By Jeff Wallace, Ph.D., Research Associate Professor, Sparks Bureau of Business and Economic Research
The nation’s economy through the Spring of 2019 has grown for several years straight, producing one of the longest economic expansions in U.S. history. Labor markets are at full employment. Labor shortages are an impediment to increasing economic growth rates, both locally and nationally. Unemployment rates, a key indicator of the performance of the local economy, have been at full employment levels and are expected to remain there throughout 2019.
Chart 1 shows U3 (blue line), the civilian unemployment rate, and U6 (red line), the unemployment rate that includes discouraged workers, marginally attached workers, and those working part-time for economic reasons. Absorbing excess labor supply (the difference between U6 and U3) requires wages and benefits to rise.
Chart 2 shows that the gap between white unemployment and black unemployment shrank from 6.1 percentage points to 2.9 percentage points between January 1972 and May 2019. Historical data does suggest that black/African Americans did not share in economic prosperity and job growth as much as whites did during this time. However, the gap between the races has been getting smaller. This is particularly true of the present time when employers are struggling to fill open positions.
Local Conditions. The strength of the local economic environment reflects national economic performance. When the nation’s economic performance is strong, the Memphis economy is also strong. Weaknesses that appear in the national economy are reflected in local economic activity.
Some critical points are listed, below:
Local unemployment rates are at the lowest in 16 years;
The local labor force remains at an historically high level;
Businesses continue to increase wage rates in an effort to fill open jobs.
As wages begin to rise, more individuals will return to the labor force. Labor force participation has risen considerably, but more participation is needed.
Employment growth is becoming more difficult and expensive. There are more job openings than there are candidates available to fill them.
One criticism of the Memphis MSA labor market at present is that even if you can find available workers, too many are not job ready. To remedy this, some employers have resorted to offering employer-paid education and training to all employees, part-time and full-time, in an effort to grow their workforce. FedEx and Walmart are examples of this.
Only in full employment are we likely to see expansive benefits and pay raises like we are now, in addition to programs for hiring ex-offenders and the extravagant education and training benefits. In this rare moment in time, there exist economic opportunities for some in the minority population that haven’t existed in quite some time. It remains to be seen whether these programs will continue when the economy slows down. Either way, the taste of success may be long lasting.