On Sept. 7, 2018, Ivanka Trump tweeted that the “August unemployment rate in America has only been below 4% nine times since 1970. Four of these times have occurred this year.” According to the Bureau of Labor Statistics, April, May, July, and Aug. are the four months she referred to, May being the lowest at 3.8 percent. It had been a long 18 years since the U.S. unemployment rate had dipped below 4 percent. This streak of low unemployment rates deeply contrasts rates during the recession in 2009 which reached an astonishing 10 percent high. Low unemployment rates, though great for those looking to get into the workforce, create challenges for businesses seeking qualified applicants to fill positions as well as increased costs for employee retention.
The White House has stated “the economy has added nearly 3 million jobs since President Donald J. Trump took office.” Adding that “during the week ending April 21, just 209,000 Americans applied to receive unemployment insurance (UI) payments. The last time initial UI claims were this low was the week ending Dec. 6, 1969 – less than five months after Neil Armstrong first set foot on the moon.” This Aug. marked a record-breaking streak of 95 straight months that the U.S. economy has added jobs.
Providing further confirmation of the White House’s claims, The Wall Street Journal, while describing the half-century low in layoffs in the U.S. wrote, “this is the lowest level of unemployment benefit applications since the end of 1969.” The U.S. economy’s growth is vastly surpassing predictions made by established experts and creating a growing gap between employable individuals looking for work and the number of jobs available. A recent article published by Bloomberg stated that “job postings exceeded the number of unemployed people by 659,000 in July, the most in data back to 2000.”
Though data can be volatile from week to week, the four-week moving average of claims, a more consistent measure, also fell to a 49-year low, “signaling overwhelming tightness in the U.S. labor market” according to The Wall Street Journal. The difference between the vacant positions available and the number of unemployed persons aids in explaining the reason why wages increased in Aug. at the fastest rate since 2009. When a business is struggling to retain its workforce due to workers now having other enticing prospects, the business raises wages and/or other incentives to keep existing employees and to attract additional employees to meet the growing demand.
The Job Openings and Labor Turnover Survey, or JOLTS, shows that the number of positions waiting to be filled increased by 117,000 to 6.94 million from an upwardly revised 6.82 million vacant positions in June. An unrelated survey from the National Federation of Independent Business showed, “38 percent of U.S. small businesses had openings that they couldn’t fill in Aug., a record in data back to 1973.” Worker shortages cause businesses to raise wages in order to remain competitive. The excess of vacant positions also takes its toll through delayed or canceled projects, as well as fines from being out of compliance within the confines of contract manpower requirements.
The ManpowerGroup North America conducted a recent survey that resulted in almost half of the US employers surveyed, 46 percent, stating that they can’t find the skills they need, “up from 32 percent in 2015 and maintaining the highest level recorded since 2006.” Becky Frankiewicz, president of ManpowerGroup North America, concluded “employers need to buy skills where necessary, borrow from external sources and help people with adjacent skills bridge from one role to another.” She continued, “above all, we need to be builders of talent, rather than consumers of work to create a workforce with the skills companies and individuals need to thrive today and tomorrow.”
It seems that the White House agrees. On July 19, President Trump released an executive order establishing the President’s National Council for the American Worker that will be enacted 180 days post its release. The executive order recognizes the American worker as the “country’s most valuable resource”, and aims to provide the needed skills training to offset the deficit of workers with the required skills to fill the nearly 7 million vacant U.S. jobs.
The order looks to the future stating that “for too long, our country’s education and job training programs have prepared Americans for the economy of the past. The rapidly changing digital economy requires the United States to view education and training as encompassing more than a single period of time in a traditional classroom. We need to prepare Americans for the 21st-century economy and the emerging industries of the future.”
The policy will be based upon the executive branch working with private employers, educational institutions, labor unions, other non-profit organizations, and State, territorial, tribal, and local governments to “update and reshape our education and job training landscape so that it better meets the needs of American students, workers, and businesses.”
The executive order is a clear sign that the White House is making an effort to provide America’s private and public sectors with the skilled workers that they need to meet current and future demand. Record-breaking low unemployment rates are great, but when there is a shortage of workers to fill vacant jobs, wages go up. When wages go up, historically, the Federal Reserve increases interest rates to slow growth and stem the rise in prices.
Article written by NEWSREP guest author – Dustin Ivers