Inside the Hottest Job Market in Half a Century

All sorts of people who have previously had trouble landing a job are now finding work. A look at who’s getting ahead, who could be left behind and how long the boom can last.

The job market doesn’t get much better than this. The U.S. economy has added jobs for 100 consecutive months. Unemployment recently touched its lowest level in 49 years. Workers are so scarce that, in many parts of the country, low-skill jobs are being handed out to pretty much anyone willing to take them—and high-skilled workers are in even shorter supply.

All sorts of people who have previously had trouble landing a job are now finding work. Racial minorities, those with less education and people working in the lowest-paying jobs are getting bigger pay raises and, in many cases, experiencing the lowest unemployment rate ever recorded for their groups. They are joining manufacturing workers, women in their prime working years, Americans with disabilities and those with criminal records, among others, in finding improved job prospects after years of disappointment.There are still fault lines. Jobs are still scarce for people living in rural areas of the country. Regions that rely on industries like coal mining or textiles are still struggling. And the tight labor market of the moment may be masking some fundamental shifts in the way we work that will hurt the job prospects of many people later on, especially those who lack advanced degrees and skills.

But for now, at least, many U.S. workers are catching up after years of slow growth and underwhelming wage gains.One face of the red-hot job market is Cassandra Eaton, 23, a high-school graduate who was making $8.25 an hour at a daycare center near Biloxi, Miss., just a few months ago. Now she earns $19.80 an hour as an apprentice at a Huntington Ingalls Industries Inc. shipyard in nearby Pascagoula, where she is learning to weld warships.

The unemployment rate in Mississippi, where Huntington employs 11,500 people, has been below 5% since September 2017. Prior to that month, the rate had never been below 5% on records dating back to the mid-1970s. In other parts of the country, the rate is even lower. In Iowa and New Hampshire, the December jobless rate was 2.4%, tied for the lowest in the country. That’s helped shift power toward job seekers and caused employers to expand their job searches and become more willing to train applicants that don’t meet all qualifications.“It’s amazing that I’m getting paid almost $20 an hour to learn how to weld,” says Ms. Eaton, the single mother of a young daughter. When she finishes the two-year apprenticeship, her wage will rise to more than $27 per hour.It’s no surprise to economists that many people who were previously left behind are now able to catch up. It’s something policymakers have been working toward for years. Obama administration economists debated how to sustain an unemployment below 5%. Now Trump administration officials are considering how to pull those not looking for jobs back into the labor force.“If you can hold unemployment at a low level for a long time there are substantial benefits,” Janet Yellen, the former chairwoman of the Federal Reserve, said in an interview. “Real wage growth will be faster in a tight labor market. So disadvantaged workers gain on the employment and the wage side, and to my mind, that’s clearly a good thing.”

This was one of Ms. Yellen’s hopes when she was running the Fed from 2014 to 2018; keep interest rates low and let the economy run strong enough to keep driving hiring. In the process, the theory went, disadvantaged workers could be drawn from the fringes of the economy. With luck, inflation wouldn’t take off in the process. Her successor, Jerome Powell, has generally followed the strategy, moving cautiously on rates.

“This is a good time to be patient,” Mr. Powell told members of Congress Tuesday.Looming Risks

The plan seems to be paying big dividends now, but will it yield long-term results for American workers?

Two risks loom. The first is that the low-skill workers who benefit most from a high-pressure job market are often hit hardest when the job market turns south. Consider what happened to high-school dropouts a little more than a decade ago. Their unemployment rate dropped below 6% in 2006 near the end of a historic housing boom, then shot up to more than 15% when the economy crumbled. Many construction, manufacturing and retail jobs disappeared.

The unemployment rate for high-school dropouts fell to 5% last year. In the past year, median weekly wages for the group rose more than 6%, outpacing all other groups. But if the economy turns toward recession, such improvement could again reverse quickly. “The periods of high unemployment are really terrible,” Ms. Yellen said.

The second risk is that this opportune moment in a long business cycle might be masking long-running trends that still disadvantage many workers. A long line of academic research shows that automation and competition from overseas threaten the work of manufacturing workers and others in mid-skill jobs, such as clerical work, that can be replaced by machines or low-cost workers elsewhere.

The number of receptionists in America, at 1.015 million in 2017, was 86,000 less than a decade earlier, according to the Labor Department. Their annual wage, at $29,640, was down 5% when adjusted for inflation.

Tougher trade deals being pushed by the Trump Administration might help to claw some manufacturing jobs back, but economists note that automation has many of the same effects on jobs in manufacturing and the service section as globalization, replacing tasks that tend to be repeated over and over again.

Andrew McAfee, co-director of the MIT Initiative on the Digital Economy, said the next recession could be the moment when businesses deploy artificial intelligence, machine learning and other emerging technologies in new ways that further threaten mid- skill work.

“Recessions are a prime opportunity for companies to reexamine what they’re doing, trim headcount and search for ways to automate,” he said. “The pressure to do that is less when a long, long expansion is going on.”

With these forces in play, many economists predict a barbell job market will take hold, playing to the favor of low- and high-skill workers and still disadvantaging many in the middle.Reaping Gains

The U.S. is adding jobs in low-skilled services sectors. Four of the six occupations the Labor Department expects to add the most jobs through 2026 require, at most, a high-school diploma. Personal-care aide, a job which pays about $11 an hour to help the elderly and disabled, is projected to add 778,000 jobs in the decade ended in 2026, the most of 819 occupations tracked. The department expects the economy to add more than half million food prep workers and more than a quarter million janitors.

Those low-skill workers are reaping pay gains in part because there aren’t a lot of people eager to fill low- skill jobs anymore. Only about 6% of U.S. workers don’t hold a high school diploma, down from above 40% in the 1960s, according research by MIT economist David Autor.

James O. Wilson dropped out of high school in the 10th grade and started selling drugs, which eventually led to a lengthy incarceration. When Mr. Wilson, 59, was released in 2013 he sought out training at Goodwill, where he learned to drive a forklift. Those skills led him to a part-time job at a FedEx Corp. facility at an Indianapolis, Ind., airport. He was promoted to a full- time job in 2017, and is now earning more than $16 an hour. He has a house with his wife and enjoys taking care of his cars, including a prized Cadillac.

“I wanted to show FedEx you can take a person, and he can change,” he said. “I want FedEx to say, ‘Do you have any more people like him?’”

Skilled workers in high-tech and managerial positions are also benefiting from the high-pressure labor market, particularly in thriving cities. Of 166 sectors that employ at least 100,000 Americans, software publishing pays the highest average wages, $59.81 an hour in the fourth quarter of 2018. Wages in the field grew 5.5% from a year earlier, well outpacing 3.3% overall growth in hourly pay. The average full-time employee in the sector already earns more than $100,000 a year.

Other technical industries, scientific research and computer systems design, were also among the five best paying fields. Some of the hottest labor markets in the U.S.—including Austin, Texas; San Jose, Calif.; and Seattle—have more than twice the concentration of technical jobs as the country on average.

A Wall Street Journal analysis of Moody’s Analytics data found Austin to be the hottest labor market in the country among large metros. It ranked second in job growth, third for share of adults working and had the sixth-lowest unemployment rate last year, among 53 regions with a population of more than a million. San Jose, the second-hottest labor market, had the lowest average unemployment rate last year and the second- best wage growth.Missing Out

While a strong economy is conveying benefits to a broad swath of Americans, those in rural areas aren’t experiencing the same lift from the rising tide.

In metro areas with fewer than 100,000 people and in rural America, the average unemployment last year was a half-percentage point higher compared to metro areas with more than a million people, according to analysis by job search site Indeed.com.

“Finding work can be challenging for rural job-seekers because rural workers and employers both have fewer options,” said Indeed economist Jed Kolko. “Many rural areas have slow-growing or shrinking populations.”

Bradley Cox lives in Vevay, Ind., a rural community of fewer than 2,000 people. The 23-year-old graduated with a bachelor’s degree in business administration and liberal arts from Indiana University East in December, but said he had found opportunities limited in his region.

After years working in hourly positions at a casino, he took a job last summer as a cashier at a CVS Health Corp. drug store, making about $12 an hour. He hoped to work at a bank, or perhaps in a traveling sales role, making use of his business degree. “But to be honest, for me to do that, I would have to move to one of the cities or commute to one of the cities, at least,” he says. “I don’t have the opportunity around where I live.”

Other workers are employed—but need to string together two or more jobs to make ends meet.Michelle Blandy, 48, had a full-time digital marketing job in Phoenix, but hasn’t been able to find steady work since moving to Harrisburg, Pa., to be closer to her family. Instead she’s pieced together some freelance projects, occasionally drives for Lyft and sells refurbished jewelry boxes on Etsy. “I have applied for full-time jobs, I just didn’t have any luck,” she said. “Harrisburg is tiny compared to Phoenix. There’s not as many tech companies or big companies here that are hiring.”

The good news is this long run of low unemployment could last for a while. Economic theory holds that when unemployment is very low, it stirs inflation, which causes the Federal Reserve to raise short-term interest rates and short-circuit growth and hiring. That kind of cycle ended the 1960s period of low unemployment, but inflation in this period remains below the Fed’s target of 2%.

That’s allowed the Fed to keep rates low. By January 1970, when the unemployment rate was 3.9%, the Fed had raised its target short-term interest rate to more than 8% to fight inflation. By contrast, when the jobless rate fell below 4% last year, the Fed kept its target rate below 2.5% thanks to low inflation.

“It may turn out that lower unemployment proves to be more sustainable than it was in the 1960s,” says Ms. Yellen. “I think we don’t know yet.”

This is an original article published in the Wall Street Journal (WSJ) by Erich Morath and Lauren Weber. A link to the article can be found here.