US Job Machine In High Gear, but Wages Move Slowly
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The Great American Job Machine is cranking out employment opportunities almost as fast as they can be filled. Welders in St. Louis, computer technicians in Alabama, hard driving executives in the Big Apple. The Sunday help wanted sections are getting so thick in some areas, they are larger than the news sections. The job opportunities are luring people who have been out of the job market for years. Some early retirees are, in fact, "unretiring."
Traditionally, such low unemployment pushes wages up and triggers inflation. But six years into this economic expansion, wages aren't yet rising much. And that puzzles economists. Is inflation an oversleeping giant or is it truly a slain Goliath?
Federal Reserve Board chairman Alan Greenspan last week called this phenomenon an "important" departure from historic norms. But Mr. Greenspan, ever on guard against inflation, says it won't last: "The relatively modest wage gains we've seen are a transitional rather than a lasting phenomenon. The unknown is how long the transition will last."
If it is a transition, it doesn't appear ready to end yet. While job growth doesn't match levels seen after World War II or a recession, it is relatively high for this point in the economic cycle. The Bureau of Labor Statistics reports the job growth in 1996 on a percentage basis ranked only 31st out of the past 57 years. The country is full of people who are finding it easy to find work or switch jobs to fatten their paychecks.
Boston-resident John Golden, for example, recently landed a new job with a major medical-services company after being downsized out of his last position. Mr. Golden found his new job through an Internet Web site called Exec-U-Net that specializes in networking (http://www.execunet.com). In Golden's case the networking resulted in a job offer within six days. The new job netted a "significant" salary increase, he says.
A recent survey by the outplacement firm Drake Beam Morin found that more than half the unemployed executives - except for men over 50 years of age - were able to land a larger salary than the one they left behind.
Denise Lauridsen of Sandy, Utah, recently changed jobs because she wanted to reduce her commute, which could take as long as an hour, into Salt Lake City. Once she quit, she found it was a job seeker's market in an area where unemployment is a low 3 percent. "I could have applied for 10 positions that day, there's just jobs everywhere," she recalls. Ms. Lauridsen, with strong computer skills and an accountant's background, took a job at fast-growing Ovid Technologies in Murray, Utah, a 10-minute commute.
In St. Louis, workers with a mechanical aptitude and technical skills are in high demand. Last week, at Ranken Technical College, 74 companies showed up at a job fair to court 200 May graduates. "We have 8 to 10 job offers for every student who graduates. They all want technically trained, mechanically oriented disciplined people who will show up on time and make money for the company," says Linda Dempsey, the placement director.
St. Louis, with about a 3.8 percent unemployment rate, is so starved for labor that workers not fluent in English can afford to be fussy. "We've had to decline some offers because they may not be on a reasonable public transportation route or have a reasonable fringe benefits package," says Anna Crosslin, president of the International Institute of Metro St. Louis, an that organization helps refugees from such places as Bosnia and Somalia.
Last week, the Federal Reserve released its "Beige Book," a periodic regional assessment of the economy. A common theme: the tight job market. In Cleveland, for example, "... manufacturers say that finding qualified workers remains a challenge."
Despite those challenges, the Fed also noted that there still did not appear to be much upward pressure on wages. Average hourly earnings are creeping up - now rising at the highest rate in six years - but economists say there is no sign yet of higher wage costs in another economic measure, the Employment Cost Index (ECI), which includes salaries plus such expenses as health-care benefits. The ECI is growing at about a 3.3 percent annual rate.
Greenspan says "job insecurity" is playing a key, if temporary, role in keeping a lid on wages. He cited a survey which showed almost twice as many workers (46 percent) feared being laid off in 1996 as in 1991, which was the bottom of the last recession.
But many economists are less concerned about inflation's return. Labor economist Audrey Freedman says the economy can still see lower unemployment without inflation because companies no longer copy one another's labor pacts. "They do raise wages when looking for a particular employee, or certain skills, but it does not mean it goes through the whole country," says Ms. Freedman. Other factors she cites that are helping to keep wages in check include the "flexible" hiring practices of many companies, such as using outside contractors or temporary workers.
But even some temporary employment firms report it's getting harder to find workers. In Milwaukee, Sharon Canter at Manpower Inc., says the toughest regions are the Midwest and Southeast. To meet demand, Manpower is emphasizing training for a changing work force. "We have more people coming in from the sidelines, retirees, parents looking for more flexible schedules, some could even be welfare participants," she says.
Economists don't expect this job growth to continue forever. The consensus is for a slower first quarter. If there is no sign of a slowdown, Greenspan is likely to raise interest rates in an attempt to slow down the job machine.