Run the Numbers: 3 Reasons Why the US Might Not Be in a Tight Labor Market

In our new column, Run the Numbers, FN unpacks the data that’s driving top retail trends in the industry.

From the lowest unemployment rate in 50 years to a larger job openings-to-job seekers ratio, the signs appear to be pointing to a tight labor market.

But other figures paint a different picture: Inflation has been low, and wage growth weak — two additional factors that help economists ascertain the jobs market in the United States.

“We don’t have any basis or any evidence for calling this a hot labor market,” Federal Reserve chairman Jerome Powell said in a House Financial Services Committee hearing last month. “To call something hot, you need to see some heat.”

Here, FN unpacks the reasons why the jobs market may not be as tight as it seems.

Uneven unemployment

According to the Labor Department, American employers tacked on a healthy economic gain of 164,000 jobs in July, with the unemployment rate still hovering near half-century lows of 3.7%. But not all regions of the U.S. can report similar numbers: The city of Burlington, Vt., for instance, posted the lowest unemployment rate — 1.9% — in June, while Yuma, Ariz., saw that figure as high as 19.6% in the same period.

Beyond location, labor shortages can also vary depending on trade. Last month, the professional and technical services industries added 31,000 jobs, compared with a mediocre change of 16,000 new hires in the manufacturing sector and retail’s trimming of 3,600 positions. (Among the steeper losses were in department stores as well as clothing and accessories stores and specialty retailers.)

unemployment rate, Bureau of Labor Statistics
Civilian unemployment rate, seasonally adjusted, 1999-2019.
CREDIT: Bureau of Labor Statistics

Low labor force participation

In July, the labor force participation rate was 63% — still relatively low compared with pre-recession levels of about 66% and a high point of 67.3% in 2000. Some of that stems from a drop in the number of prime-age workers — those between 25 and 54 years old — opting to work or hunting for jobs. It is also affected by an increasing number of retirement-ready baby boomers and an aging American population.

Additionally, labor force participation among women has been in decline for nearly 20 years, with the figure peaking at 60.7% in 2000. The Bureau of Labor Statistics predicts that the women’s labor force participation rate will continue sliding in the 2014–24 decade.

labor force participation rate, Bureau of Labor Statistics
Civilian labor force participation rate, seasonally adjusted, 1990-2019.
CREDIT: Bureau of Labor Statistics

Workers want better opportunities

With the number of job openings outpacing that of job seekers, American employers are facing heavy competition — a sentiment made even more profound in the retail industry. Companies are shifting their hiring strategies in an effort to staff up vacant positions ahead of the crucial holiday shopping season. (Retailers like Amazon and Kohl’s have boosted wages and benefits in order to attract top talent as well as begun recruitment over the summer to get a head start on the busiest time for the industry.)

However, more employees willing to leave their posts means more applications arriving at employers’ desks. Such a trend could motivate employers against wage increases, deeming them unnecessary to recruit adept laborers. Moreover, the BLS still reports a high number of workers — roughly 4 million in July — actively seeking full-time positions but ultimately resorting to available part-time jobs due to economic reasons. There remains an oversupply of employees in low-skill posts including administrative and warehouse work.

retail jobs, Bureau of Labor Statistics
Employment levels in the retail industry, seasonally adjusted, 1999-2019.
CREDIT: Bureau of Labor Statistics

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