By Joe Moreland, Contributing Writer
For the first time in the history of the United States there are more jobs available than there are people looking for work. The U.S. Bureau of Labor Statistics
report for May shows that in April of this year there were 6.7 million
jobs available and only 6.4 million people listed as unemployed. This is
the second month in a row that this historic phenomenon has occurred,
and it’s getting wider as April’s gap was 65,000 wider than in March.1
■ The Problem
The problem is even worse than it looks. Most markets are considered
“fully employed” at around 5% unemployment. “Fully Employed” does not
mean that everyone has a job. It is, rather, an estimate of the lowest
unemployment can go before it will start to cause inflation. As
unemployment gets under 5%, so the theory goes, candidates get scarce
and employers will begin to compete for the available workers by
increasing wages faster than anticipated. Raising wages too quickly will
bring about inflation because more money in the hands of consumers
creates a greater demand for products. Greater demand causes supplies to
fall short, creating price increases to raise supply levels up to meet
the new demand.
So, if the country is fully employed at an unemployment rate of 5%,
and we are at 3.6% right now, does that mean we are about to experience
serious inflation? Maybe.
■ Jobs, Wages and Inflation
Experts expected inflation to kick in by now. So why hasn’t it
happened yet? Because wages have not increased as expected. With the
number of job seekers so low, and the number of jobs so high, the
anticipation was that employers would get into a wage war, increasing
their offers to lure candidates away from their current employers. The
BLS reports, however, that hourly wages only ticked up by one tenth of a point in April.
As a result, having more jobs than workers has not caused much of a
change because employers are not offering enough money to convince
people to change jobs.2
According to the BLS, unemployment is down in 350 of the 388 metropolitan markets
they measure. Ninety-six of those markets (including Austin) have a
jobless rate of less than 3%. The question remains: How long before
employers start to offer higher wages to steal workers from their
competition? How much of the pain can they endure?3
One of the reasons employers have been so reluctant to start a wage
war is basic economics. Sudden pay increases lead to inflation. If there
is more money in the hands of consumers, consumers demand more product
to purchase. Employers then have to create even more jobs to meet the
new demands. This causes wages to go higher. Demand then escalates more
and jobs have to added again. You see the slippery slope? Things just
keep getting worse. So companies are trying to toe the line as long as
they possibly can.
1 https://www.bls.gov/home.htm
