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”
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 York-based 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.”
The bottom line Worker shortages are spreading, and those with lesser skills are starting to benefit, lowering unemployment in the process.