as a “manager” in the U.S economy. So this data set provides very real insights into what is happening in law offices, architectural firms, ad agencies, and the rest of the business support infrastructure that is critical to other business segments in getting products on shelves and services to consumers.

Looking backwards from September 2023 to 2013, new hires and separations played a game of tag, with 144.35 million hires barely inching past 139.24 million separations. As businesses scrambled to fill positions, the average number of monthly open and unfilled job postings nearly tripled, from 765,000 in 2013 to a peak of 2,136,000 through 2022. That’s a 12.1% compound annual growth rate. For comparison, the S&P 500 returned roughly 11.6% during that same period, and I don’t think that is a coincidence. These professionals play two core functions in creating business value: fueling growth and decreasing risk. Business has become increasingly complex, and financial markets have generally rewarded that complexity as seen with the explosion of financial securitization and derivatives over the past fifty years. The business owners that have invested in a strong professional support organization and the associated high-quality compliance and reporting have been rewarded with premium valuations as they exit.  

Let’s not overlook the Baby Boomer exodus. Those born in the post-WWII baby boom have been a dominant influence in the workforce. But as they trade briefcases for golf clubs, we’re left with a talent void. SHRM, the go-to folks for HR wisdom, highlighted a skill gap with the Boomer’s departure. Between 2019 and 2020 alone about 3.2 million of them hung up their hats. That’s about 4.5% of their workforce, gone in a puff! 

The ripple effect? Gen Xers and Millennials, who were once grumbling about slow-moving career ladders, suddenly found themselves staring at a gaping hole in leadership and experience. The dam broke, but the flood left a gap in training and development for stepping into more senior roles. We can also see indications of this in the BLS data sets. From 2018 to 2020 we saw relative stability in seasonally adjusted open positions at about 1.2 million. Again, this is everything from architects to supply chain managers to claims adjusters.  Data from 2021 through 2023 has seen that volume climb to an average of 1.9 million, another 50% growth in three years! In fairness, those numbers seem to have moderated back to about 1.7 million over 2023, a likely impact from the aggressive tightening of monetary policy over that timeframe.

So, where does this leave us? Facing a labor gap that’s more like a chasm, businesses need to get creative. This shift isn’t just a temporary fix; it’s a blueprint for the future of work.

What’s the business world to do? Innovate, of course. We’ve seen businesses pivot during COVID, embracing hybrid and remote work models. Turns out, you don’t always need a large investment in office space to get things done. It’s not just about filling seats; it’s about reimagining how we work, where we work, and who we work with. The next part of our story will dive into the creative solutions businesses are cooking up to tackle this talent puzzle. Stay tuned for a look into the world of fractional employment, AI’s role in the workplace, and why your next CFO might just be working beachside in Costa Rica.