Popular Economics Weekly
Is US economy running out of available workers? Just 20,000 nonfarm payroll jobs were created in February, per the Labor Department’s Bureau of Labor Statistics, the lowest total in 17 months. But it may have been because there aren’t enough workers that want to work. That has to be part of the reason for the sharp drop from January’s 311,000 new payroll jobs—that was also revised up from 304,000 jobs!
“The unemployment rate declined by 0.2 percentage point to 3.8 percent in February, said the BLS, and the number of unemployed persons decreased by 300,000 to 6.2 million. Among the unemployed, the number of job losers and persons who completed temporary jobs (including people on temporary layoff) declined by 225,000. This decline reflects, in part, the return of federal workers who were furloughed in January due to the partial government shutdown.”
Note that workers returning from the “partial government shutdown” accounted for some of the 300,000 decrease in unemployment, but that was in the Household Survey, a telephone survey of a smaller number of respondents that includes the self-employed.
The larger and generally more accurate Establishment survey of actual business payrolls showed a much larger decrease of 31,000 fewer construction workers (vs. 53,000 hired in January), with smaller drops in retail and government employment as well. So the two surveys don’t usually match.
That rate fell because of a sharp rise in the number of those employed (up 255,000) and a sharp fall in the number of unemployed, as I said, which makes for an unexpected 2 tenths dip in the unemployment rate to 3.8 percent.
The bottom line is there aren’t enough workers for hire. The number of job openings reached a series high of 7.3 million on the last business day of December due to the looming scarcity of hires. This means businesses must find more creative ways to hire and hold their employees—such as continue to raise salaries.
Wages in today’s report are another indication of the labor shortage, jumping 0.4 percent in the month which is outside expectations for a year-on-year rate of 3.4 percent that is at the high end of expectations.
It should also mean more job creation this year, since many of those 6 million still out of work are simply waiting for wages to return to pre-recession levels, according to various sources. This is measured by the voluntary ‘Quits’ component of the Job Openings and Labor Survey that has been rising. Many of those having to work during and after the Great Recession had to take steep reductions in pay.
So getting back to an equivalent breakeven for those workers holding out means taking into account the pay losses from the downturn even with a fully employed economy. The gap between openings and hires is now 1.428 million, a new record and up from 1.304 million in November. It’s a very good number for growth prospects in 2019, as employers don’t look for this many new employees while continuing to raise wages, unless they see a better future.
Harlan Green © 2019
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