Negative Unemployment, the New Reality

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It's no secret that finding good technicians for your shop is really, really tough right now. In fact, I would argue that it's the toughest it's ever been and not trending toward becoming easier anytime soon. You cannot pick up any industry publication without hearing about the technician shortage, that's for sure… to the point of nauseam.

In all of the noise surrounding the need for qualified technicians, what hit home with me most was a comment that Dave Ramsey made on his radio show. Kind of surprising in that something from a "non-industry" person made the most sense to me, but it did. While I can't seem to find the video online, he essentially said that our country currently has a negative unemployment rate. Basically, there are more job openings than people to fill the jobs.

It almost sounds like what we're hearing in the service repair industry, right? What's scary is that he isn't only referring to our industry — he's referring to the American workforce in general. The current unemployment rate is at 3.7%, which actually rose from a 49 year low of 3.6%. I think it's safe to say that a good portion of the remaining people who are unemployed either do not want to work or are not able to. Either way, the actual unemployment rate is at an all time low and the trades are among those with the biggest need for skilled labor.

None of this is probably all that earth shattering to any of you. If you're reading this, there is a pretty good chance that you've gotten harassed for not getting a job done that you simply didn't have enough help to finish. You could also be frustrated by lack of revenue growth, even though it seems like you can't keep up with what you've already got in the bays.

All of this points to a new normal. There are more jobs in the service repair industry than there are people to fill them.

Upcoming Market Correction?

On the business side of this, we're constantly hearing whispers of an upcoming market correction. For those of us that were working in 2007, it certainly doesn't feel like all that long ago we went through a recession that entailed a whole lot of heartache. The thought of enduring another recession while being staff-heavy isn't all that appealing. Thoughts of laying off good people due to lack of work opens what feel like fresh wounds. So, we're kind of stuck between a rock and a hard place, eh?

Well, maybe not. According to Mr. Ramsey, in terms of jobs, we could actually afford a bit of a market correction to help us fill some of these jobs. In his opinion, the unemployment rate could rise quite a bit, and we'd still be in really good shape. While this may be true for the general populous, I would argue that it's actually more evident in the service repair industry.

Driving Profitability: From Sales to Customer Experience

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Think about where dealerships make their money in a down economy — it's the service department, stupid! Why do you think absorption rate has trended to become one of the more important performance indicators of a dealership? It's because it’s the service department that keeps the boat afloat during rough waters...

...And it has to. Based on what we're reading, the sales department profitability continues to struggle. In a recent article from Automotive News, Ingra Maurer of McKinsey & Co states, "Dealerships aren't making any money on new vehicles today. They're not making much money anymore on used cars, either." She continues, "For every incremental 1 percent of used-car transactions that go online, $40 million in used-car profits get eroded. And we see a shift to up to 50 percent online sales by 2030 — eroding a lot of the profit that dealers are benefiting from today."

Crazy to think that in roughly 10 years, half of all cars will be bought online. I have a feeling that dealers everywhere are seeing this and are coming up with plans of how to adapt. The most logical place to expand is in a dealership’s service department. Manufacturers, and every other major business, are starting to focus on customer experience more than anything — as cars become more commoditized and people start to use shared transportation as a common method of travel. That customer experience will be driven by the service departments ability to make a customer’s life easier.

Optimize and Grow Your Service Department

So, why does this matter when we discuss negative unemployment? It matters because if you're waiting to hire to prevent becoming staff-heavy in a possible recession, the service department isn't the place to do it. In fact, you had better be figuring out how to optimize and grow your service department, even if that means doing so through some form of downturn. Doing so will grow your absorption rate and carry you through tough times. Make this a priority!

Let's reflect about what I've said in this article:

  • There are currently more jobs than people, especially in the service repair industry.
  • The people that we're in search of just happen to power the most profitable part of a dealership.
  • In the not so distant future, the service department could replace sales as the stars of a dealership.
If this information doesn’t scream for shops to adapt, I'm afraid the business may just pass you by.

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