NBC: Waging the Hiring War; By James Pethokoukis

U.S. News & World Report
Waging the Hiring War
Will low unemployment come to mean high inflation?
By James Pethokoukis
Posted 5/6/07

Mike Weimar isn't running some corporate megabehemoth. Impact
Displays, a Santa Clara, Calif., graphic design firm that makes trade
show signs, has maybe 20 employees. But with a company that size,
quickly filling job openings is critical. And right now Weimar is
struggling to fill a sales rep position. "I've been trying for a
couple of months," he says. "I've had an ad on craigslist and just put
one on Monster.com ... but I am based in Silicon Valley, and a lot of
people are looking for high-tech sales jobs, and this isn't as sexy.
.... And a lot of the people who do respond are kind of flaky."

Finding experienced, capable, non-flaky workers isn't a problem just
in Silicon Valley-well, the flaky part might be-nor is it limited to
the sales business. It's a daunting challenge for many types of
companies all across America. The staffing giant Manpower surveyed
2,400 U.S. employers earlier this year to find which jobs were hardest
to fill. Among the top 10 were teacher, accountant, and mechanic. The
hardest of all for the second straight year: sales representative.
Overall, 41 percent of responding firms reported problems in hiring,
about the same as last year. "And it's not just about finding warm
bodies," says Melanie Holmes, vice president of corporate affairs at
Manpower. "Not enough people are keeping their skills up to date."

On a roll. A recent Federal Reserve report found "continuing tight
labor market conditions, especially for skilled occupations," in nine
of the 12 Fed districts from New York to San Francisco. None of this
should be too surprising given the state of the job market. The
unemployment rate was a skimpy 4.5 percent in April, the Labor
Department reported Friday. Of course, that number may not seem so low
compared with the jobless rates of the late 1990s and 2000. In April
2000, soon after the Nasdaq stock market hit its all-time high, the
unemployment rate fell to a low of 3.8 percent.

But today's numbers are still impressive. Consider: The jobless rate
has been as low as or lower than today just 10 percent of the time
since the 1960s. "This is a tight labor market based on the
unemployment rate and on the gains in wages we have seen recently,"
says Drew Matus, U.S. economist at Lehman Brothers.

So what's not to like? Plentiful jobs-especially for college grads,
whose jobless rate is just 1.8 percent-and fatter paychecks aren't
exactly the avian flu. Except that they are, kind of, for the killjoys
at the Fed. From mid-2004 through mid-2006, the Fed raised short-term
interest rates 17 times-from 1 percent to 5.25 percent-to slow the
economy and contain inflation pressures. Like a viral contagion, once
inflation really starts to spread, it's hard to stop. And one place
the Fed has seen cost pressures is in the labor market. Higher wages
are fine as long as they are matched by rising productivity, or worker
output per hour. But, after a string of boom years, labor productivity
slipped badly last year.

What all this means is this: Firms may choose to deal with more rapid
cost pressures by passing them into the prices that consumers pay for
everything from laptops to doctors' visits. That would place upward
pressure on core inflation, which has been above the maximum 2 percent
level that Fed Chairman Ben Bernanke would prefer to see. On the
positive side for the Fed, labor costs rose at just a 0.6 percent
annual rate in the first quarter.

But beyond the pesky inflation issue is what many economics pros call
"the employment conundrum." The nation's economy has slowed
dramatically over the past year, mostly because of the housing
downturn. Yet the unemployment rate has also dropped, as the economy
has added some 2 million net new jobs.

So which is right, the weak growth numbers or the strong jobs numbers?
Janet Yellen, president of the San Francisco Fed, took a stab at an
explanation in a recent speech. Government statistics show the economy
is generating income faster than the numbers on gross domestic product
would indicate. If the income numbers are on the mark, Yellen said,
"this would mean that both labor and product markets have been tight."
And that would make the Fed less likely to cut interest rates soon.

But that's the big picture, the view from 50,000 feet. All
small-businessman Weimar knows is that the last time he made a job
offer, "I couldn't even get the guy to call me back."

(end of article)

.

Relevant Pages

  • Re: NBC: Waging the Hiring War; By James Pethokoukis
    ... people are looking for high-tech sales jobs, ... unemployment rate was a skimpy 4.5 percent in April, the Labor ... economy and contain inflation pressures. ...
    (rec.music.artists.springsteen)
  • Analysis of Unemployment Figures from the Trib
    ... the labor market expansion--usually these are complaints from the political ... But the average duration of unemployment ... Ah, but these new jobs are dead ends, right? ... deliver the economic gloom on which some politicians routinely stake their ...
    (soc.retirement)
  • NFP: Even Worse Than Reported
    ... come out of BLS regarding NFP job creation and the unemployment rate. ... Until Friday’s report. ... Labor Pool: 637,000 left the labor force last month, typically ... the share of men older than 20 with jobs was at its ...
    (misc.invest.stocks)
  • Re: 641,000 jobs cut this year so far
    ... unemployment records, ... of Labor Statistics, known as The Current Population Survey. ... The mills began closing and moving south. ... Good jobs (in contrast with manual ...
    (soc.retirement)
  • Re: Economic `Armageddon predicted
    ... How about the phony unemployment figures. ... Official economic indicators such as CPI are ... Don't tell me there is no inflation in the US ... economic forecast which argued that McDonalds jobs were "factory" jobs since ...
    (sci.econ)