Hiring weakens in May; jobless rate slips to 4.3%
Employers may be running short of skilled applicants
WASHINGTON — Are employers starting to run out of workers to hire?
A hiring pullback reported in Friday’s U.S. jobs data for May raises that prospect. The economy added just 138,000 jobs, which was still high enough to help cut the unemployment rate to a 16-year low of 4.3 percent. With the recovery from the Great Recession having reached its eighth year, hiring is gradually weakening.
“It’s definitely becoming an increasing problem for businesses — finding qualified workers,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “The pool has diminished considerably.”
Not only did employers slow their hiring during May. The government also revised downward its estimate of job growth in March and April by a combined 66,000. Monthly gains have averaged 121,000 the past three months, compared with 181,000 over the past 12 months. As recently as 2015, job growth averaged 226,000 a month.
Companies are now choosing from among a smaller pool of applicants, especially for those who have the education or skills they need.
“Given reports that job openings are near all-time highs, it suggests that businesses are struggling to fill these positions,” said Beth Ann Bovino, U.S. chief economist for S&P Global Ratings.
For now, most analysts think job growth remains solid enough for the Federal Reserve to feel confident about raising interest rates again when it meets in two weeks.
One unusual characteristic of today’s job market is that the unemployment rate keeps falling even
as hiring has slowed. Economists say the main reason is that the proportion of adults who either have a job or are looking or one has remained unusually low. Once people stop looking for a job, they’re no longer counted as unemployed.
Contributing to the trend has been the continuing retirements of America’s vast generation of baby boomers. In addition, companies are increasingly seeking workers with college degrees or specialized know-how — construction experience, for example, or a background in machine automation. As they do, the less-qualified are finding it harder to land work, and some have grown discouraged and given up their searches.
Historically, declining unemployment tends to lead to strong pay raises. So far, that hasn’t happened broadly across the economy. Average hourly earnings have risen a middling 2.5 percent over the past year.
Pay gains may be weak in part because one crucial ingredient for economic growth — worker productivity — has been sluggish. Workers generally enjoy higher incomes once they generate more value per hour on the job. Other economists suggest that broad pay gains tend to occur after a lag and that the low unemployment rate should lead to higher wages within the next 18 months.