When the Fed released last month’s Beige Book, as part of the explanation why employers are having an increasingly more difficult time finding jobs, it presented the following disturbing anecdote from a Boston Fed respondent:
Restaurant contacts, particularly in heavy tourism regions, expressed concern about possible labor shortages this summer, exacerbated by an expected slowdown in granting H-2B visas. Half of contacted manufacturers were hiring, though none in large numbers; several firms said it was hard to find workers. One respondent said that during a recent six-month attempt to add to staff for a new product, two-thirds of applicants for assembly line jobs were screened out before hiring via math tests and drug tests; of 400 workers hired, only 180 worked out.
Fast forward to today when the Fed released its latest, May, Beige Book (which, as always, found that the pace of economic expansion remained modest to moderate), and while it did not have any quite as vivid stories about the deterioration of the US labor force, there were some troubling observations.
But first, among the “bigger picture” observations, the Fed noted that Consumer spending had softened, with many districts reporting little or no change in non-auto retail sales. The Fed also said that agricultural conditions remained mixed with some regions negatively affected by unusually wet weather, and also observing tthat “the creditworthiness of applicants for agriculture loans worsened for a third straight quarter.”
Furthermore, there was little inflationary pressure, as recent data has confirmed, and as a result pricing pressures little changed from prior report although rapidly rising costs for lumber, steel, and other commodities tended to push input costs higher for some manufacturers. More troubling was the partial return of deflation as “some Districts noted falling prices for certain final goods, including groceries, apparel, and autos.”
But, as last month, the most interesting observation had to do with labor shortages which were noted across a broadening range of occupations and regions, even though most firms across districts noted little change to the recent trend of modest wage growth. Here are some excerpts from the Beige Book on the topic:
- Labor markets continued to tighten, with most Districts citing shortages across a broadening range of occupations and regions
- Labor markets remained tight, with employers facing limited supply
- Labor markets remained tight, and wages for skilled workers have continued to grow moderately
- Labor markets tightened, with employers looking to enhance benefits packages as a means of employee retention
- The labor market tightened further, and wage pressures grew moderately
- Contacts from staffing firms in labor markets with lower unemployment rates have noted greater wage pressure
But how is this possible with virtually no wage growth and with over 90 million Americans outside the labor force? Here is the exlanation, courtesy of an anecdote from the San Francisco Fed:
Leisure and hospitality contacts said they have not been able to fill many entry-level and seasonal positions due to a lower number and inferior quality of applicants compared with past years… Attracting qualified applicants for low-skilled manufacturing jobs is difficult, and many newly hired workers prove to be unreliable… Several contacts observed that applicants for some low-skilled positions did not meet the minimum job requirements or were unable to pass pre-employment screenings such as drug tests.
.. and then there was this:
staffing-firm contacts reported revenue declines, mostly reflecting a dearth of applicants to fill their clients’ positions
Although there is some hope…
That said, competition for low-skilled workers is strong and is driving up starting wages…. one firm increased driver pay by 3 cents per mile, equating to a 7.5 percent wage increase
And one company appears to have even found the solution to America’s problem: if you can’t find qualified workers at a low wage… just raise it:
a manufacturing firm that was expanding raised wages for unskilled workers 10% and noted a significant improvement in retention and the quality of applicants.
So simple even a Fed economist gets it.
via http://ift.tt/2seYw8o Tyler Durden