Low joblessness is lifting all boats
Photo: Justin Sullivan/Getty
For more than a year, the U.S. jobless rate has hovered right around 4% — including the last three months, when it's been a mind-boggling 3.7%, a half-century low. Fast-growing companies desperate for workers have turned to accepting candidates with lesser skills, drug use and felony records, dispensing with long-held hiring red lines.
Why it matters: If these trends continue, they may begin to whittle away at some of the nation's most stubborn problems — that millions of Americans have given up trying to find work after years of unemployment, and a vast number of jobless people lack sufficient skills for the quickly advancing economy.
What's happening: For five years, the labor participation rate — the percentage of people aged 16 and up who are working or actively seeking work — has been below 63%, and has been slowly declining. Historically speaking, the absolute number is not bad — it was even lower from 1948 through 1978. And many of those technically unemployed people are over 65 and retired. But in the four decades since, the rate has climbed as high as 67% — and economists have puzzled over how to get back to those bigger numbers.
The nine-year-old economic expansion has not budged the figure yet, but it has pulled hundreds of thousands of long-term unemployed people into jobs, often at companies where they learn transferable skills when previously they had few. Wages are up 3.1% this year, below rates in other historically tight job markets but also the first substantial gains in a decade.
Among the little-discussed spillover effects:
- These workers may be far more employable when they look to climb the economic ladder. "Just breaking a long spell of unemployment improves someone’s employment prospects going forward," says Oren Cass, author of "The Once and Future Worker."
- The 3.5% jobless rate for those with only a high school diploma is its lowest in 18 years.
- In the aggregate, these numbers may juice the entire economy, creating the conditions for higher GDP growth and "a persistent, positive macroeconomic effect," says Jason Furman, former chief economist to Barack Obama and now a professor at Harvard.
"This is win-win for employees and the aggregate economy," says Darrell West, head of the Center for Technology Innovation at the Brookings Institution. "Over time, having a better trained workforce will boost productivity and improve national competitiveness."
The background: For years, one of industry's biggest gripes has been a shortage of skilled workers, and economists have unflatteringly compared U.S. technical skills with those in Europe and Asia, not even in the top 10 countries in some rankings.
In addition, there are worries about slowing U.S. economic growth and a potential recession in the rest of the world.
The impact of training more and more of the unskilled work force is to change the country's underlying structure: The entire country starts out at a higher level of competency.
Yes, but: Adam Posen, president of the Peterson Institute for International Economics, tells Axios that research is not clear yet on how much of a lift such conditions provide to workers or the economy.
- A boom from 1995 to 2000 pulled a lot of workers into the U.S. economy, but it "didn’t have as much lasting benefit of re-employability or staying in the workforce when the economy turned down as we expected," Posen said.
- "That may have been because the recession that eventually came was so large and abrupt."
- But Rick Wartzman, head of the Center for a Functioning Society at the Drucker Institute, said he is skeptical about the long-term economic impact of the current expansion. "I don't want to confuse what might be happy momentarily with what has been going on for 30 years," he said.
Go deeper: Employers say it's harder to find workers