The stock market rallied Friday in response to a "not as bad as expected" August jobs report. Overall employment fell by 54,000 according to WSJ, but that was mostly because the Census was winding up. Private sector employment grew by 67,000 with most of the gains in services, especially health and education.
No matter how you spin the data, one conclusion is inescapable -- the labor market is in terrible shape: GDP is growing (modestly) but employment is not. The economics profession is still trying to come to grips with the situation. Paul Krugman and others claim that the stimulus packages to date have been inadequate and we need to double down on those efforts. Two recent pieces, one in WSJ and another in the Economist, look at research by Narayana Kocherlakota (president of the Fed branch in Minneapolis) on how the labor market itself has been affected by the financial crisis and recession. Kocherlakota argues "Firms have jobs, but can't find appropriate workers. The workers want to work, but can't find appropriate jobs. Whatever the source, though, it is hard to see how the Fed can do much to cure this problem."
Kocherlakota thinks there is a mismatch between the skills demanded by employers with open positions and the skills supplied by unemployed workers. One intriguing bit of supportive evidence: normally in recessions, the number of open positions falls as employers can fill open jobs more quickly, whereas this time the vacancy rate has actually risen over the last year from 1.8 to 2.2 percent. Why such a mismatch? (1) The housing market collapse has reduced geographical mobility and (2) the skills needed to succeed in autos, construction, and finance are not a good fit for health care and technology.
It would be interesting to hear from part-time MBAs concerning the difficulty (or lack thereof) their firms are having in filling open positions.
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What's going on with inflation?
2 years ago
Something anecdotal to your comment on reduced mobility is a recent conversation I had with a local commercial broker. Several companies have tried to recruit numerous unemployed engineers back to Kansas, California, and Texas only to be turned down as these engineers were unwilling to relocate due to their preference to stay in the RTP area. As a sign of scarcity or desperation, some of these companies set up a local presence to employ the engineers.
ReplyDeleteI also notice that many candidates for positions within my company lack solid communication and other soft skills to succeed in a customer-facing business.
My company has felt the effects of long-term job vacancies in field sales, as it has become more difficult to hire experienced candidates within the assigned territory's geography. The housing collapse contributes to the problem by making it more costly to relocate new hires. This has caused a shift in strategy by some of our competitors. Some firms are now moving existing field employees to major metros within the region (e.g., Atlanta, Dallas, etc.) and requiring each worker to travel to their assigned territory during the workweek. While this increases business travel expenses, it eliminates the need for future relocations and their associated costs. It has also resulted in a larger candidate pool to choose from for job openings. My company is considering taking an identical approach for field employees and I imagine more companies will follow suit.
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