TRANSFORMING TEAMS

WHAT TO EXPECT FROM THE LABOR MARKET

RECRUITING, WAGES & LEGISLATION

------------ BY SUSAN PALÉ

INFLATION. INFLATION. Inflation. We not only hear that word 15 times a day, we experience it every day—at the gas pump, supermarket, and that before-work coffee and bagel purchase.

Many economists are concerned that the interest rate increases approved by the Federal Reserve will slow economic growth and cause a recession. It’s too soon to know and although the labor market remains strong, there are some signs of changes ahead.

Q. My employees are concerned about the latest variant of COVID19. How do we make sure our office stays safe and compliant? A. In our compliance practice, we are routinely fielding questions about how to handle the latest strains of COVID-19. For up-to-date information, we recommend checking out OSHA’s guidance at www. osha.gov/coronavirus/safework.

That said, the most recent CDC guidelines recommend isolating for five days for those who develop symptoms and/or test positive, and to wear a mask for the following five days unless symptoms persist, in which case individuals should isolate for 10 days and then wear a mask for five additional days.

Vaccinated employees need not quarantine if exposed, but should wear a mask for five days and monitor for symptoms. Unvaccinated individuals should isolate for five days and wear a mask for an additional five days.

Recruitment & Unemployment

On July 8, the U.S. Department of Labor (DOL) issued its Job Openings and Labor Turnover Survey for June. Job openings declined slightly. The biggest decreases in openings occurred in the Professional/Business Services, Durable Goods Manufacturing, and Non-Durable Goods Manufacturing sectors. During the same 30-day period, hire and separation numbers were unchanged.

The USDOL also reports that all jobs lost to the COVID-19 pandemic have now been recovered.

The job opening numbers have— until now—been steadily increasing as have the hire and separation numbers. It’s too soon to tell if the June numbers are a “blip” or indicative of more changes to come.

The U.S. unemployment rate was 3.6% in July 2022. That’s low, but not as low as most of Minnesota, which has six metro areas with unemployment rates less than 2%, with Mankato and Rochester 1.3%. Tips for employers: • Identify the best resources to help you stay informed about labor market activity in the market(s) where you operate and consult those resources regularly. • Anticipate continued difficulty recruiting, especially entry-level candidates. • If raising pay is necessary to hire new talent, review pay levels for current, experienced employees to ensure internal equity.

• Streamline your application process. Many candidates report “giving up” trying to apply online because of a confusing/convoluted/redundant application process.

Wage Growth

The Conference Board recently reported that real wages are on track to increase 3.9% in 2022. That would be the largest increase since 2008. And employees in all roles— executives, managers, professionals, and hourly—are expected to receive similar increases.

Wage growth will also vary by geography. In areas with low unemployment and high demand for workers, expect wages to rise more sharply and quickly. In areas with high living costs, wages will rise to keep pace with those costs, which may in turn cause employers to raise prices—perpetuating the “wageprice” spiral that currently exists.

Despite high wage growth, the current inflation rate of 9.1% (the highest recorded in 40 years) results in negative wage growth for many employees. What that means is this: for employees making $40,000, real income is reduced to $36,664 when current inflation is considered. Tips for employers: • Develop and implement a longterm salary planning process that addresses current and anticipated labor market issues. • Be aware of differing costs in different labor markets. This is critical when operating multiple locations.

• Review current pay policies for competitiveness in recruiting market(s) and anticipate the need to increase wages to recruit and retain. • Consider other types of salary increases (e.g., equity increases, bonuses, special incentives) to supplement/replace the standard yearly increase of 2%-3%.

Minimum Wage

The federal minimum wage remains at $7.25, and is not likely to be raised any time soon. Twenty-one states currently have a minimum wage of $7.25.

As always, states and municipalities are well ahead of the federal government in raising wages to address costs of living and labor. A lot of these changes take effect mid-year. Tips for employers: • Be aware that minimum wage changes may not be statewide and may not take effect on Jan. 1. • Understand that even though a location may have a specified minimum wage, prevailing wages for specific jobs in specific markets may be well above these minimum levels.

• Keep informed of what’s happening at federal, state, and local levels in all of your locations.

Legislative Outlook

The current Democratic administration continues steps to advance its workplace policy agenda prior to the 2022 midterm elections. The proposed 2023 DOL budget includes major funding to expand Registered Apprenticeship opportunities, funding to allow OSHA to rebuild its rulemaking and enforcement capability and expand its whistleblower protection program, and increased funding for the Wage and Hour Division to more aggressively enforce rules regarding the misclassification of employees as independent contractors.

The United States is one of the few western countries that doesn’t offer paid family leave to employees. A federal proposal for paid family leave, originally included as part of the Build Back Better Act, is being considered by both houses of Congress as a stand-alone proposal but is not expected to advance.

Eleven states and the District of Columbia now offer some type of paid leave for employees. Federal employees are also eligible for up to 12 weeks of paid leave under the Federal Employee Paid Leave Act (FEPLA) of 2020. Tips for employers: • Subscribe to Affinity HR Group’s HR Support Plan which tracks state legislative updates that affect workplace policies and practices (www. affinityhrgroup.com/hrsupportplan). • Identify other resources to keep up on changes/new requirements at the federal, state, and local level. • Increase focus on compliance. Expect increased enforcement of OSHA, Federal Contract Compliance Programs, and DOL rules.

SUSAN PALÉ

Susan Palé, CCP, is vice president for compensation with Affinity HR Group. Reach her at (877) 660-6400 or contact@affinityhrgroup.com.

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THE WORLD IS WIDE OPEN FOR U.S. “WALL OF WOOD” A SPECIAL SERIES FROM NAWLA

------------ BY ROSE BRADEN

WE’RE ALL TOO familiar with the supply-chain problems, labor shortages and other fallout from the COVID-19 pandemic. But even before the outbreak turned the world on its head, the domestic lumber market was facing the makings of its own crisis: in a nutshell, too much wood.

Domestic Dilemma

For years, industry participants have been debating what to do about the “Wall of Wood” in the U.S. South, where timber growth far exceeds removals. With the domestic market unable to consume all of the lumber that’s harvested, a solution was desperately needed. We got one—at least temporarily—when COVID turned out to have the opposite effect on the housing market as what was expected.

Contrary to the gloom-and-doom predictions, the market continued to surge beyond anyone’s wildest imagination. As we know, people were stuck at home under pandemic lockdowns, prompting a trend in homebuying and remodeling that was even more appealing thanks to low interest rates. The result: domestic demand for softwood lumber took off, soaring to unprecedented highs.

While U.S. lumber production dipped at the outset of COVID, mills maxed out production to catch up with demand as the pandemic dragged on. Supply that was normally available for export

(Southern yellow pine forest photo courtesy Conner Industries)

was diverted to the domestic market, making it more difficult for international customers to source lumber from the U.S. On top of that, America’s booming domestic market—and the lofty prices that went with it—made our wood less competitive on the global stage.

Over the past year, softwood lumber prices have started to relent in response to softening demand. The reduction in prices—from an average of $1,500 per 1,000 bd. ft. in June 2020 to an average of $650 per 1,000 bd. ft. now—means the U.S. is competitive once again as an international supplier. U.S. softwood exports increased during the second half of last year, with a 6% increase expected for 2022.

Export Excitement

Reinvigoration of the export market will help return some balance to the U.S., which has been overwhelmingly focused on domestic lumber over the past couple of years. Companies that don’t export may want to take the time to explore the option now, in light of the important implications associated with selling wood overseas. • Housing Cycles: For one, the U.S. housing market isn’t always

going to be as hot as it has been recently. On average, over the past 30 years, the U.S. has experienced a recession or housing market downturn about every seven years.

Companies that diversify between domestic and international markets tend to come out of these scenarios in much better shape than those that put all their eggs in the domestic basket. You need only look back as far as the 2009 recession for an example of this dynamic at work. • Wall of Wood: The export market will help alleviate the excess volume in the United States—primarily the South—at a time when a global timber shortage is looming in the rest of the world. These circumstances place our country in a highly favorable position to supply the international markets. Global furniture demand, for example, has not subsided; and other nations will look to U.S. softwood to help meet that need. • Declining International Timber Supply: As the U.S. sees an increase in standing timber, a variety of issues are limiting the supply of international timber, including bans on the use of illegally harvested tropical timber, forest fires and rising log costs in Brazil, a ban on timber sales on old-growth forests in British Columbia, and bans on the use of Russian lumber. These factors place the U.S. in a key position to improve its competitiveness in international markets. • International Appeal: In addition to generous supply and prices that have fallen to a more competitive

------------| ABOUT NAWLA

North American Wholesale Lumber Association is the association that delivers unparalleled access to relationships and resources that improve business strategy and performance through sales growth, cost savings, and operational efficiencies for wholesalers and manufacturers of forest products and other building materials that conduct business in North America.

Learn how NAWLA can help your business at nawla.org. range, U.S. lumber exporters are attractive to foreign buyers for an assortment of other reasons.

Our legally harvested and sustainably managed timber aligns with growing global interest in sustainably managed forests and wood products. Thanks to education efforts by SEC and other U.S. agricultural trade organizations, international buyers in specific markets consider U.S. softwoods the gold standard. Examples of this include preferences for eastern white pine in Pakistan, highgrade Douglas fir in Japan, and preservative-treated southern yellow pine in the Caribbean. The U.S. is in excellent position be a central supplier to international markets.

Where to Look

Although a tariff war with the U.S. has taken a toll on exports to China—with exports plummeting to $60 million in 2020 from $159 million in 2017—Southeast Asia continues to show great potential for U.S. lumber exporters. Sixty percent of the world’s population resides in Asia (excluding China), and the region holds 54% of the world’s middle-class wage earners.

Even greater opportunity lies closer to home with our neighbor to the south. The potential for doing business with Mexico is nothing short of incredible, due in no small part to the fact that we share a border. That means our shipping rates are more cost-effective compared with other competing suppliers in the international market.

Phytosanitary regulations in the U.S. also work on our behalf with Mexico as a lumber customer. Those policies require products coming in from Mexico to be heat-treated; therefore, it makes sense for Mexico to buy lumber that is already heattreated from the United States, manufacture it into pallets, and then move their own goods across the border on those compliant pallets.

Add to that the multiple advantageous aspects of the new U.S./ Mexico/Canada trade agreement. Softwood lumber exports to Mexico more than doubled from $127 million to $272 million between 2020 and 2021. As U.S. lumber prices continue to soften, Mexican buyers—who are extremely price sensitive—will become even more inclined to buy from U.S. suppliers.

There’s so much potential in the export market and so many benefits, but it’s not as simple as adding an “Export” page to your website. Companies must prioritize their export business—it can’t be an afterthought; suppliers must be actively involved.

Maintaining international markets and customers requires a lot of work and a lot of time. And, of course, travel. Virtual communication sufficed during COVID—particularly in cases where the relationship was already established—and it has its place even now. However, nothing can replace face-to-face interaction, especially when trying to cultivate a relationship with a new customer.

Now that we’re able to get back on planes and attend trade shows and visit customers on site, the inperson dynamic is vital to building and maintaining relationships and also understanding the markets that we’re supplying, and vice versa. As a case in point, SEC recently hosted a group from Pakistan—some of whom, as you might imagine, had never been to a forest in real life. We took them to a sustainably managed forest in Wisconsin, where they could walk the forest stand and talk to forest managers. They learned so much more than they ever could virtually. That kind of experience just can’t be achieved by remote.

With COVID in the background, export is ready to flourish. It’s a lot of work, but with so many factors working in our favor, it surely will be worth it. At a minimum, tapping into this ocean of outside demand will allow U.S. lumber companies to even the playing field between domestic and international business while also mitigating an oversupply problem here at home.

ROSE BRADEN

Rose Braden is president of the Softwood Export Council (www.softwood.org).

Tahoe Forest Products is leasing 37.2 acres in Carson City, Nv., from the Washoe Tribe, where it has broken ground on a new sawmill.

Expected to begin production in first quarter 2023, the facility will be able to mill about 50 million bd. ft. of lumber annually.

Ten acres will be needed for buildings—including a sawmill, rough lumber sorter, dry kilns, and planer mill—and the remainder for log storage.

Logs—initially salvaged during fire clean-up efforts at Sierra-at-Tahoe—will be milled into a wide range of products, including dry-surfaced 2” construction lumber, timbers, fence posts and landscape products from the fir, and boards and factory lumber for windows from the pine. Bark will be sold for landscaping and other uses, chips and sawdust will be sold to agricultural end-users and to power plants, and planer shavings will go for animal bedding.

The first logs arrived at the site on July 18, with an additional 17 million bd. ft. expected to arrive by November.

John Shinn, CEO of Tahoe Forest Products, said the project came about very quickly because there was no other practical market for salvage logs or thinnings from the Tahoe Basin or the Humboldt Toiyabe National Forest.

He is joined in management at TFP by chairman Kevin Leary.

ABC Supply Co. has opened a new location in Medford, Or., under branch manager Tom Frost.

NorCal Lumber Co. is nearly complete with relocation of automated building component machinery to its 181-acre Marysville, Ca., distribution facility. The equipment was purchased last year from bankrupt Katerra’s Phoenix, Az., factory.

LP Building Solutions completed the sale of its Engineered Wood Products business to Pacific Woodtech, Burlington, Wa., for $210 million. The deal includes LP’s three LVL and I-joist plants, associated timber licenses, and the SolidStart brand.

Panda Windows & Doors, North Las Vegas, Nv., is partnering with Tuval Minimal of Israel to bring its custom steel windows and doors to the North American market.

Forest2Market, Charlotte, N.C., has launched Carbon Analysis 360 on its SilvaStat360 business intelligence platform.

BlueTape, San Francisco, Ca., raised $55 million in debt and investment funding to support its payment and funding solutions for the construction industry. 84 Lumber again ranked on the 2022 Inc. 5000 list of the nation’s fastest-growing private companies, moving up 569 spots since last year.

INVESTIGATORS are still trying to determine what started the fire that decimated Timber Products’ Ampine mill in Sutter Creek, Ca.

BLAZE DESTROYS AMPINE FACILITY

Timber Products’ Ampine particleboard mill in Sutter Creek, Ca., was destroyed by fire on July 25. The cause of the incident remains under investigation.

The blaze was contained to the 135,000-sq. ft. main building, which—along with the custom machinery inside and all other contents—were deemed “a total loss.” About 150 workers have been displaced.

According to TP’s Chris Knowles, the company is likely “months away” from deciding the fate of the site. In the meantime, TP’s second particleboard facility, in Medford, Or., has been moved to 24/7 operation.

MONTANA POLE YARD ADDS TREATING PLANT

Frontier Post LLC, Stevensville, Mt., has added a CCA treating plant to handle its own post and rail production, as well as agricultural products manufactured by others.

Operating on six adjacent acres as Frontier Wood Preservers, the facility saves the company money, labor and especially time.

“With the addition of our own treating facility, we are more flexible, more fluid,” said owner Orley Troyer. “We buy trees in the woods to manufacture and retail fence posts and rails. We used to ship them out to be treated. Now there’s just one loading and unloading. It’s worked out real well.”

The entire operation was installed late last year by American Wood Technology, sales agent for Moldrup Systems, including autoclave, cylinder, all pumps, tanks, control system, and mixing system. “We do the whole thing, and assist with the install,” said AWT’s Claus Staalner. “It comes in preassembled components. We started from scratch, and they were up and running within a week.”

Frontier says it’s been a smooth hand-off. “It’s a learning curve,” Troyer shared. “American Wood Technology/Moldrup has been very good to work with.”

Frontier currently treats about 95% of the posts and poles they manufacture, primarily lodgepole pine, to .40 retention or refusal. Much of the outside work is for fencing jobs and orchards in Washington, Oregon and California.

Frontier is also working toward being able to treat .60 products, such as highway guardrails.