Full employment is both a blessing and a curse
By Michael Randle, EDITOR
Woohoo, with an unemployment rate of 4.6 percent in November, we are at full employment as a nation! Most economists, even the snootiest at the Fed, agree that a national unemployment rate of around 4.8 percent based on the U-3 model is the definition of full employment in this country. We are not at late 1990’s full employment, yet. Back then, the unemployment rate got below 4.0. At 5.0 percent in the South, we are close to full employment as a region, as well. It’s something to celebrate.
There are, however, still some issues in the American South. We do have some slack available in Alabama, Louisiana, Mississippi, Oklahoma, West Virginia and in sub-regions like Eastern Kentucky, where thousands of skilled coal miners have lost their jobs.
As this issue’s cover story suggests, we are almost out of labor in this country. Full employment is a blessing and a curse. For one, almost everyone who wants a job has a job, and secondly, full employment drives up wages as employers turn to pilfering employees from rival companies.
On the negative side, full employment also means that backfilling labor for large projects — manufacturing or otherwise — for five, 10 or more years out, is almost an impossible task. That means competing in the manufacturing arena with Mexico — or any country that can easily serve the U.S. consumer and backfill labor for large projects 25 years out — is going to get more difficult as the years go by and this country’s workforce gets older and older.
Since 2010, we’ve significantly added manufacturing jobs for the first time in years in an age when robots are taking boots off the factory floor in record numbers. Some say automation will eliminate 5 million jobs in the U.S. by 2020. Is that where we are going to find the labor to keep this advanced manufacturing momentum going?
The demographics have our backs against the wall. For decades, you could count on about 200,000 people entering the workforce (ages 16-65) each month. That has cratered to just 71,000 on average each month in the last two years. Census reported in the fall quarter that 71,000 will drop to an average of about 50,000 people entering the workforce monthly for the next 15 years. Not good.
With immigration sure to slow under the new administration, the only place we can find more labor is from within. That would be the 95 million Americans who are of workforce age, yet are not in a job or looking for one. Surprisingly, few realize those counted as “not participating in the workforce” include high school and college students, prisoners, retirees, stay-at-home moms or dads, and the disabled.
As of October, the U.S. had a labor force participation rate of about 63 percent. The record participation rate over the last 20 years is 67.3 percent, which was set in February 2000. If educators and economic development leaders can focus on training for unfilled jobs (we have 5.5 million of them), we might convince another four percent of those not participating to enter the workforce, tying the record participation rate seen in the last 20 years. That would give us another 4 million people entering the workforce in addition to the 600,000 who come of age each year. It’s not much, but it’s all we have.
So, let’s hear it for full employment! It’s a great achievement and certainly rarefied air when the manufacturing and the service sectors are both creating jobs at the same time for several consecutive years. But now the really tough grind begins; finding skilled labor for growing companies who want to plant their flag in the South.