New initial jobless claims improved much more than expected last week to reach the lowest level in more than five decades, further pointing to the tightness of the present labor market as many employers seek to retain workers.
The Labor Department released its weekly jobless claims report on Thursday. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg:
- Initial unemployment claims, week ended Dec. 4: 184,000 vs. 220,000 expected and an upwardly revised 227,000 during prior week
- Continuing claims, week ended Nov. 27: 1.992 million vs. 1.910 million expected and a downwardly revised 1.954 million during prior week
Jobless claims decreased once more after a brief tick higher in late November. At 184,000, initial jobless claims were at their lowest level since Sept. 1969.
“The consensus always looked a bit timid, in light of the behavior of unadjusted claims in the week after Thanksgiving in previous years when the holiday fell on the 25th, but the drop this time was much bigger than in those years, and bigger than implied by the recent trend,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in an email Thursday morning. “A correction next week seems likely, but the trend in claims clearly is falling rapidly, reflecting the extreme tightness of the labor market and the rebound in GDP growth now underway.”
After more than a year-and-a-half of the COVID-19 pandemic in the U.S., jobless claims have begun to hover below even their pre-pandemic levels. New claims were averaging about 220,000 per week throughout 2019. At the height of the pandemic and stay-in-place restrictions, new claims had come in at more than 6.1 million during the week ended April 3, 2020.
Continuing claims, which track the number of those still receiving unemployment benefits via regular state programs, have also come down sharply from pandemic-era highs, and held below 2 million last week.
“Beyond weekly moves, the overall trend in filings remains downward and confirms that businesses facing labor shortages are holding onto workers,” wrote Rubeela Farooqi, chief U.S. economist for High Frequency Economics, in a note on Wednesday.
Farooqi added, however, that “the decline in layoffs is not translating into faster job growth on a consistent basis, which was evident in a modest gain in non-farm payrolls in November.”
“For now, labor supply remains constrained and will likely continue to see pandemic effects as the health backdrop and a lack of safe and affordable child care keeps people out of the workforce,” she added.
Other recent data on the labor market have also affirmed these lingering pressures. The November jobs report released from the Labor Department last Friday reflected a smaller number of jobs returned than expected last month, with payrolls growing by the least since December 2020 at just 210,000. And the labor force participation rate came in at 61.8%, still coming in markedly below its pre-pandemic February 2020 level of 63.3%.
And meanwhile, the Labor Department on Wednesday reported that job openings rose more than expected in October to top 11 million, coming in just marginally below July’s all-time high of nearly 11.1 million. The quits rate eased slightly to 2.8% from September’s record 3.0% rate.
“There is a massive shortage of labor out there in the country that couldn’t come at a worst time now that employers need workers like they have never needed them before. This is a permanent upward demand shift in the economy that won’t be alleviated by companies offering greater incentives to their new hires,” Chris Rupkey, FWDBONDS chief economist, wrote in a note Wednesday. “Wage inflation will continue to keep inflation running hot as businesses fall all over themselves in a bidding war for talent.”
In the era of great awakening, leaders have to step up and be conscious about building trust with people they work with.
The old rules and hierarchies, that were already becoming obsolete, have now been thrown out of the window. People look for integration of work and well-being knowing that work is what you do, not a place you go to.
Opportunities are abound and excellent people have ample choices (they always had). It is high time that organizations and leaders think this through carefully to first align their own mindset to this new reality and then take conscious actions to build teams, practices and processes that are not just high-performing but also have a strong fabric of trust woven in.
Employees, after all, are volunteers who exercise their choice of working with you. Effective leadership is about making it worth for them.
Building high-trust environment means putting the human back at the center of how a business functions and building everything – purpose, culture, processes, structures, rituals, systems, tools and mindsets – around it.
How would we know if we are working in an environment where we can trust others and that we are trusted? We can always answer this based on our intrinsic feeling but if you are a leader who is working hard to build trust, here are a few vital signs that you need to look for.
Amid a nationwide staffing shortage, rising demand for nurses has led hospitals to increase salaries and other benefits to attract and retain workers, Melanie Evans reports for the Wall Street Journal.
Hospitals increase salaries, benefits to keep up with nursing demand
Hospitals across the country have been struggling amid staffing shortages, particularly of nurses, Evans reports. According to health care consultancy Premier, nurse turnover rates have increased to around 22% this year, up from the annual rate of about 18% in 2019.
“We are employing more nurses now than we ever have, and we also have more vacancies than we ever had,” said Greg Till, chief people officer at Providence Health & Services.
To retain their current nurses and attract new staff, many hospitals have increased their nurses’ salaries to remain competitive in the job market, Evans reports.
For example, HCA Healthcare, one of the largest hospital chains in the country, said it increased nurse pay this year to keep up with Covid-19 surges and compete with rivals also trying to fill vacant positions.
Similarly, Jefferson Health in May raised salaries for its nearly 10,000 nurses by 10% after the system discovered that rivals had increased their compensation. “The circumstances required it,” said Kate Fitzpatrick, Jefferson’s chief nurse executive.
In addition, Citizens Memorial Hospital in Bolivar, Mo., this month raised its nurses’ salaries by up to 5% after rivals in other nearby cities increased their workers’ wages. Sarah Hanak, Citizen Memorial’s CNO, said the hospital also increased the hourly wages of nurses working overnight shifts by around 15% to ensure sufficient staffing for those shifts.
“We were forced to,” Hanak said. “We absolutely have to stay competitive.”
Overall, the average annual salary for RNs, not including bonus pay, grew to $81,376, according to Premier—a 4% increase across the first nine months of the year. This is larger than the 3.3% increase in the average annual nurse salary for 2020 and the 2.6% increase in 2019, Evans writes.
In addition to salary increases, some organizations, such as Providence, are also offering other benefits to attract and retain nurses, such as more time off, greater schedule flexibility, and new career development opportunities. Many hospitals are also hiring new graduates to work in specialized roles in ORs and other areas, allowing them to advance their careers more quickly than they would have before.
Overall, this rising demand for nurses has allowed those entering the workforce to negotiate higher salaries, more flexible working hours, and other benefits, Evans writes.
“I think you get to write your ticket,” said Tessa Johnson, president of the North Dakota Nurses Association.
Nurse compensation increases were inevitable—here’s why
It was inevitable that we would get to this point: baseline nurse compensation on a clear upward trajectory. Inevitable because this boils down to laws of supply and demand. Amid a clear nursing shortage, organizations are being forced to raise baseline compensation to compete for increasingly scarce qualified nurses. This is true in nearly every market, even for those considered to be ‘destination employers.’
If anything, what’s most surprising in the data from Premier is the moderated increase of around 4%. From a worker’s perspective, that’s not even covering cost of living increases due to inflation. However, amid this new data, it’s important to keep two things in mind:
Two considerations for health care leaders
- New data only captures baseline compensation.Differentials—which organizations must standardize and expand across shifts, specialties, and even settings—plus overtime put baseline compensation much higher. Not to mention lucrative sign-on bonuses, that members tell us are increasingly table stakes in their markets. In general, we don’t recommend this type of incentive that does nothing for retention. You’re better off investing those resources in baseline compensation as well as beefing up your RN bonus plan to incentivize retention.
- There is a new floor for wages (and it’s only going up from here).
Open questions (and important indicators) we are assessing
- What happens to wages for entry-level clinical roles? As the shortage of RNs persists, organizations will need to make a shift to team-based models of care, and those are only possible with a stable workforce of entry-level personnel. Right now, that part of the health care workforce is anything but stable. When you consider their work and their wages in comparison to out-of-industry players that pay the same or better, that’s a clear area where investment is required.
- Will the share of nurses working permanently with travel agencies return to pre-pandemic levels? That’s to say, what will those RNs who experienced the traveler lifestyle and pay value more moving forward: the flexibility and premium pay or stability of permanent employment? Even if this number stabilizes a couple percentage points above pre-pandemic levels, that will aggravate provider’s sense of shortage.
Edward Karlovich serves as the executive vice president and CFO for UPMC, a $23 billion provider and insurer based in Pittsburgh.
Since joining UPMC in 1990, Mr. Karlovich has served in several financial leadership roles. Most recently, he was vice president, CFO and chief of staff for UPMC’s Health Services Division. He became CFO of the entire integrated system with 40 hospitals in October 2020, after serving on an interim basis for about a year.
Here, Mr. Karlovich shares with Becker’s the skills he thinks CFOs need to succeed today, some key capital projects in the works at UPMC and his organization’s top financial priorities.
Editor’s note: Responses were lightly edited for length and clarity.
Question: What is the most pressing issue facing hospital CFOs due to COVID-19?
Edward Karlovich: I would say the most pressing issue for me is disruption. COVID-19 has done many things to disrupt the way we think about our organization and business. Some disruptions we faced in the last year include staffing and supply chain challenges. UPMC did a great job weathering through the supply disruptions and labor challenges. We always had adequate personal protective equipment for our folks here. We also really made a conscientious decision last year to keep our workforce intact; we didn’t lay off workers, and we took care of people who needed time off because of COVID-19. We also made sure employees knew they had the support of our executive leadership team. In summary, COVID-19 has created a disruption, and we must think about how things are different now coming out of the disruption.
Q: What are some things you are doing to work through the change/disruption?
EK: From an organizational perspective, we embarked on what we call the “UPMC experience” a few years ago. We looked at the way we are doing things to understand the experience of our employees and patients. This prepared us to be more creative in our thinking as to how we address challenges and disruption. We also learned through this the importance of interdependencies. Our business, both provider and insurance side, discussed a need to tackle the disruptions in an integrated way and discussed a need to communicate changes effectively. This year, we provided about 40 news conferences to get the standard message out across all of our regions. We also have a 90,000-plus employee organization which allows you to move around resources to deal with some challenges and disruptions.
Q: What are UPMC’s top financial priorities for 2022?
EK: From a financial perspective, we want to maintain a positive margin to support our capital investments and employees. To do this, we are focused on a few things. First, supporting our operating employees to ensure they can perform to the best of their ability. They are the ones who make the difference each and every day. Second, we want to make sure we, as a finance team, can provide the things that the organization needs to be successful. This includes, but is not limited to, making sure supply chain folks can get all needed supplies and ensuring we have the cash collections needed to fund our organization. Another priority is making sure we provide the advice and guidance needed to invest our dollars effectively so we can prepare for the next challenge.
Q: What are a few key capital projects UPMC has in the works?
EK: UPMC is a premier provider in our community, and we operate a number of specialty hospitals in the area. We are the primary pediatric, psychiatric, women’s health and oncology provider in the region. Over the past couple of years, we’ve embarked on a journey to provide new facilities in western Pennsylvania for these major programs. We are also investing heavily in a vision and rehabilitation institute, which is a $500 million project that will put our clinicians, researchers and other providers together to drive breakthroughs in vision care and rehabilitation.
We also are going to embark on a new tower for UPMC Presbyterian Oakland Campus [in Pittsburgh]. It is going to be the largest capital project we’ve embarked on since I’ve been here. This project will be more than $1 billion and is so important to the community.
The third thing we are looking at is enhancing our oncology services and product at UPMC Shadyside [in Pittsburgh]. What we’ve recognized is that we are the provider and insurer of choice in western Pennsylvania, and we have to invest in this community for the next 50 to 100 years.
Q: What skills are essential for hospital and health system CFOs to thrive in today’s healthcare landscape?
EK: The technical skills are given as CFO. To get in that leadership position, you have to be able to perform the necessary tasks. However, to make your organization better, I could boil it down to four things. First, you have to be a partner to your other senior leaders. Finance doesn’t exist in a vacuum. You have to be in the room with those folks, helping them manage and drive the business. The second thing is flexibility. If you think about what we experienced as an industry over the last two years, if you weren’t flexible, you were going to be seriously challenged. Flexibility is such an important attribute because the pace of change is going to accelerate in our industry. Third, I’d say talent recognition is a key skill. It is important to be able to find talent as well as mentor and develop them as employees who can provide a great service to the organization. Fourth, you have to embody integrity. There is no doubt in my mind that integrity is a core value that is essential to everything you do as a finance leader. You have to maintain your integrity at all times. Those are essential skills. If you’re going to be a successful CFO now, you have to have those skills outside of the technical.
Q: What is one piece of advice you would offer to another healthcare CFO, and why?
EK: I’d say, look beyond the challenges of today. It’s not just about what you can actually see and envision in front of you. Try to look at the implications that are not necessarily top of mind. What the future holds is uncertain for all of us in healthcare now. You need to be thinking about what things might be coming down the road that will change our business and commitment to our communities dramatically. Try to brainstorm around that. Trying to think forward and speculate about what might happen is very valuable.
For years, pioneering CFOs steadily extended their duties beyond the boundaries of the traditional finance and accounting function. Over the past year, an expanding set of beyond-finance activities – including those related to environmental, social and governance (ESG) matters; human capital reporting; cybersecurity; and supply chain management – have grown in importance for most finance groups. Traditional finance and accounting responsibilities remain core requirements for CFOs, even as they augment planning, analysis, forecasting and reporting processes to thrive in the cloud-based digital era. Protiviti’s latest global survey of CFOs and finance leaders shows that CFOs are refining their new and growing roles by addressing five key areas:
Accessing new data to drive success – The ability of CFOs and finance groups to address their expanding priorities depends on the quality and completeness of the data they access, secure, govern and use. Even the most powerful, cutting-edge tools will deliver subpar insights without optimal data inputs. In addition, more of the data finance uses to generate forward-looking business insights is sourced from producers outside of finance group and the organization. Many of these data producers lack expertise in disclosure controls and therefore need guidance from the finance organization.
Developing long-term strategies for protecting and leveraging data – From a data-protection perspective, CFOs are refining their calculations of cyber risk while benchmarking their organization’s data security and privacy spending and allocations. From a data-leveraging perspective, finance chiefs are creating and updating roadmaps for investments in robotic process automation, business intelligence tools, AI applications, other types of advanced automation, and the cloud technology that serves as a foundational enabler for these advanced finance tools. These investments are designed to satisfy the need for real-time finance insights and analysis among a mushrooming set of internal customers.
Applying financial expertise to ESG reporting – CFOs are mobilizing their team’s financial reporting expertise to address unfolding Human Capital and ESG reporting and disclosure requirements. Leading CFOs are consummating their role in this next-generation data collection activity while ensuring that the organization lays the groundwork to maximize the business value it derives from monitoring, managing and reporting all forms of ESG-related performance metrics.
Elevating and expanding forecasting – Finance groups are overhauling forecasting and planning processes to integrate new data inputs, from new sources, so that the insights the finance organization produces are more real-time in nature and relevant to more finance customers inside and outside the organization. Traditional key performance indicators (KPIs) are being supplemented by key business indicators (KBIs) to provide sharper forecasts and viewpoints. As major new sources of political, social, technological and business volatility arise in an unsteady post-COVID era, forecasting’s value to the organization continues to soar.
Investing in long-term talent strategies – Finance groups are refining their labor model to become more flexible and gain long-term access to cutting-edge skills and innovative thinking in the face of an ongoing and persistent finance and accounting talent crunch. CFOs also are recalibrating their flexible labor models and helping other parts of the organization develop a similar approach to ensure the entire future organization can skill and scale to operate at the right size and in the right manner.
- Hospitals across the country have spent more than $3 billion on personal protective equipment since the start of the COVID-19 pandemic, though costs have steadily declined since the worst shortages experienced during the second quarter of 2020, according to an analysis from Premier, a group purchasing organization.
- Before the pandemic, hospitals normally spent about $7 on PPE costs per patient per day. That figure shot to $20.40 during the second quarter of last year, and during the first quarter of this year was around $12.45 per patient per day, according to Premier.
- Hospitals are also still paying more for qualified clinical labor — roughly $24 billion more in total per year compared to before the pandemic, according to another Premier analysis out last week.
PPE was in short supply early in the pandemic, spurring bidding wars and financially straining hospitals as they suffered from the budgetary fallout of canceled elective surgeries and other lucrative services.
While supply chain challenges have since eased and costs are down since their peak, hospitals are still spending more on PPE than before the pandemic, and consumption and demand remains strong in light of the delta variant, according to the report.
Premier used a database representing 30% of U.S. hospitals across all regions from September 2019 through last month to track spending trends, looking at costs for eye protection, surgical gowns, N95 respirators, face masks, exam gloves and swabs. It then calculated total costs measuring quantities used per patient, per day, multiplied by the percent change in pricing for the quarter.
Ultimately, hospitals are still using far more N95 respirators than they were prior to the pandemic.
Demand is still up for eye protection, surgical gowns and face masks, though pricing is close to pre-pandemic levels for those items. Costs for surgical gloves and N95 respirators are still above pre-pandemic levels, according to the analysis.
While most PPE costs have steadily declined for hospitals, other expenses have not, namely labor costs.
Contract labor costs have fluctuated, though they reached record highs amid COVID-19 surges, commanding record rates from providers. And nursing shortages, especially, have been so dire that hospitals are spending more on recruiting and retaining for the positions, boosting benefits and offering steep sign on bonuses.
Clinical labor costs are up 8% on average per patient, per day compared to before the pandemic, according to the earlier Premier analysis. That translates to about $17 million in additional annual labor expenses for the average 500-bed facility.
As of last month, overtime hours are up 52% since before the pandemic. The use of agency and temporary labor is up 132% for full-time employees and 131% for part-time employees.
The most expensive labor choices for hospitals are contract labor and overtime, typically adding 50% or more to an employee’s hourly rate, according to Premier.
For that report, Premier used a database with daily data from about 250 hospitals, bi-weekly data from 650 hospitals and quarterly data for 500 hospitals from October 2019 through August to analyze workforce trends among employees in emergency departments, intensive care units or nursing areas.