YELLEN STILL FACES THE CUT, DON’T CUT DILEMMA

US showing signs of running short of workers

Kelly Services executive George Corona started noticing the change about six months ago. The $5.5 billion staffing company was finding it tougher to come up with workers to fill beginner positions at warehouses and call centers run by its clients.

”It’s becoming harder and harder to attract people to do these entry-level jobs unless you raise the wages,” said Corona, chief operating officer for the Troy, Michigan-based Kelly.

Seven years into the economic expansion, the US is showing some signs of running short of people who want jobs and are qualified to fill existing openings. The shortfall, which has been evident for some time for highly skilled workers such as computer software developers, is starting to spread to those with lesser talents as unemployment falls further.

“We are now close to eliminating the slack that has weighed on the labour market since the recession,” Federal Reserve Chair Janet Yellen said in a June 6 speech in Philadelphia.

At an almost nine-year low of 4.7% in May, the jobless rate was around the level that most Fed policy makers reckoned was equivalent to full employment when they released their last economic estimates in March.

As Yellen and her colleagues prepare for another policy making meeting starting on Tuesday, they face a dilemma. Is the recent slowdown in jobs growth — payrolls have risen 116,000 per month since March compared with last year’s average 229,000 pace — mainly the result of dwindling demand for labour or of shrinking supply?

If it’s the former, that argues for even more caution by the Fed in raising rates. If it’s the latter, policy makers run the risk of eventually overheating the economy if they tarry too long in tightening credit.

In her recent speech, Yellen focused on the possibility that the recent downdraft in jobs growth portended a broader slow down in the economy. Investors have taken that tack as well and don’t see the Fed increasing rates this year, based on trading in the federal funds futures market.

The labour department reported on June 8 that job openings rose to 5.8 million in April from 5.7 million in March. That tied last July’s results as the highest since records began in 2000. Hires, meanwhile, fell to 5.1 million, from 5.3 million.

Highly skilled workers have been in short supply for a while, with the jobless rate for those with a college degree or better hovering around 2.5% since the middle of last year. “Among the more credentialed people like engineers, scientists and those in finance, if you want to work, you’re working,” Corona said.