With the U.S. near full em­ploy­ment, wages fi­nally inch up­ward

Low-skilled work­ers find jobs seven years into the ex­pan­sion “I’ve never seen it this tight, es­pe­cially at the hourly level”

Bloomberg Businessweek (Asia) - - CONTENTS - Rich Miller and Steve Matthews, with Tim Jones and Ali­son Vek­shin

Kelly Ser­vices ex­ec­u­tive Ge­orge Corona started notic­ing the change about six months ago: The $5.5 bil­lion temp agency was find­ing it tougher to find work­ers to fill be­gin­ner po­si­tions at ware­houses and call cen­ters run by Kelly clients. “It’s be­com­ing harder and harder to at­tract peo­ple to do th­ese en­try-level jobs un­less

you raise the wages,” says Corona, Kelly’s chief op­er­at­ing of­fi­cer.

Seven years into the eco­nomic ex­pan­sion, the U.S. is show­ing signs it’s run­ning short of job seek­ers qual­i­fied to fill open­ings. The short­fall, which has been ev­i­dent for some time for highly skilled work­ers, is spread­ing to work­ers with less ed­u­ca­tion as un­em­ploy­ment falls fur­ther.

“We are now close to elim­i­nat­ing the slack that has weighed on the la­bor mar­ket since the re­ces­sion,” Fed­eral Re­serve Chair Janet Yellen said in a June 6 speech. At 4.7 per­cent in May, the job­less rate is around the level that most Fed pol­i­cy­mak­ers con­sider to be full em­ploy­ment.

Pay­rolls have risen 116,000 per month since March, com­pared with last year’s 229,000 pace. No one knows whether the slow­down stems from the dwin­dling de­mand for la­bor or a shrink­ing sup­ply of work­ers. If it’s the for­mer, the Fed needs to ex­er­cise even more cau­tion in rais­ing rates. If it’s the lat­ter, pol­i­cy­mak­ers run the risk of over­heat­ing the econ­omy by wait­ing too long to in­crease the cost of credit. In­vestors don’t see the Fed rais­ing rates this year, based on trad­ing in the fed­eral funds fu­tures mar­ket.

The U.S. Depart­ment of La­bor re­ported on June 8 that job open­ings rose to 5.8 mil­lion in April from 5.7 mil­lion in March. Hires fell to 5.1 mil­lion from 5.3 mil­lion. That com­bi­na­tion “sug­gests that firms may be hav­ing dif­fi­culty in find­ing qual­i­fied em­ploy­ees in a tight­en­ing job mar­ket,” Maury Har­ris, chief U.S. econ­o­mist at UBS, and his team wrote in a June 8 re­port ti­tled Has the Well Run Dry?

The job­less rate for those with a col­lege de­gree or bet­ter has hov­ered around 2.5 per­cent. “Among the more cre­den­tialed peo­ple like en­gi­neers, sci­en­tists, and those in fi­nance, if you want to work, you’re work­ing,” Corona says. Bob Funk, chief ex­ec­u­tive of­fi­cer of staffing agency Ex­press Em­ploy­ment

Pro­fes­sion­als, says that to hire an ac­coun­tant re­cently, he had to of­fer a salary 20 per­cent higher than what his ex­ist­ing book­keep­ers get be­cause de­mand for those skills is so high.

The less-skilled are now prof­it­ing from the stretched sup­ply of la­bor. “I’ve been in the man­age­ment busi­ness for restau­rants since 1987 in At­lanta, and I’ve never seen it this tight, es­pe­cially at the hourly level,” says Robby Kuk­ler, part­ner with Fifth Group Restau­rants in At­lanta, which em­ploys 800 peo­ple at a cater­ing com­pany and eight restau­rants, in­clud­ing South City Kitchen.

“The em­ployee is now in con­trol,” says Becca Dern­berger, a vice pres­i­dent at Man­pow­erGroup, a staffing and worker train­ing com­pany with $19.3 bil­lion in world­wide rev­enue last year. Some com­pa­nies are re­spond­ing by low­er­ing their job re­quire­ments for ap­pli­cants and tak­ing on those who might need fur­ther train­ing, she says.

Oth­ers, though, are find­ing it hard to ad­just to the new real­ity of the job mar­ket. “Com­pa­nies aren’t that will­ing” yet to raise wages for the harder-to-fill en­try-level jobs, Kelly’s Corona says. “It’s a process that’s go­ing to take time” to play out.

The re­cent down­shift in hir­ing in­di­cates that de­mand for work­ers is eas­ing some­what, Funk says. His Ok­la­homa City-based staffing com­pany has about 14,000 po­si­tions open, com­pared with about 30,000 through­out last year.

The down­turn in en­ergy has ben­e­fited la­bor-starved con­struc­tion com­pa­nies, as work­ers who left that in­dus­try for the oil­patch re­turn, says Tom Crane, chief hu­man re­sources of­fi­cer for Skan­ska USA, the Amer­i­can branch of the gi­ant Swedish con­struc­tion com­pany. Still, the New York­based builder is do­ing a lot more—such as team­ing up with lo­cal com­mu­nity col­leges and vo­ca­tional schools—than it has to re­cruit and re­tain work­ers. Says Crane: “It’s not go­ing to get any bet­ter.”


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