Job openings exceed number of unemployed

Earlier this month the Labor Department reported that there are more open positions than there are unemployed workers.  There were 6.7m openings at the end of April, well above the 6.3m unemployed.  This is the first time this has happened since the data series on job openings launched in 2000.

Although this is encouraging news for individuals looking for work, keep in mind that many employers prefer to poach talent away from someone else.  The unemployed have to compete against people who already have jobs for open positions.  Also there are many people involuntarily working part-time who are trying to gain full-time positions.  Takeaway: employers still have a large pool of position-seekers from which to draw, but the pool has gotten smaller relative to the number of open posts.

Companies with open positions will now consider changing the skill and experience requirements and increasing wages.  Consider the following example from WSJ:

To attract workers, the Saladworks restaurant chain has raised its starting wages about 5%. It also has relaxed standards on tattoos and piercings, allowed employees to wear jeans and bandannas, and gotten more flexible about schedules.

What happened to construction workers

Today builders say they are facing a profound shortage of qualified, trained workers.  Yet construction employment dropped by 2.3m jobs between 2006 and 2011 and is still 1.3m below the 2006 peak.  So what happened to over one million workers?  Why aren't they coming back in the market?

WSJ's Real Time Economics blog has the answer: some have switched to other industries but many have dropped out of the labor force.  At the same time hiring of young workers has been slow, so now there are not enough trained workers to meet demand.

This evidence further supports the view that despite the lowest employment to population ratio we have seen in 40 years, the labor market is close to having a balance between supply and demand.  Those who have dropped out of the labor market after they lost their jobs in the Great Recession do not appear to be coming back.

Upskilling

I ran across the term "upskilling" this weekend when I read this WSJ piece about Wal-Mart.  It seems that the term is of recent origin, and is meant to indicate the opposite of downskilling.   A Google search points to a White House initiative called "UpskillAmerica," encouraging employers to make investments in on-the-job training, employee education, and internal career paths.

Wal-Mart has already made the decision to increase entry level wages.  Recently it announced a new training program that will be rolled out to over 4500 U.S. locations, focusing on entry-level workers.  Both of these steps make sense economically if the cost savings from reduced turnover and higher productivity offset the cost of higher wages and more training.

Employee turnover costs money—by industry estimates as much as $5,000 per front-line worker, or 20% to 30% of an entry-level salary. Standard turnover in retail is 50% in the first six months. If Wal-Mart can reduce this churn, persuading people to stay at least 12 to 18 months, it will save “tens of millions of dollars a year.”

Increased customer satisfaction is another possible payoff.  A key issue will be how responsive turnover really is to higher wages and more training.  Unless Wal-Mart plans to build a lot more stores, I have to question its ability to create long term career options for its entry-level help.

Employers are keenly aware of training costs.  If they think workers can be persuaded to stick around, they will consider investing in skill development.  Otherwise they will either avoid training altogether or shift the cost to the worker via lower compensation.  Over the last seven years, the trend has been toward reduced investment in employee development.  If the tide is turning now, that is a pretty good signal that we are getting near full employment and employers are fearful of labor shortages.

Supply and demand for truckers

Spending the morning at the NC State Poole College of Management's semi-annual Supply Chain Resource Cooperative meeting.  Lots of great student projects for companies like CAT, Duke Energy, GSK, MetLife and others.

One topic that has come up repeatedly is the shortage of truckers and the increasing difficulty firms are having with this critical transportation mode.  At the same time, the percentage of young people who are participating in the labor force is at a 30 year low.

So what is stopping young people (or even not so young) from entering the profession?  (I have posted on this topic before.) Lots of theories were offered.  Part of the story is that training is expensive to obtain (but there are student loans); another part is that many potential job candidates cannot pass background checks and drug tests (maybe, but I would like to see some numbers).  One new theory offered by Jason Schenker (economist and regular SCRC speaker) -- Xbox addiction.

A first sign of wage growth

Numbers about the labor market continue to send mixed messages.  The unemployment rate is down to 5.9 percent, a level last seen in summer 2008.  In contrast the employment-population ratio dropped from 63 per cent in early 2008 to 58.5 percent by fall 2009 and has not recovered since (still at 59.0 percent).  So is the labor market back to full employment, as the unemployment data indicate, or is there still a significant excess supply of potential workers?

A key signal, many observers feel, is what will happen to wages as output expands.  If those out of the labor force are really just like the unemployed, employers will be able to fill new positions without having to raise salaries.  On the other hand, if those who have left are out for good and we really are near full employment, then salaries will need to increase.

It is too early to know which interpretation will turn out to be correct.  Last week WSJ reported rising "manufacturing wages ... in some major industrial states as shortages of certain skills ... force more companies to pay up to attract and retain workers."

However, most jobs are in the service sector.  When we hear about Walmart having trouble getting greeters and cashiers, we will know for sure that the labor market is getting near capacity.

More on labor shortages

Two recent pieces on labor shortages, following up on my earlier post:
1) Today's WSJ reports a looming national shortage of less-educated workers.  Two things going on: more high school grads are obtaining some post-secondary education (supply down) and demand is picking up in sectors that need less-educated workers (demand up).  So what does econ 101 (or for NC State MBAs MBA 505) tell us is going to happen?  If the claims about shortages are real, wages will rise; if the claims are just management bellyaching, nothing will change.
2) Wharton HR expert Peter Cappelli has been arguing that one reason employers are having trouble finding qualified workers is that the corporate world has vacated the training business.  Workers now obtain skills on their own (usually through education) or obtain them through gradual observation and absorption on the job (learning-by-doing).  He tells BusinessWeek that employers will have to start investing more in training to turn this around.  Such investments are risky unless trained employees can be retained.  So maybe they will have to be paid more???