We are often slow to recognize important trends even when the signs are all around us, and the current example is that jobs are plentiful and likely to stay that way. Unemployment rates across United States are low, and the job market is particularly tight in states like Utah. Much of this good fortune is due to the continuing economic expansion that began over eight years ago with Utah’s unemployment rate now down to 3.5 percent.
However, the continued expansion is not the only reason why the job market is favorable for current graduates and potential job changers. The other factors have to do with demographic trends in the workforce, and these will remain even if a recession temporarily pushes up the jobless rate.
Perhaps the largest factor is the number of baby-boomers leaving the workforce over coming years, and those retirements often create promotion opportunities within the organization or job openings for someone outside. Baby boomers born between 1946 and 1964 now range from 53 to 71 years in age, so the middle of that range is now reaching peak retirement years. Nationally, this works out to about 10,000 people a day retiring, so if it seems that there have been a lot of retirement parties recently, it is not just your imagination.
A second favorable trend in the current market is that job losses in manufacturing have largely taken place and will not continue at the same pace as in the past. In 1960, manufacturing accounted for 24 percent of the workforce and now accounts for 8 percent nationally, and 9 percent in Utah. Future job losses due to continuing automation in manufacturing firms are now more likely to be offset by gains in other manufacturing firms.
Finally, the growth in newcomers to the workforce is much lower than in previous decades, again assisted by demographic trends. The labor participation rate for women has now plateaued after increasing sharply in prior decades when an average of 10 million additional women entered the labor force each decade, or about 3,000 per day. Some demographic changes are specific to Utah, as recent data show a near decade-long decline in births, although Utah continues to gain workers from migration from other states.
With all these positive factors, two puzzles remain. First, why there are still so many Utahns seeking jobs with all these job openings? Although there are many fewer job seekers than there were two years ago, there are still nearly the same number of job seekers in the state as job openings.
One explanation is that there is a mismatch between the skills needed by employers and the skills of the job seekers, and businesses frequently cite the lack of qualified applicants for their inability to expand operations. A second is that the wages offered for many of the lower skilled jobs are not worth getting off the couch. Statistics bear this out as four of the top six occupations with job openings in Utah pay less than $11 per hour for starting workers.
The second puzzle: Why are wages are so slow to increase given the competition for workers? Some economists point to the number of people who have dropped out of the labor force as evidence that there are plenty of available workers, but this does not explain why firms have not offered higher wages to coax them back into the labor market.
Another explanation is that firms are reluctant to increase wages unless workers can deliver more output (productivity growth). This fits the evidence better since a high percentage of the job openings are in low wage/low skill positions. By contrast, average earnings for college graduates have increased more than twice as much as for high school graduates over the last 15 years, and unemployment rates for college graduates are also lower at 2 percent, compared to 4.3 percent for those with only a high school degree.
All these factors suggest that jobs will be plentiful for some years, or at least until self-driving vehicles and further automation push workers out of the largest transportation and service occupations. However, despite these good times, the best strategy for workers in a strong job market is not that different from the best strategy in a weak job market: pursue ways to increase your skills and productivity. The strong economy may be able to lift all boats, but it is not likely to be enough to keep your head above the water.
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Loren Yager, Park City, formerly served as the chief economist of the Government Accountability Office, the investigative arm of Congress.