Tightest Job Market Since 2008 in U.S. Cities Prompts Higher Pay

Photographer: Mario Tama/Getty Images

Companies across the U.S. from Texas to the District of Columbia and Nebraska are struggling to fill positions with metropolitan jobless rates below the 5.2 percent to 5.6 percent level the Federal Reserve regards as full employment nationally. Close

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Photographer: Mario Tama/Getty Images

Companies across the U.S. from Texas to the District of Columbia and Nebraska are struggling to fill positions with metropolitan jobless rates below the 5.2 percent to 5.6 percent level the Federal Reserve regards as full employment nationally.

To hire 10 to 15 project coordinators this year, Sabre Commercial Inc. has boosted pay 10 percent and added a 401(k) retirement plan.

“It is an employee’s market,” said John Cyrier, co-founder and president of the 48-employee Austin, Texas-based builder. “We are definitely seeing a labor shortage in Austin and central Texas. I see it only getting worse.”

Companies across the U.S. from Texas to Virginia and Nebraska are struggling to fill positions with metropolitan jobless rates below the 5.2 percent to 5.6 percent level the Federal Reserve regards as full employment nationally. Competition for workers is prompting businesses to raise wages, increase hours for current employees, add benefits and recruit from other regions.

“There are spot labor shortages” that probably will “broaden out over the next year as the job market steadily improves,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania.

Unemployment in Austin-Round Rock-San Marcos was 4.8 percent in February, Labor Department figures show. Forty-nine, or 13 percent, of the 372 metro areas reported jobless rates below 5 percent that month, the most for February since 2008, two months after the start of the recession. The lowest was 2.8 percent in Houma-Bayou Cane-Thibodaux, Louisiana, because of offshore-oil exploration in the Gulf of Mexico.

Four years ago, during the worst of the labor-market slump, just two cities had rates below 5 percent.

Wage Pressure

“That says the economy is getting better in a lot of places,” said David Wiczer, labor-market economist at the Federal Reserve Bank of St. Louis. While national unemployment is a closely watched indicator, “it is difficult to average things. This does have implication for wage pressure at the local level.”

The latest Fed Beige Book review of regional economic conditions highlighted the pinch, with six of the 12 districts - - Dallas, New York, Cleveland, Richmond, Chicago and Kansas City -- reporting difficulty finding skilled workers.

“There were several reports of upward wage pressures” in the Dallas district, which includes Austin, according to the review released this week. “Construction-related manufacturers said they had to pay truck drivers more, and an oil-field services firm noted definite wage increases.” Pressure also “continued to be reported in petroleum refining, both in construction-type jobs and factory personnel. Two other manufacturers said they intend to give small raises in the near future.”

Rising Compensation

Compensation has risen about 2 percent nationally so far this year and probably will increase by 2.2 percent next year, 2.5 percent in two years and 3 percent by late 2016, Zandi estimates.

“The national economy will return to full employment one metro area at a time,” he said.

As incomes edge higher and labor markets tighten, the Fed may raise its benchmark interest rate more than policy makers have projected, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York and the top unemployment forecaster for the past two years, according to data compiled by Bloomberg.

The FOMC has held its federal funds rate on overnight loans among banks near zero since December 2008 and has predicted the rate will be 1 percent at the end of 2015 and 2.25 percent at year-end 2016. LaVorgna estimates it will be 1.5 percent in December 2015 and 3.5 percent a year later.

Lowest-Wage Jobs

Regional demand will have the greatest impact on paychecks for the lowest-wage jobs, such as fast-food, because people aren’t likely to relocate for these positions, said Gary Burtless, an economist in Washington at the Brookings Institution who was previously at the U.S. Labor Department.

“Tightening local markets while the national market remains weak would reflect some geographic mismatch, in which demand is rising in some localities while the supply -- unemployed workers -- are concentrated elsewhere,” said Harry Holzer, a professor of public policy at Georgetown University in Washington and former chief Labor Department economist.

While some people will move for good-paying careers over time, migration can be limited by poor information about opportunities, houses with mortgages more than the value of the properties and an aging population, Holzer said.

The number of positions waiting to be filled climbed by 299,000 to 4.17 million in February, the most since January 2008, the Labor Department reported April 8. The figure is among the job-market barometers Fed Chair Janet Yellen tracks.

Cooks Needed

In New Orleans, where unemployment is 4.2 percent, “we are getting killed on overtime,” said Ti Martin, co-owner of Commander’s Palace, SoBou and Café Adelaide, which employ a total of more than 350 people. “We are doubling up and working extra hours,” and managers are filing in as cooks. The restaurants have a dozen or more openings, mainly for experienced chefs and servers, she said.

Martin is leading an effort among proprietors to start a nonprofit culinary institute in the city to train needed kitchen staff.

In Omaha, with a 4.5 percent unemployment rate, the Greater Omaha Chamber is coordinating a program that will increase the number of internships to more than 300 this year from 135 in 2012 at employers including Mutual of Omaha Insurance Co., Union Pacific Corp. (UNP) and ConAgra Foods Inc. (CAG) Exposing young people to the city has been an “excellent recruitment tool,” said Sarah A. Johnson, director of talent and workforce initiatives for the chamber.

Seasonal Jobs

A tight market “is literally our reality,” said Omaha Steaks International Inc. spokeswoman Beth Weiss. The food seller hired more than 3,000 people for seasonal jobs during the holidays and uses cash bonuses and employee discounts to try to attract workers.

The jobless rate in the Washington metro area, which includes the Virginia cities of Alexandria and Arlington, was 5.1 percent in February, near a five-year low, which means some professional jobs have gone begging.

“The competition for people is really fierce right now,” said Gar Muse, principal with Cooper Carry, an architectural firm that has increased staff to 50 in Alexandria from 40 in 2010 and plans to hire more. Cooper Carry boosted its advertising to seven print and online outlets this year from a single posting and uses social media to promote job openings.

The company also has had to work to keep existing staff. “We have lost a handful of people,” Muse said. “They are constantly being approached and we have had to make some counteroffers.”

Social-Media Recruiting

Social-media sites are playing a bigger role in scouting talent. Some 77 percent of employers used networking websites to recruit potential job candidates last year, up from 56 percent in 2011, according a 2013 study by the Society for Human Resource Management, an Alexandria-based trade group representing human-resource professionals.

The labor shortage is expected to worsen in some regions. In Houston and the surrounding area, construction for the oil, gas and petrochemical industries on the Gulf Coast will require about 36,000 more workers in 2016 than in 2013, according to Industrial Info Resources Inc., a Houston-area based research company.

Even with hot labor markets in some cities, twenty-nine metro areas still have unemployment rates of at least the October 2009 post-recession peak of 10 percent, including Atlantic City, New Jersey, and Fresno, California.

Slowly Improving

The national picture is “generally consistent with a slowly improving” job market that is “still far from complete health,” said Rob Valletta, research adviser at the San Francisco Fed, whose work has been cited by Yellen.

Moreover, some economists believe the decline in joblessness -- which was 6.7 percent in March and has fallen faster than Fed policy makers predicted -- is sending a misleading signal about the health of the economy.

“The labor market actually has a fair bit more slack than would be indicated by the national unemployment rate,” said Jesse Rothstein, a former chief economist at the Labor Department who now teaches at the University of California at Berkeley. “If you believe that, then the same problem has to hold in local labor markets as well.”

Employers in Austin say they don’t see evidence of slack, such as discouraged workers waiting for more opportunities to start looking for jobs.

Tech Growth

“There is a stronger economy and a lot of growth in the tech sector,” said Jason Schenker, president of Prestige Economics LLC, an Austin-based economic research company. “Construction is booming. There is some migration of people for jobs, which has a multiplier effect creating more jobs.”

The city was “relatively resilient” during the 18-month recession that ended in June 2009, in part because it is the state capital and home of the University of Texas, he said.

“It is definitely a war for regional talent,” said Sherri Manning, vice president at Q2 Holdings Inc. (QTWO), an Austin company with 446 people that provides technology for online and mobile banking.

Q2 Holdings, which hires 70 percent of its staff from Texas, provides cash bonuses to employees for referrals and holds recruiting events with pizza at pinball arcades. Last year, it started a 90-day training program to teach needed skills to people with a technical inclination -- such as a math or science degree -- though no formal experience. Those who do well are hired, Manning said.

Construction Demand

Shortages exist in Austin for construction workers in trades including installing drywall and painting, Sabre Commercial’s Cyrier said. His company, which began boosting wages in 2011, directly employs project coordinators, while contracting out most other tasks. Subcontracting costs have gone up 15 percent or more in the past three years, he said.

He has sought to create a more collegial environment to attract younger workers. One example: stressing more communication, including daily huddles among staff about project issues. Making sure the company is viewed as a good place to work is important because it receives a third fewer resumes than two years ago, he added.

“If we get a good resume, we have to make a decision really quick,” he said. “We are always looking.”

To contact the reporter on this story: Chris Wellisz in Washington at cwellisz@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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