Insufficient numbers of workers can affect growth

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By almost any of the usual measures, the job market is better than it has been in decades. According to the U.S. Bureau of Labor Statistics, the U.S. seasonally adjusted unemployment rate in May 2018 was 3.8 percent, the lowest level in nearly 20 years.

Job gains have averaged 179,000 during the past three months, with millions more people now employed than a year ago.

Unemployment insurance weekly initial claim filings were down to 222,000 for the week ending June 2, and the four-week moving average of 1,728,750 is the lowest it has been since Dec. 8, 1973.

For the first time since BLS has been tracking them, the number of job openings has surpassed the number of job seekers. In April, the level of job openings climbed to 6.7 million, a new series high and well below the number of unemployed (6.1 million).

Job openings were up across a spectrum of industries including retail (openings up 31,000), health care (up 29,000), and construction (up 25,000).

Professional and technical services, transportation and warehousing, manufacturing, and mining also saw significant increases in job openings.

While low unemployment levels seem like a good thing, insufficient numbers of workers available to fill new positions can actually slow overall economic growth as companies have difficulties expanding to meet demand.

Most economists consider an unemployment rate of 4.5-5 percent to signify that the economy is at or near full employment, and we are well below that point.

Labor shortages are occurring in many industries and in different parts of the country, and it has become increasingly difficult for employers to fill open positions.

Even with these clear signals of strength, some workers still face challenges. Wages have edged up only slightly, with average hourly earnings for all nonfarm employees up 71 cents for the year (2.7 percent).

Labor force participation has also remained relatively consistentat 62.7 percent, indicating that there may be potential workers who have totally dropped off the unemployment counts because they have given up, although long-term trends are moving in that direction.

There are also millions who are working part time but would rather be full time or are otherwise underemployed.

Less than nine years ago during the worst part of the Great Recession (fall of 2009), unemployment was 10 percent and job openings stood at just 2.4 million. That’s six unemployed people per job opening.

Since that time, the unemployment rate has been cut by 6.2 percentage points and job openings have increased by 4.3 million, even though for several years we were talking about a “jobless recovery.” It’s an impressive comeback from that situation to one of the strongest job markets in history in less than a decade.

Dr. M. Ray Perryman of Lindale is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

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