Waging the Hiring War
Will low unemployment come to mean high inflation?
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.
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