The State of Today’s Job Market? It’s Not Nearly as Tight as You Think

John Hollon in the news, Job Market, Labor, Recruiting, Talent Acquisition 3 Comments

Do you really believe that today’s U.S. unemployment rate is at the lowest level since 1969?

Well I don’t, and I’m getting tired of the constant overhype about how this is possibly the greatest market for job seekers ever, and that anyone who wants a job can find one.

That’s because the current job market isn’t nearly as good as everyone thinks it is, and Neel Kashkari believes that, too.

What’s that you say? Don’t know who Neel Kashkari is?

He called out California’s “crazy train”

Well, I know him for two things:

  1. Back in 2014, he was the GOP candidate running against California’s longest-serving Democratic governor in America’s bluest state. As you might imagine, Kashkari got pounded, losing to Gov. Jerry Brown by 17 points. Today, however, Kashari is fondly remembered for his campaign attack against Brown’s “crazy train,” the $77 billion high-speed bullet-train/money pit from LA to San Francisco that Brown championed, but now has been clipped by his successor. It may never, ever be completed, but if it is, it will only connect Bakersfield, Fresno, and Merced. “Crazy train?” You be the judge of that.
  2. Kashkari is now President and CEO of the Federal Reserve Bank of Minneapolis, and in the spirit of his “crazy train” attack, he recently called out the Labor Department and Bureau of Labor Statistics for continuing to lean so heavily on the unemployment rate as a “reliable” indicator that the U.S. economy is at “capacity.”

In other words, just like he once called out Jerry Brown’s boondoggle of a bullet train, Kashkari is now questioning the overhyped media notion that we’re in the greatest job market in a more than a half century.

A “less-than-reliable” employment indicator

Kashkari recently wrote in The Wall Street Journal that the real issue is the workforce participation rate — defined as the percentage of the entire population either employed or actively looking for work — and that the “trauma of the Great Recession” has skewed the unemployment rate, making it a less-than-reliable indicator.

Here’s his point:

“The official unemployment rate has fallen to 3.6%, the lowest in 50 years. Historically, such low unemployment has signaled that the economy is at full capacity, which causes wages and inflation to accelerate as employers compete for scarce workers. Yet wage growth has increased modestly, to about 3% a year, and inflation is still running at 1.5%, below the Fed’s 2% target. What’s going on?

Maybe we’re looking at the wrong indicators. … Official unemployment counts only people actively looking for work, and ignores those who have left the job market, including the millions who dropped out after the 2008 financial crisis.”

Kashkari cares about all this because he’s the president of a Federal Reserve bank, and being able to read the labor market correctly is a big part of his job as is figuring out what the right monetary policy should be . That’s because the Federal Reserve is supposed to “correctly determine how to achieve its dual mandate of stable prices and maximum employment.”

Why the state of the job market really matters

Of course, you care about this because you’re trying to build your own workforce — and the current state of job market plays a big part in how you go about doing that.

If you think the job market is tight as a drum because we’re at full employment, you’ll develop hiring strategies based on that. But what if there are a lot more job candidates out there than you think? What if we’re seeing people who had pretty much given up on finding a job (and I know someone who fits that description) back in the market and looking for work?

If that’s the case — and Neel Kashkari thinks it is — your entire recruitment and hiring strategy probably needs a big adjustment.

Here’s how he describes it in The WSJ:

“The unemployment rate lately has falsely signaled that maximum employment was near, even though millions more jobless people still wanted to work. …

Remarkably, more than 70% of people who got jobs in April indicated the previous month that they weren’t looking for work. For two decades, through expansions and recessions, disability drove increasing numbers of prime-age workers out of the labor force. Economists feared this trend would never reverse. Yet in recent years people who previously had considered themselves disabled have been entering jobs. This is a wonderful development, but it adds to policy uncertainty. …

With productivity growth climbing to 1.5%, maximum employment and stable inflation will likely occur when wages are rising at a sustained rate of about 3.5%. Today wage growth is only around 3%, meaning there is likely still slack in the labor market: The economy hasn’t yet reached its capacity.”

“Maximum employment isn’t here yet”

Just like he rightly called out California’s “crazy train” as a complete and total boondoggle, Neel Kashkari is now calling out those who believe we’re at full employment in the same way. And he ends his WSJ commentary with this crucial point:

“No one knows how many more Americans want to work. But if the job market continues to improve with only modest wage growth and below-target inflation, it can be safely assumed that maximum employment isn’t here yet …”

I say “amen” to that. Adjust your talent acquisition strategy and act accordingly.

John Hollon

John Hollon is an award-winning journalist and nationally recognized expert on leadership, talent management, and smart workforce practices. He currently is Editor-at-Large at ERE Media. He also was founding Editor of the popular talent management website TLNT.com, and before that, Editor of Workforce Management magazine and workforce.com.
John also held editing positions at the Los Angeles Herald Examiner and the Orange County Register, and was top editor for Gannett at two statewide papers —Montana’s Great Falls Tribune and The Honolulu Advertiser. He also has deep experience in magazine and online publishing as editorial director at Fancy Publications, VP of Editorial at Pets.com, and Editor of the San Diego Business Journal.
In addition, John is an adjunct professor in the College of Communications at California State University, Fullerton, and a board member at the Kronos Workforce Institute. He holds an MBA from Pepperdine University’s Graziado School of Business & Management, and lives in Southern California.

Comments 3

  1. I think it’s a mistake to think of “the job market” as a monolith. As one singular market comprised of all jobs, all workers and all candidates. In truth, there are many many many – limitless, really – micro-markets, defined by variables like geography and job function. Some are REALLY tight. So tight that they’re on the verge of snapping (and quite likely, they NEED to snap in order to provide for any real, upward wage growth). Others are marked by extreme slack. What I’m seeing as a corporate Talent Acquisition professional who recruits for A LOT of different kinds of roles in one organization, is that the job markets are upside down in terms of where economists might WANT to see slack, and in terms of where actual employees expect there to be slack. Well-compensated professional roles requiring some amount of specialized education or experience are easy peasy to recruit for. Candidates are plentiful and honestly…somewhat desperate at times. These candidates keep hearing that the job market is “tight,” and while that might be so for some jobs/industries/geographies, it’s NOT particularly tight for these kinds of roles. Need an attorney? A marketing professional? An HR pro? A project manager? A software analyst? Take your pick. Candidates are plentiful. Where the job market IS tight is for roles that many, many, many people aspire to distance themselves from. Roles that lack real cultural cache and that companies ASSUME should be easy to fill because people in the upper reaches of management and leadership have SO distanced themselves from, that they place nearly no value on them whatsoever and endeavor to pay as little as possible. I’m recruiting for several roles right now and here is an example to illustrate my point: One role is a Business Systems Analyst role with a starting salary that’s budgeted around $85k. I’ve got literally dozens of well-qualified candidates clamoring for this job. The other is a Maintenance Technician role with a starting wage that’s budgeted around $22/hour. I’ve got literally ONE candidate for this role right now, and he’s already got 2 other offers on the table. AND YET, once offers are made, the candidate selected for the BSA role could counter and ask for an additional $8k in comp, and leadership will likely approve that request, while the candidate selected for the Maintenance Tech role could ask for an additional $1/hour and be met with complete derision.

    1. John Hollon Post
      Author

      Michele — Great insights on the job market, and you’re right — you can be flooded for candidates for an $85k position while also scratching to find anyone for a $20 per hour job. My point has always been that these kinds of discrepancies exist because there are segments where it is hard to find enough people (engineers, accountants, nurses, etc.) and then others where there are huge numbers of people and not enough jobs.

      But, there is also this notion to paint the current job market as one of the best of all time with the lowest unemployment ever. Neel Kashkari doesn’t think this is the case, and neither do I. Not only is the way the Labor Department measures unemployment terribly antiquated and out of date in the age of the gig economy, but is simply misses a lot of people who really want to work but aren’t getting counted — like me.

      I think we agree that in general, the job market isn’t all that “tight,” and I think back to the dotcom boom when the market WAS really tight and think to myself, “today’s job market is nothing like that.”

  2. Struck a cord, food for thought. Skewed data…oops forgot about a whole segment of the population… Nice piece!
    Best,
    Mark

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