What is going to happen when the U.S. unemployment rate drops under 4 per cent, which is predicted to happen by this summer? 1 way to tell is to look at towns where joblessness is lower than that. Bloomberg News reporters traveled to Iowa, Georgia, and Maine. What they saw there’s encouraging. They discovered that companies have found ways to deal with tight labour markets and still make money. Businesses have pulled in employees from the sidelines–such as retirees, immigrants, and the homeless–and retooled processes to use less labour. Some have increased pay considerably for particular jobs, but so far there are no indications of a general wage explosion. That should embolden those in the Federal Reserve who wish to increase interest rates gradually to give growth a chance.
From glistening sea-salt caramel balls to truffles packed with hand-tied bows, the treats available at Wilbur’s of Maine Chocolate Confections in Freeport exude artisanal allure. While that is a source of pride for proprietor Andrew Wilbur, whose parents started the company, he is staring down a problem. Manufacturing workers are tough to find in Freeport, which is 15 miles north of Portland and part of its statistical area. At 1.8 percent, the unemployment rate is the third-lowest from the nation. “It’s made me think, Do I go to more mechanization?” Wilbur says from within his production plant, where three workers are making candy in what seem like miniature cement mixers.
Wilbur has increased wages for his 40 employees by over 20 percent over the previous 3 decades, but he has passed barely any of his costs onto customers. Company at his three brick-and-mortar outlets is already down or up, and he’d have dropped online and wholesale clients if he had raised prices substantially, he says.
It takes a complete year for these workers to get up to speed and five for them to reach what Wilbur, with no hint of irony, calls “the sweet spot.” With inexperienced employees starting at $12 to $14 an hour, onboarding is getting to be a significant expense. Lowering his voice a little, Wilbur admits he’s changed some of his packagings to make it less labor-intensive, such as doing away with hand-applied labels.
Shipwreck & Cargo, a souvenir store in downtown Portland that stocks items like lobster-printed boxers and Maine blueberry tea, staffed its floor with just two sales assistants throughout the busy summer season rather than the typical three. The supply of workers has dried up just as the tourism industry is on an upswing, says shop manager Jennifer Smith. “You want the right people, standing and smiling in front,” says Smith, who adds the candidate pool is becoming smaller and not as competent in the five years she has been running the store.
The leisure and hospitality industry is the backbone of the local economy, but professional and business services are engines of growth in the past several years. Weekly wages in the Portland area have been moving up slowly, climbing in accordance with the national average during the first three quarters of 2017, the most recent figures show. Inflation in the Northeast has been operating under two percent.
1 huge reason employers are trying to fill slots is the fact that Maine’s population growth has leveled off. The country has the highest median age in the nation at 44. “Last year, I was unable to get how many people I needed. I was probably short one and a half people,” states Tammara Croman, the director of Portland’s Pomegranate Inn, whose eight guest rooms are outfitted with lush floral wallpapers and works by local artists. She says the operation ran at full capacity, however, with too-few housekeepers, it was not able to accommodate as many ancient check-ins. “We end up having to hire people who we wouldn’t normally,” says Croman, who’s already put out feelers for the summer.
Applicants with no relevant experience are asked to come in for three-week trials, which provides Croman a opportunity to determine if they are cut out for the job–a mixture of housekeeping and customer support. “It allows you to see the person’s work ethic if they’re showing up on time, if they’re doing a good job,” she says.
The workforce challenges happen to be “top of mind for a while, and I don’t know if we see an end in sight,” says Quincy Hentzel, head of the Portland Regional Chamber of Commerce. Having said that, it is not all bad. “Businesses are extremely appreciative of their good employees and working really hard on retention,” she says. “That’s wonderful.”
A tight labour market also means that workers can afford to be picky. At Wilbur’s chocolate store, two store managers left last year because they’d better chances in administrative work. While the business was able to hire replacements, mounting payroll costs are weighing on profit margins. Pointing to a large, hand-painted chocolate Easter bunny in his mill, Wilbur shakes his head. “We probably make a lot of people happy,” he says, “but I’m not sure that we cover the bills.” –Jeanna Smialek
Marietta, Georgia: Casting a Wider Net
Unemployment rate: 3.7%
Average weekly wages: $1,139
Lanre Bakare, a 36-year-old Nigerian immigrant, was homeless and had small marketable work experience when he was accepted into a training program run by CobbWorks Inc.. , a federally funded nonprofit that matches employees and companies from the building, logistics, information technology, and health-care fields. He earns $40,000 yearly as an analyst managing vendors and provides at residential construction sites in Cobb County, Ga., and the surrounding region. Eleven months into the project, Bakare still marvels at his salaried status and is looking forward to that most dreaded of occupation rituals: the performance review. “I’m really excited,” he says. “We’re going to talk about if they are going to increase my job, what are my possibilities.”
CobbWorks has existed since 2000 but has recently expanded its outreach, training individuals with spotty work histories or criminal histories who companies would not have considered a couple of years back. Companies can’t afford to be picky. Founded in Cobb County, whose seat is Marietta, a city of 61,000 about 20 miles northwest of downtown Atlanta, was 3.7 percent in December. Weekly wages in the region rose more slowly than the national average during the first three quarters of 2017, the most recent figures show. Inflation, meanwhile, has been moving up relatively quickly from the Atlanta area, rising 3.3 percent in February compared with the country’s 2.2 percent.
Marietta’s biggest employer, hospital community WellStar Health System, says it is not feeling the labour crunch due to a decade-long campaign to make sure its pay and benefits are competitive. Attrition in WellStar is below the national average for the sector, according to spokesman Keith Bowermaster. The city’s No. 2 company, Lockheed Martin Corp.. , is relatively insulated from local labour trends because the marketplace for aerospace engineering work is nationwide.
But some smaller companies in the region are scrambling. That is especially true in the Cobb Galleria and adjoining Cumberland Mall places, a few miles south on I-75, where office buildings, hotels, shops, restaurants, and a new ballpark for the Atlanta Braves compete for employees. “We’ve had fast-food restaurants offering bonuses,” says Roger Tutterow, an economist at Kennesaw State University. He has also seen signs that labour shortages are constraining certain businesses, noting that the amount of building permits issued last year was half what it was during the boom that preceded the housing bust, although demand for new houses is running high.
Several Marietta companies report they are improving benefits to hang on to workers and attract new ones. InfoMart Inc.. , a 137-person operation that performs background screenings for businesses, started paying 100 percent of its workers’ health insurance premiums this year, up from 75 percent. It also rehabbed its office space to make it more “collaborative-looking,” says Senior Vice President Tim Gordon, who’s especially keen to attract millennials. InfoMart also allows its tech employees to work from home four out of five days a week.
PHOTOGRAPHER: JOHNATHON KELSO FOR BLOOMBERG BUSINESSWEEK
Just outside the city limits, Gas South LLC, a natural gas retailer, raised its minimum wage to $15 an hour in late 2016 and now offers every employee–including those in its call center–a one-month paid sabbatical every five years on top of regular vacation time. It also pays its workers’ health insurance premiums and has equipped its call centre employees so they can work at home. “We did some research into the cost of living and discovered that some of our people were really struggling,” says Chief Executive Officer Kevin Greiner. “With more money comes less stress. It helps us recruit and keep quality people.”
Paul’s Pot Pies is one of many storefronts lining Marietta’s well-appointed town square, which can be outfitted with a gazebo, flowering trees, and boxes of flowering tulips, daffodils, and hyacinths. Its owner, Paul Lubertazzi, added $2 to the hourly pay of his minimum-wage employees eight months ago because he says he was afraid he would lose them to other companies. A pickup in sales of his frozen pastry pies, which cost $9 to $25, helped cover the increase. But the cost of lots of his ingredients, especially vegetables, has risen also, and that’s why he intends to increase prices sometime this season: “I wanted to do it in January, but I’m holding off,” Lubertazzi states. “People do complain.” –Margaret Newkirk
Ames, Iowa: Building an Employee Pipeline
Unemployment rate: 1.5%
Average weekly wages: $833
“Join our team,” beckons the chyron in foot-tall red lettering outside the Taco John’s in Ames, Iowa. Across the road, a cactus-shaped hint at TacoTime admits it, too, is hiring.
“Help wanted” signs are a frequent sight in Ames, which boasts the lowest unemployment rate in the country–1.5 percent. From behind the beige laminate cashier counter of the Taco John’s, director Justin Cornelius says this outpost of this Tex-Mex chain increased pay by 50cents an hour in the fall. However, turnover has improved, because employees have more choices than they did a couple of years back. Cornelius himself is a fill-in; he has been on loan by a Des Moines restaurant since December. Normally, it takes four to six weeks to discover a permanent manager. In Ames it has been 10 months and counting.
Two miles north, in O’Donnell Ace Hardware, director Tausha Tjernagel says her shop has raised salaries every six months for the last year and a half. She is now starting full-time employees with no experience at $11 an hour, well above the nation’s $7.25 minimum. Nevertheless, Tjernagel has had to request workers to be flexible to fill holes in the program. Older part-timers who would prefer a weekday morning change are spending their Saturdays ringing up lawn fertilizer or stocking shelves with hammers and nails. But that’s far better than allowing checkout lines get longer, and that’s exactly what many town residents say is occurring at other retailers. Says Tjernagel: “We make it so that it’s not noticeable to our customers.”