Aug 30, 2019 - Economy

America's worker deserts

Illustration of a desk and a tumbleweed

Illustration: Sarah Grillo/Axios

The U.S. unemployment rate is so low that some cities and states have turned into "worker deserts" — places where companies can't find people to hire.

Why it matters: The "good news" story of the strong labor market has a big downside that is playing out in places like Iowa, New Hampshire and Florida, where companies say they can't keep up with business demand — hampering growth — unless they find more workers.

By the numbers: Across the country, there are more than 1 million more jobs available than there are people to fill them.

In Iowa, for instance, the unemployment rate was 2.5% in July, just 1 percentage point above the lowest level on record.

  • According to the most recent government data, there are 70,000 fewer unemployed Iowans now than there were at the onset of the current economic expansion.
  • That's great for Iowans, but there's a catch: Population growth in the working-age demographic has been shrinking since 2015, according to the U.S. Census Bureau, while more Iowans are aging out of the labor force.

A dramatic example of how far companies are willing to go to find new workers is Iowa-based Wells Enterprises, which makes Blue Bunny ice cream. It opened new facilities across the country for the sole purpose of finding employees — with mixed success.

  • Mike Wells, who took over the family business 12 years ago, tells Axios he opened an office in Minneapolis to handle marketing and sales, but still couldn't find workers.
  • A year later, Wells Enterprises closed that office and built another in Chicago, where he was finally able to hire the right people for those roles.
  • Wells tells Axios it's just as challenging finding workers for those types of jobs as it is for its factory production lines.

Faced with worker scarcities, other Iowa companies are stretching as much as they can.

  • Vermeer, an industrial equipment manufacturer, has asked employees to work Saturdays — on a voluntary basis — to keep up with customer demand. But that has its limits, Vermeer's board chair Mary Andringa tells Axios, since a weekend shift isn't "as agreeable to team members as it was 30 to 40 years ago."
  • The company has struggled to find workers for its assembly line. "We disappoint customers if we can't get a product to them," Andringa says. "We've got some things now that if people order, they can't get it for 6 months. We don't like that."

A similar dynamic is playing out in states like New Hampshire, where unemployment is close to a 30-year low.

  • "There are 20,000 jobs waiting to be filled, with no one to fill them," David Juvet of New Hampshire's Business and Industry Association tells Axios.
  • The state's population growth is "at a near standstill" compared with earlier decades, making it "unlikely" that the pipeline of people entering the workforce will be large enough to replace those leaving, economists said in a 2018 analysis.

In Florida, where the unemployment rate remains "persistently low," companies are "bringing back retirees on a contract basis, increasing the use of interns and apprenticeships and enhancing productivity through better workforce training," Mark Vitner, an economist at Wells Fargo, wrote in a recent report.

  • He also noted how heavily the state relies on immigration to refuel its working-age population.

Between the lines: Manufacturing and construction are being hit particularly hard.

  • "500,000 [manufacturing] jobs are still open in the United States and we can't fill them," Nicholas Pinchuk, CEO of toolmaker Snap-On, told CNBC this week. "Our factories have never had more hours."
  • "The severity of the labor shortage in the construction industry is the strongest headwind that we face," Jon Jaffe, an executive at homebuilder Lennar, told analysts in June.
  • Despite a slowdown in activity, manufacturing saw a record number of job openings in June.

Small businesses are suffering too: In a poll, the number that said finding qualified workers was their single most important problem hit a 46-year high last month, according to the National Federation of Independent Business, which tracks Main Street sentiment.

  • "The shortage of potential employees relative to the demand for them is slowing economic growth," economists at the NFIB wrote.

Be smart: Worker deserts are creeping up in a handful of states critical for the 2020 presidential election, and business leaders there are pushing for policies that would create bigger labor pools — namely, immigration.

  • Mini-scoop: On Sept. 4, the Iowa Business Council — a coalition of Iowa's biggest companies — plans to release a set of pro-immigration recommendations, taking a position on this issue for the first time.

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