The US faces significant labour shortages in a wide range of sectors as unemployment falls towards 4 per cent and the working-age population stagnates, a leading business association has predicted.
With the time needed to fill a job already near the highest in at least 16 years and the number of people voluntarily leaving jobs at its strongest since the recession, difficulties finding skilled labour will intensify, pushing up wages and squeezing corporate profits, the Conference Board said in a report.
Barring a recession, joblessness should fall another point compared with its 5 per cent rate now, and wage growth will be running at 3-3.5 per cent in 2017, a percentage point higher, said the board.
A lengthy list of lines of work that will show significant shortages includes occupational therapists, nurses, plant operators and machinists, and the states with the tightest labour markets include Texas and Colorado.
“We are already very close to full employment, yet we have this trend of very slow growth of labour supply for the next 15 years, and there is very little that could be done about it barring major immigration reform,” said Gad Levanon, chief economist, North America at the Conference Board. “The implication of that is it is harder to find workers, and there is more acceleration in labour costs.”
While demand for workers has been sufficient to lure some Americans off the sidelines and into work, the steady exit of ageing baby boomers from the workforce is likely to weigh on the labour force participation rate over the longer term. From the perspective of employees the trends are good news, Mr Levanon added, because they should mean pay increases faster.
The US jobs market has tightened steadily even as growth in gross domestic product remains lacklustre, presenting a conundrum to Federal Reserve policymakers as they consider the next move in interest rates. One question Janet Yellen, the Fed chair, and her colleagues are trying to answer is how much hidden slack there is in the workforce — for example, people working part-time because they cannot find a full-time job.
Slow wage growth suggests that considerable slack remains, but some measures of wage growth are starting to stir. The Fed’s so-called Beige Book survey last week reported that the firming labour market was starting to deliver higher wages in nearly every region of the US.
Some employers are lifting entry level wages, and states including California and New York are aggressively boosting minimum wages to well above the federal minimum of $7.25 an hour.
Analysis from Goldman Sachs this week estimated that labour costs as a share of S&P 500 companies’ revenues rose to 9.8 per cent last year compared with 9.1 per cent in 2014, and were set to jump further.
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