After another fairly quiet day for the major U.S. equity indexes, Thursday will bring us two of the week’s big economic reports, with data on private payroll growth and manufacturing activity serving as the highlights.
At 8:15 a.m. ET, the May report on private payroll growth is expected to show 180,000 jobs were added during the month.
And then at 10 a.m., the Institute for Supply Management’s latest manufacturing PMI report is expected to show a continued expansion of economic activity in May with a reading of 54.7. Thursday will also feature manufacturing data from Markit Economics and the latest weekly report on initial jobless claims.
Friday, of course, will bring us the week’s biggest economic report: the May jobs report.
Demand for labor, going up
The defining theme of the U.S. economy right now is that the labor market is tight.
Economists will quibble over just how tight labor market is or is not. The textbooks would tell you wages ought to rise when the availability of labor falls. And given the fairly tepid rise in wages we’ve seen over the last year and the still-low participation rates, there is perhaps more slack left in the market and more reason for the Fed to remain cautious. Still, commentary from American businesses makes clear there is more demand than supply for workers in America.
The Federal Reserve’s latest Beige Book, a collection of economic anecdotes from each of its 12 districts, was released on Wednesday, and showed that everywhere you look in America, finding workers is, well, hard work.
“Payrolls grew across a broad range of industries, with continuing wage pressures in some skilled occupations and at the lower end of the pay scale,” said officials at the Federal Reserve Bank of Cleveland.
“Staffing firms noted an increase in the number of job openings and placements during the past two months, a situation which they attributed to an improving business climate… Payrolls grew across a broad range of industries, with continuing wage pressures in some skilled occupations and at the lower end of the pay scale. Staffing firms noted an increase in the number of job openings and placements during the past two months, a situation which they attributed to an improving business climate.”
In the Boston Fed’s district, officials said, “Payrolls grew across a broad range of industries, with continuing wage pressures in some skilled occupations and at the lower end of the pay scale. Staffing firms noted an increase in the number of job openings and placements during the past two months, a situation which they attributed to an improving business climate…
“Staffing firms continued to report strong labor demand and tight labor supply. They singled out the following positions as particularly hard to fill: systems administrator, network engineer, and medical assistant. All contacted staffing firms indicated that bill and pay rates had increased.”
In the Dallas region, we had perhaps the best commentary on a segment of the labor market that is usually filled by the most highly seasonal workers out there: students.
Officials in the district said, “Leisure and hospitality contacts said they have not been able to fill many entry-level and seasonal positions due to a lower number and inferior quality of applicants compared with past years.”
And in this critique of the labor market — that applicants now are just way worse than they’ve been — we’re getting to the heart of how this resolves. In this situation, employers have three choices: raise wages, lower standards, or don’t hire.
But they also sort of have a fourth choice, which is complain. We often hear in the media and elsewhere that young people — read: young workers — today are entitled, or hard to wrangle, or too picky about what opportunities exist.
And this may be true.
But employers are also getting over a multi-year, post-crisis period in which they had complete run of the place, hiring consistently overqualified and super-eager candidates to fill jobs as many workers were happy to simply find work.
And so while the modern U.S. economy has a long tradition of celebrating capital over labor — or business owners over workers — it seems likely that in this instance it is not so much that employees are failing on their effort or qualifications so much as owners can’t believe they’re getting squeezed on labor costs.
—
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
Read more from Myles here:
