Firms struggle to find, retain workers as economy hums
By David J. Lynch
(c) 2018, The Washington Post
Sunday, January 14, 2018
Ron Sandlin has tried everything.
He's boosted pay, added vacation days and even lowered the minimum age requirement from 25 to 23. But he still can't find enough qualified people to drive Patriot Transportation Holding's oil trucks.
"I've been in this business since 1984, and I've never seen what we're dealing with in terms of hiring people," said Sandlin, president of the Jacksonville, Florida, trucking firm. "Driver pay is going to have to continue to go up, and our customers are going to have to pay for it."
This is what full employment looks like. A decade after the worst economic downturn since the Great Depression, the United States suddenly finds itself at a place where almost everyone who wants a job can find one. The unemployment rate in December was 4.1 percent, leaving employers struggling to attract and retain good workers and raising the prospect of higher wages as the U.S. approaches congressional elections in November.
"Employees today have lots of options in all corners of industry, whether you're in fast food or retail or investment banking," said Art Mazor, a principal at Deloitte Consulting. "This feels super tight."
Since President Donald Trump signed a $1.5 trillion tax cut in December, several major employers have announced pay hikes or one-time bonuses. The latest came Thursday when Walmart announced plans to raise its starting hourly wage to $11 from $9 and distribute bonuses of up to $1,000. Other companies such as American Airlines, AT&T, Comcast and Bank of America have cited the tax legislation as the trigger for similar moves, drawing cheers from Republicans.
But the pace of wage growth actually has been accelerating at least since the fall of 2015. For the year ending Sept. 30, wages rose 3.2 percent compared with 2.9 percent for the same period one year earlier and 2.2 percent two years ago, according to economist Jim O'Sullivan of High-Frequency Economics.
Unemployment has been lower than the 4.6 percent rate that the Federal Reserve says is sustainable over the long term since March, which helps explain the brightening outlook for workers.
"It's really not until unemployment drops below the full employment level that you get upward pressure on wages," O'Sullivan said.
Employers face an especially daunting landscape in Ames, Iowa, which has the nation's lowest jobless rate at just 1.5 percent. The local Chamber of Commerce has helped recruit workers from as far as North Carolina, while employers have doubled bonuses for employees who refer new hires, said Brenda Dreyer, the Chamber's head of workforce development.
"This is not the same world of recruiting," she said. "You can't do just one thing anymore. You really have to be going at it in a number of ways."
At Mary Greeley Medical Center, the 220-bed hospital in Ames, CEO Brian Dieter has adopted more flexible employee scheduling to appeal to students from nearby Iowa State University. The hospital also has reached out to "nontraditional workers," including retirees, to fill entry-level clerical, housekeeping and valet parking jobs, he says.
Chris Nelson, the fourth-generation owner of a century-old electrical business in Ames, struggles to maintain a full roster of electricians. He's raised wages, redoubled efforts to attract young people to apprenticeships that last four to five years and even taken on semiretired workers to plug the gaps in his 70-worker firm.
"As the economy has continued to improve, it's really hit this past year," he said. "There's more work around than there are people trained to do it."
In November, when Dupont announced plans to close a local cellulosic ethanol plant, 90 workers found themselves jobless right before Thanksgiving. Dryer, of the Ames Chamber, contacted them within a week, acting as a matchmaker for companies with vacancies. Many soon landed positions at companies such as Hach Chemical and Danfoss Power Solutions.
At Patriot Transportation, Sandlin, 56, says hiring difficulties have increased as the economy healed from the punishing recession. A lack of drivers is causing him to forgo new business opportunities, he said, adding that he could easily boost his roughly 600-person payroll by 10 percent if he could find qualified candidates.
He's raised pay over the past year by 3 to 4 percent, added two vacation days and offered hiring and longevity bonuses that run up to $10,000 in certain cases.
"We're trying to do things to make the job more appealing," he said.
Sandlin's struggles are not unique. The construction industry has complained about a shortage of experienced workers. In a survey by the Association of General Contractors released earlier this month, 78 percent of respondents said they were having a hard time finding qualified workers, an increase from 73 percent one year ago.
In the short run, economists expect the jobless rate to continue falling, dipping below 4 percent later this year for the first time since December 2000. The economy already has been expanding for more than eight years, steadily shrinking the unemployment rate from its October 2009 peak of 10 percent.
Last month, the Republican Congress approved the $1.5 trillion tax cut that economists say will further stimulate the economy.
Millions of aging or discouraged workers who retreated to the sidelines in the aftermath of the recession will likely be drawn back into the workforce. That would be a healthy development, unless the job market gets so tight that employers engage in bidding wars that rapidly drive wages and prices higher.
"We still have some slack," said Michael Strain, an economist with the American Enterprise Institute. "The unemployment rate can continue to fall without sparking a significant increase in inflation."
In Wichita, Kansas, Spirit AeroSystems will take up some of that slack. The maker of aircraft components such as fuselages announced in December that it will hire 1,000 workers over the next five years as part of a $1 billion expansion.
The company says it already is facing a tight labor market, especially for skilled workers. Spirit has broadened ties with local vocational institutions, expanded its skilled apprenticeship program and gone national with recruiting efforts that formerly stayed close to home.
"We're seeing a wide variety of applicants, but fewer with direct aerospace or manufacturing experience than we have in the past," said Justin Welner, vice president for human resources. "Those experienced candidates who do apply are highly sought after, and we generally find ourselves competing with other employers."
Tight labor markets are likely to persist. Over the next decade, as the baby boomers retire, the labor force will expand by just 0.5 percent annually, roughly one-third as fast as it did between 1950 and 2016, according to the Congressional Budget Office.
Such an anemic workforce rise will sap the economy's forward momentum, which is why most economists expect Trump to fall well short of his goal of 3 to 6 percent growth. Through 2027, the CBO anticipates, the U.S. will grow at an average annual rate of just 1.8 percent.