My column for the Washington County Daily News is online. Here you go:
When I was in business school during the previous millennium, I remember sitting in a class listening to a professor drone on about the unemployment rate, wage pressures, labor participation and the notion of full employment. Full employment is when everyone who is willing and able to work is employed. Full employment does not mean that the unemployment rate is 0 percent. An economy is traditionally considered to be at full employment when the unemployment rate is between 4 percent and 6 percent because there will always be a percentage of people transitioning between jobs and times when workers’ skills do not match the jobs available.
By any account, the U.S. and Wisconsin, and especially in West Bend, are in a state of full employment. The most recent employment reports indicate that the U.S. has an unemployment rate of 3.8 percent. Wisconsin is beating the rest of the nation by a full point with an unemployment rate of 2.8 percent. West Bend has an astonishing unemployment rate of 2.3 percent.
On the micro-level, the evidence of hyper-employment is overwhelming. A short walk around West Bend will find a “help wanted” sign at almost every business. Several businesses have large signs advertising starting wages for entrylevel jobs at $10, $15 or more per hour — and those businesses are struggling to find good employees.
At the macro-level, a Bureau of Labor Statistics report says that while 223,000 jobs were created in May, the number of unemployed persons dropped by 6.1 million people. That means that nearly 6 million people entered the national workforce to fill jobs that were already open. This has the labor participation rate — the total number of Americans employed — increasing to 62.7 percent. That still is not as high as it once was, but it is finally steadily increasing after being in steady decline since it peaked in early 2000.
There really is no longer any excuse for every ablebodied adult to get a job. Anyone with a pulse and a modicum of work ethic can, and should, get a job. This is an economic truth that policy makers should bear in mind when debating things like welfare and education.
While high unemployment creates a litany of societal and economic problems, full employment presents a set of problems. They are better problems, but problems nonetheless. First and foremost, American businesses are struggling to attract and keep good employees. In particular, entry-level jobs and skilled jobs are difficult to fill. There are still plenty of lawyers and middle-managers out there, but finding a good roofer or hotel front desk clerk has become a challenge.
The inability to find good workers has undoubtedly retarded our nation’s potential economic growth.
The inability of some businesses to find good workers is partially their own fault. Fearful of the future, too many American businesses have been slow to increase wages to attract workers off of the economic sidelines and into jobs. We are finally seeing some significant wage increases in fits and starts. Some employers and industries are offering substantial wage increases to attract workers.
While overall private sector wages have increased between 2.5 percent and 2.9 percent since last year, wages for construction workers are growing at 3.8 percent — and that does not include the ample amount of overtime pay available to willing workers. Residential construction workers’ wages are growing at an even faster 5 percent. According to the National Federation of Independent Business, 35 percent of small business owners reported increasing wages to attract and retain employees. And some of America’s largest employers like Walmart, Costco, Walgreens, Publix, Tyson Foods and many more have increased wages.
Increasing wages, which always lag in a growing economy, are finally here, but that will drive another economic metric — inflation. As wages increase, the cost of goods and services will increase to pay for them. While rampant inflation destroys economies, moderate inflation in a growing economy is quite healthy. Thanks to sustained economic growth since President Ronald Reagan was in office and the Federal Reserve’s almost irrational fear of inflation for the past decade, Americans have not experienced significant inflation in a generation. Barring more unnatural manipulation by the Federal Reserve, the American economy should expect higher inflation over the next economic cycle as the value of the dollar reconciles with the value of labor.
It was only a few short years ago when President Barack Obama and Governor Jim Doyle were trying to convince us that America’s best economic days were behind us and we needed to adjust to the new normal of a European-style economy. Thankfully, they were wrong. America’s, Wisconsin’s and West Bend’s economies are booming and all of us are seeing the benefits.