With more job openings than unemployed workers, employers may have to get creative to entice more Americans into the labor market.
By Andrew Soergel Senior Reporter
Employers across industries have for months complained of a shortage of workers as the unemployment rate creeps to levels unseen in nearly half a century – all while tens of millions of working-aged Americans still lack formal employment without any apparent interest in sending out a resume.
The percentage of workers interested in holding a job who don’t currently have one is as low as it’s been in years. That’s driven much debate among economists, employers and politicians as they attempt to figure out exactly how to better tap the pool of nearly 100 million Americans over the age of 16 who neither have a job nor are actively looking to land one.
“It’s possible that there is a hidden reservoir of potential workers that are outside the labor force, but could return,” Jim Baird, chief investment officer at Plante Moran Financial Advisors, wrote in a research note on Thursday. “Evidence of that was clear last month as an estimated 600,000 new workers entered (or re-entered) the labor force.”
Indeed, hundreds of thousands of Americans jumped off the sidelines last month, according to the most recent jobs numbers published last week by the Bureau of Labor Statistics. That report also showed the labor force participation rate – the percentage of civilian non-institutionalized Americans working or actively looking for a job – tick up slightly to 62.9 percent.
At the same time, the national unemployment rate rose for the first time since August from a multi-decade low of 3.8 percent to 4 percent, though an influx of workers is believed to have been the driving force behind the spike.
“How could that [unemployment increase] be good news? Because it means people are moving back into the labor force at unexpected levels, suggesting that the expansion may have more room to run than we thought and that companies may not face higher wage bills just yet,” Brad McMillan, chief investment officer at Commonwealth Financial Network, wrote in a research note last week.
The government’s standard unemployment rate only accounts for Americans actively looking for work, causing those who have simply given up on trying to find a job to slip through the statistical cracks.
Still, the number of individuals counted as unemployed in April fell short of the number of job openings for which employers were actively recruiting for the first time since the government began tracking vacancy data in 2000. That gap between the number of jobs available and the number of people who, at least on paper, are ready to fill them has persisted and widened in recent months, fueling policy discussions about how best to encourage more Americans to seek employment and help keep the economy growing.
“The abundance of job openings nationally should entice others to exit the sidelines and look for a job,” Baird said, though he went on to note that “the bottom line is that labor market conditions remain tight.”
So who are these people still on the sidelines amid America’s second-longest economic recovery on record?
Of the 94.4 million Americans who were considered out of the labor force last month – neither employed nor actively looking for a job – more than 19 million were at least 75 years of age. Unemployment among elderly Americans is problematic for those who experience it, but economists generally believe a considerable share of that older demographic consists of retirees who would likely not be interested in throwing their hats back into the employment ring.
Another 22.1 million are between the ages of 65 and 74. Gallup in 2015 estimated only a third of the oldest members of the Baby Boom generation – who turned 65 in 2011 – were still engaged in the workforce. So there are likely also many retirees in this group who would also be reluctant to get back to work, even as the average retirement age in the U.S. creeps up and the share of Americans working later in life continues to balloon.
More than 14 million of those not in the workforce in June were Hispanic or Latino, more than 12 million were black and more than 73 million were white, with labor force participation rates of 66.5 percent, 62.2 percent and 62.9 percent, respectively.
All told, nearly 23 million Americans are not counted in the labor force and are considered to be in the sweet spot of their working careers – between the ages of 25 and 54, meaning they are unlikely to be retired and in most cases likely to have completed the bulk of their post-high school training and education.
Ivanka Trump, the president’s daughter and a White House adviser, boasted during an interview last week with Fox Business Network that the U.S. holds “a large population of prime-age men and women who are out of the workforce and who are now slowly starting to return.”
The claim garnered “two Pinocchios” from The Washington Post’s popular fact-checker, which noted that “labor force participation among prime-age workers has been increasing, but not by ‘large’ amounts” and that “it has been steadily, slowly climbing since well before [President Donald] Trump took office.”
Trump’s assertion isn’t entirely inaccurate. Labor force participation among prime-age workers sat at 82 percent in June, up 0.4 percentage points over the year. In February, the rate sat at its highest point since June 2010.
The Post’s fact-checker takes issue with a separate reference to Supplemental Nutrition Assistance Program recipients, as well as Trump’s categorization of a “large population” returning to the workforce – the number of 25-to-54-year-olds employed or actively looking for a job in the U.S. expanded by slightly more than 1 million people over the past year, representing an improvement of just 1 percent.
The Post also bats away the idea that certain policies put in place by the Trump administration have done much of the heavy lifting – prime-age labor force participation bottomed out in September 2015 and has steadily climbed since.
But the percentage of prime working-aged Americans actively participating in the labor market is still shy of the 83 percent threshold the U.S. enjoyed during the mid 2000s, prior to the Great Recession.
Economists have developed a host of theories as to why folks in the prime of their working years continue to sit on the sidelines – some have pursued higher education, some have borne the brunt of declining demand for low- and middle-skill jobs as automation and globalization displace jobs, some are victims of the opioid epidemic and some are believed to have simply moved back in with their parents.
But many agree that any meaningful increase in labor force participation – a metric already expected to face headwinds for the foreseeable future as Baby Boomers continue to age out of the workforce – is unlikely to play out without wage hikes that could encourage more folks to look for jobs.
And with average hourly earnings up just 2.7 percent over the year, economists generally believe there’s still room for employers to shell out and entice jobless Americans back into the fold.
“With payroll growth continuing at this pace, and several measures on the household side, such as the prime-age employment rate, still not fully recovered, it seems likely that workers may have to continue to wait to see wage growth show up in the numbers,” Martha Gimbel, the director of economic research at employment hub Indeed, said in a statement last week.
Andrew Soergel, Senior Reporter