Tag Archives: worker shortage

U.S. companies hire more workers; signs labor crunch may be easing

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth accelerated in June, offering tentative signs that a worker shortage could be starting to ease as companies raise wages and offer incentives to entice millions of unemployed Americans sitting at home.

The Labor Department’s closely watched employment report on Friday also showed just over 150,000 people entered the labor force last month. The report suggested the economy ended the second quarter with strong growth momentum, following a reopening made possible by vaccinations against COVID-19.

Still, employment gains remained less than the million or more per month that economists and others had been forecasting at the beginning of the year.

“This may be a sign that some of the temporary labor shortages holding back the employment recovery are starting to ease,” said Andrew Hunter, a senior U.S. economist at Capital Economics.

Nonfarm payrolls increased by 850,000 jobs last month after rising 583,000 in May. That left employment 6.8 million jobs below its peak in February 2020. Economists polled by Reuters had forecast payrolls advancing by 700,000 jobs. There are a record 9.3 million job openings.

The leisure and hospitality industry added 343,000 jobs, accounting for 40% of the employment gains in June. More than 150 million people are fully immunized, leading to pandemic-related restrictions on businesses and mask mandates being lifted. Government employment jumped by 188,000 jobs, driven by state and local government education. End of school year layoffs were fewer relative to the previous year.

Manufacturing added a modest 15,000 jobs. Factories are struggling with rampant worker shortages as well as scarce raw materials, which are forcing some to cut production.

Construction payrolls contracted again last month. Though the sector remains supported by robust demand for housing, expensive lumber is hampering homebuilding.

Politicians, businesses and some economists have blamed enhanced unemployment benefits, including a $300 weekly check from the government, for the labor crunch. Lack of affordable child care and fears of contracting the coronavirus have also been blamed for keeping workers, mostly women, at home.

There have also been pandemic-related retirements as well as career changes. Economists generally expect the labor supply squeeze to ease in the fall as schools reopen and the government-funded unemployment benefits lapse but caution many unemployed will probably never return to work.

Record-high stock prices and surging home values have also encouraged early retirements.

U.S. stocks opened higher on the data. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

WAGES RISING

Average hourly earnings rose 0.3% last month after gaining 0.4% in May. That raised the year-on-year increase in wages to 3.6% from 1.9% in May. Annual wage growth was in part flattered by so-called base effects following a big drop last June.

According to job search engine Indeed, 4.1% of jobs postings advertised hiring incentives through the seven days ending June 18, more than double the 1.8% share in the week ending July 1, 2020. The incentives, which included signing bonuses, retention bonuses or one-time cash payments on being hired, ranged from as low as $100 to as high as $30,000 in the month ended June 18.

Some restaurant jobs are paying as much as $27 per hour plus tips, according to postings on Poachedjobs.com, a national job board for the restaurant/hospitality industry. The federal minimum wage is $7.25 per hour, but is higher in some states.

With employment not expected to return to its pre-pandemic level until sometime in 2022, rising wages are unlikely to worry Federal Reserve officials even as inflation is heating up because of supply constraints. Fed Chair Jerome Powell has repeatedly stated he expects high inflation will be transitory.

The U.S. central bank last month opened talks on how to end its crisis-era massive bond-buying.

Though the unemployment rate rose to 5.9% from 5.8% in May, that was because 151,000 people entered the labor force. The jobless rate continued to be understated by people misclassifying themselves as being “employed but absent from work.” Without this misclassification, the unemployment rate would have been 6.1% in June.

(Reporting by Lucia Mutikani; Editing by Dan Burns, Chizu Nomiyama and Andrea Ricci)

U.S. manufacturing sector slows in April amid supply challenges

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. manufacturing activity grew at a slower pace in April, likely constrained by shortages of inputs amid pent-up demand unleashed by rising vaccinations and massive fiscal stimulus.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity fell to a reading of 60.7 last month after surging to 64.7 in March, which was the highest level since December 1983.

A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index edging up to 65 in April.

The White House’s massive $1.9 trillion pandemic relief package and the expansion of the COVID-19 vaccination program to all adult Americans has led to a boom in demand. But the pent-up demand is pushing against supply constraints as the pandemic, now in its second year, has disrupted labor supply, leading to shortages that are boosting prices of inputs.

That has been most evident in the automobile industry, where a global semiconductor chip shortage has forced cuts in production. Ford Motor Co said last week the scarcity of chips slashed production in half in its second quarter.

Technology companies are also feeling the heat. Apple warned last week that the chip shortage could dent iPads and Mac sales by several billion dollars.

Demand for goods like motor vehicles and electronics has surged during the pandemic as Americans shunned public transportation and millions worked from home and took classes remotely. Robust consumer spending helped to lift gross domestic product growth at a 6.4% annualized rate in the first quarter.

Most economists expect double-digit GDP growth this quarter, which would position the economy to achieve growth of at least 7%, which would be the fastest since 1984. The economy contracted 3.5% in 2020, its worst performance in 74 years.

The ISM survey’s measure of prices paid by manufacturers rose last month to the highest reading since July 2008.

The survey’s forward-looking new orders sub-index dropped to 64.3 after racing to 68.0 in March, which was the highest reading since January 2004.

Backlogs of uncompleted work increased last month as did export orders. Manufacturers started drawing down on inventories last month to meet demand. Business warehouses are almost bare, which should keep manufacturers busy and scrambling for resources for a while.

The survey’s manufacturing employment gauge fell to 55.1 after shooting up to 59.6 in March, which was the highest reading since February 2018. The index was well below the 61.5 forecast in a poll of economists, with the slowdown in hiring probably due to a scarcity of workers. Companies across many industries are struggling to find workers, even as employment is 8.4 million jobs below its peak in February 2020.

Federal Reserve Chair Jerome Powell last week acknowledged the worker shortage saying “one big factor would be schools aren’t open yet, so there’s still people who are at home taking care of their children, and would like to be back in the workforce, but can’t be yet.”

The worker shortage could hurt expectations for another month of blockbuster job growth in April. According to an early Reuters survey of economists, nonfarm payrolls likely increased by 950,000 jobs last month after rising by 916,000 in March.

The government is due to publish April’s employment report on Friday.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)

U.S. job openings surge, point to tightening labor market

FILE PHOTO: Job seekers line up at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job openings rebounded sharply in March, while the pace of hiring was little changed, pointing to a growing worker shortage that could slow employment growth this year.

Despite the tightening labor market conditions, the report from the Labor Department on Tuesday also showed workers still reluctant to voluntarily quit their jobs in droves to seek opportunities elsewhere. The scarcity of workers poses a risk to the economy’s growth prospects. The economy will mark 10 years of expansion in July, the longest in history.

“The risks right now for the economic outlook going forward is there is actually a danger that companies will run out of the help they need to produce goods or sell their services,” said Chris Rupkey, chief economist at MUFG in New York.

“The U.S. economy has never faced a time when labor shortages might endanger or cut short a long economic expansion, but now it does.”

Job openings, a measure of labor demand, surged by 346,000 to a seasonally adjusted 7.5 million, the Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS, showed. The job openings rate rose to 4.7 percent from 4.5 percent in February.

Vacancies in the construction industry increased by 73,000 in March. There were 87,000 job openings in the transportation, warehousing and utilities sector, while real estate, rental and leasing companies had 57,000 unfilled position. Job openings in the federal government, however, decreased by 15,000 in March.

HIRING LAGGING

Hiring was little changed at 5.7 million in March. The hiring rate was steady at 3.8 percent. The lag in hiring suggests employers are experiencing difficulties finding qualified workers, a trend that implies a slowdown in job growth later this year.

There is growing anecdotal evidence of worker shortages, especially in the transportation, manufacturing and construction industries. The economy created 263,000 jobs in April, with the unemployment rate dropping two-tenths of a percentage point to 3.6 percent, the government reported last Friday.

Economists expect job growth to slow to about 150,000 per month this year, still well above the roughly 100,000 needed to keep pace with growth in the working age population.

In March, there were 0.83 job seekers for every job opening. Job openings exceeded the number of unemployed by 1.3 million. Vacancies have outpaced the unemployed for 13 straight months.

The number of workers voluntarily quitting their jobs was little changed at 3.4 million in March, keeping the quits rate at 2.3 percent for a 10th straight month.

The quits rate is viewed by policymakers and economists as a measure of job market confidence. The Federal Reserve last week kept interest rates unchanged and signaled little desire to adjust monetary policy anytime soon.

“You have to hand it to the business community. Despite being on the wrong side of the tight labor market, firms are managing to keep from a major bidding war for workers and are still not losing workers to competitors,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

Layoffs slipped in March, lowering the layoffs rate to 1.1 percent from 1.2 percent in the prior month. Layoffs fell in the government sector, but rose slightly in manufacturing and construction. The increase in manufacturing layoffs likely reflected redundancies in the automobile sector, which is experiencing slowing sales and an inventory overhang.

“Layoffs and discharges are extremely low, by historical standards, which reflects that employers need their workers and are prepared to make an effort to retain them,” said Julia Pollak, labor economist at employment marketplace ZipRecruiter.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. weekly jobless claims hit more than 48-and-a-half-year low

FILE PHOTO: Job seekers and recruiters gather at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits dropped to a more than 48-1/2-year low last week as the labor market strengthens further, but trade tensions are casting a shadow over the economy’s outlook.

Other data on Thursday showed manufacturing activity in the mid-Atlantic region accelerated in July amid a surge in orders received by factories. But the Philadelphia Federal Reserve survey also showed manufacturers paying more for inputs and less upbeat about business conditions over the next six months.

Fewer manufacturers planned to increase capital spending, suggesting trade tensions, marked by tit-for-tat import tariffs between the United States and its trade partners, including China, Canada, Mexico and the European Union, could be starting to hurt business sentiment.

The survey came on the heels of the Federal Reserve’s Beige Book report on Wednesday, showing manufacturers in all districts worried about the tariffs and reporting higher prices and supply disruptions, which they blamed on the new trade policies.

“Yesterday’s Beige Book and the recent decline in the investment intentions balance in the Philly Fed survey show that escalating trade tensions are starting to have a material impact on companies’ confidence about the future,” said Brian Coulton, chief economist at ratings agency Fitch.

Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 207,000 for the week ended July 14, the lowest reading since early December 1969, the Labor Department said. Economists polled by Reuters had forecast claims rising to 220,000 in the latest week.

The second straight weekly decline in claims, however, likely reflects difficulties adjusting the data for seasonal fluctuations around this time of the year when motor vehicle manufacturers shut assembly lines for annual retooling.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2,750 to 220,500 last week.

The dollar firmed against a basket of currencies. Stocks on Wall Street were lower, while prices for U.S. Treasuries rose.

WORKER SHORTAGE

The claims data covered the survey week for the nonfarm payrolls component of July’s employment report. The four-week average of claims dipped 500 between the June and July survey periods, suggesting solid job growth this month.

The economy created 213,000 jobs in June, with the unemployment rate rising two-tenths of a percentage point to 4.0 percent as more Americans entered the labor force, in a sign of confidence in their job prospects.

Federal Reserve Chairman Jerome Powell told lawmakers this week that with appropriate monetary policy, the job market will remain strong “over the next several years.”

The labor market is viewed as being near or at full employment. There were 6.6 million unfilled jobs in May, an indication that companies cannot find qualified workers.

That was reinforced by the Beige Book, which showed worker shortages persisting in early July across a wide range of occupations, including highly skilled engineers, specialized construction and manufacturing workers, information technology professionals and truck drivers.

Thursday’s survey from the Philadelphia Fed showed its business conditions index jumped to a reading of 25.7 in July from 19.9 in June. The survey’s measure of new orders increased to 31.4 from a reading of 17.9 in June.

But its gauge of factory employment fell as did the average workweek. Manufacturers also continued to report higher prices for both purchased inputs and their own manufactured goods. The survey’s prices paid index soared to 62.9 this month, the highest level since June 2008, from 51.8 in June.

The index has risen 30 points since January. Sixty-three percent of manufacturers in the region reported paying more for inputs this month compared with 54 percent in June.

The price increases are likely related to tariffs on steel and aluminum imports, which were imposed by the Trump administration to protect domestic industries from what it says is unfair foreign competition.

Wednesday’s Beige Book mentioned a machinery manufacturer in the Philadelphia area who described the effects of the steel tariffs as “chaotic to its supply chain, disrupting planned orders, increasing prices, and prompting some panic buying.”

The Philadelphia survey’s index for future activity decreased for the fourth straight month. Capital spending plans over the next six months also fell as did intentions to hire more factory workers.

“Further escalation could create worse conditions and this remains a downside risk to the otherwise positive outlook over the next year,” said Adam Ozimek, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)