US salaries on the rise as unemployment rate hits half-century low
American companies continue to hire, easing worries of a weakening economy
American businesses have complained for years that they can’t find the workers they need to fill available jobs. November’s robust hiring gain suggests that at least some have found a way to do so.
With the unemployment rate now at a half-century low of 3.5 per cent, many economists have also warned that hiring would soon slow simply because there are fewer unemployed workers available.
That day may still come, but it didn’t last month. Employers added 266,000 jobs in November, the most since January. Monthly hiring has, in fact, picked up since earlier this year: it averaged 205,000 for the past three months, up from a recent low of 135,000 in July.
The fact that wages gains are accelerating suggests that companies aren’t just luring in new workers, but fighting for a smaller pool of applicants.
Last week's jobs report largely squelched fears of a recession that had taken hold in the summer. Steady job growth has helped reassure consumers that the economy is expanding and that their jobs and incomes remain secure. That should boost spending and growth in the months ahead.
US President Donald Trump seized on the strong jobs report as he tries to focus voters' attention on the state of the economy rather than the impeachment inquiry being led by House Democrats. The latest numbers also come as Mr Trump’s trade war with China had prompted companies to cut back on their investments in plants and industrial equipment, slowing growth.
“Without the horror show that is the Radical Left, Do Nothing Democrats, the Stock Markets and Economy would be even better, if that is possible, and the Border would be closed to the evil of Drugs, Gangs and all other problems! #2020,” the president tweeted.
He returned to the report later Friday, tweeting: "JOBS, JOBS, JOBS!”
Employers seemed to be shrugging off economic concerns, adding jobs at a solid clip. And other risks to the global economy, such as a disorderly Brexit for the UK, have faded in the past month. Given all that, the economy could provide a boost for Mr Trump in next year’s election.
Investors cheered the report, sending the Dow Jones industrial average up 340 points in afternoon trading.
The new job numbers were released as companies have been getting more creative about enticing workers as the ranks of the unemployed dwindle. Some are willing to hire people who are less qualified and train them, while others are raising pay to attract more applicants. Still others are offering flexible work schedules or have dropped some drug-testing requirements.
These efforts have lifted the proportion of Americans with jobs and lowered the unemployment rate by much more than many economists thought possible.
“Companies have somehow achieved continued success in luring job candidates,” says Stephen Stanley, chief economist at Amherst Pierpont Securities.
Some recruiters have overhauled their approach to hiring and retention as the competition for workers has tightened. Beth Thress, vice president of human resources at a Cincinnati-based company that owns two senior living centres, says it became harder to retain nursing aides and housekeepers once such retailers as Walmart and Target increased their pay.
So Ms Thress went to the board of Maple Knoll Communities, a non-profit that employs 675 people, and won approval to raise starting pay. She also offered more flexible schedules and set up an emergency fund for employees.
“There’s just a lot more competition, you’ve got meet their needs in some form or fashion,” she says. “It’s been a real shift in mentality.”
The changes are working so far, Ms Thress says. The company has reduced turnover from about 40 per cent in 2017 to just 8 per cent so far this year.
Wages overall still aren’t growing as quickly as they have in previous expansions, but there are signs of improvement. Average hourly pay for workers, excluding managers and supervisors, which covers about 80 per cent of the workforce, rose 3.7 per cent in November from a year ago. That’s just a tick lower than October’s figure, which was the highest since the recession.
The higher pay is coaxing workers off the sidelines and back into the job market. The proportion of Americans in their prime working years — aged 25 to 54 — with a job was 80.3 per cent last month, matching October’s level as the highest since January 2007.
Companies are also offering bigger raises to entice potential candidates who are working elsewhere. People who switched jobs saw their pay rise 4.3 per cent from a year earlier, according to the Federal Reserve Bank of Atlanta, the biggest gain since the recession and a full percentage point higher than the pay increase for those who stayed.
Becky Frankiewicz, president of Manpower Group North America, says her organisation often tells its corporate clients to consider loosening their job listing criteria.
“We are counselling companies to look at the requirements they set for a job and ask if they are really mandatory or just nice to have,” she says.
Ms Frankiewicz pointed to the fact that nearly 90 per cent of the technology jobs listed at Manpower require a college degree in computer science, but less than half the people working in the field have one.
Rebecca Hamilton, co-chief executive of Badger Balm, a skincare company, said the firm’s generous pay and benefits have made it easy to fill jobs, even though it is based in a small town of 700 near Keene, New Hampshire.
The 90-person company offers health and retirement benefits, but also an on-site gym, yoga classes and massages, and a free organic lunch every day.
“We don’t have any trouble whatsoever finding really good, talented people,” Ms Hamilton says.
Still, it’s not clear how long companies will be able to keep hiring at November’s blowout pace. The fact that wage gains are accelerating suggests that companies aren’t just luring in new workers, but fighting for a smaller pool of applicants.
“It’s an indication that we are starting to reach the limits of the job market,” says Joe Song, an economist at Bank of America Merrill Lynch.
Updated: December 8, 2019 03:12 PM