Americans who need jobs aren’t going where the jobs are

Rick Newman
Columnist

Business is so good for SEI Manufacturing in Cromwell, Ind., that there’s only one thing preventing explosive growth: a shortage of workers. “I could double my revenue if I could get the workers,” says Nathan Scherer, the 37-year-old owner of the company, which makes marine components. “It frustrates me. I never would have thought the biggest barrier to my success would be an inability to get workers.”

President Trump has promised to “bring back” manufacturing jobs he claims have been shipped to countries like China and Mexico, and revive fading industries such as coal and steel. But in many pockets of the country, the problem isn’t shuttered factories or abandoned mines but humming businesses that can’t find the staffers they need.

The Labor Department reports nearly 6 million jobs open nationwide, close to the highest level in the 17 years the government has been gathering such data. The unemployment rate, at 4.4%, is below the level many economists consider “full employment,” or the rate at which employers must start boosting wages to lure the workers they need.

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There are still about 8 million Americans who are unemployed, underemployed or drifting in and out of the labor force. Perhaps 10 million other working-age adults have dropped out of the labor force and given up looking for a job. That’s a real problem, but it doesn’t mean there aren’t enough jobs in the country. It means the jobs aren’t located where the jobless live, or the available jobs require skills the jobless don’t have. It’s also possible some people who aren’t working simply don’t want the jobs that are available.

Trucking companies, for instance, are short about 50,000 drivers, according to Bob Costello, chief economist for the American Trucking Association. It’s obviously demanding work that requires being away from home for 7 to 10 days at a stretch. But pay has been rising, Costello says, with a typical driver able to earn $50,000 t0 $70,000 a year. The driver shortage has made companies more flexible, and willing to let drivers make their own schedules, when possible. And the nature of the job lets drivers live in low-cost areas of their choosing, with the south and Midwest being best, logistically. Still, the driver shortage is expected to intensify rather than ease, and despite the hype, self-driving trucks that could help solve the problem are probably still decades away.

Nathan Scherer, owner of SEI Manufacturing, right, with Andy Cripe, owner of Polar Kraft Boats. Both Indiana companies are struggling to find needed workers.

There are many anecdotal reports of labor shortages across the country. Farmers in California report that seasonal foreign workers aren’t showing up the way they used to—and neither are Americans happy to take the work foreigners are leaving behind, even though pay is approaching $15 per hour, or more. A tech and manufacturing boom in Utah and Colorado has pushed the unemployment rate more than a full percentage point below the national average in those states, and led to labor shortages in construction, health care and other sectors. In North Carolina, builders can’t erect enough homes to meet demand because they can’t find the workers. Home prices will rise, contractors say, as they’re forced to pay more to draw people to job sites.

Job-search site Indeed says these are the top 10 cities for job growth:

And these are the worst 10 cities, where job growth is actually negative:

Normally, in a free-market economy, workers move away from areas where jobs are drying up, to areas where jobs being created. But that isn’t happening the way it used to. The portion of Americans moving to a different state is now half what it was in 1980, as this chart shows:

The question is why more people aren’t moving away from economically distressed areas to places where there is more opportunity. A few analysts say tales of labor shortages are exaggerated, because pay isn’t rising the way it ought to be if companies had no choice but to raise wages in order to attract workers. But there may simply be a lag between what’s happening on the ground and what shows up in nationwide data. In northern Indiana, Scherer says, “we’re almost getting to a wage-war situation.”

Wage data may also fail to capture the choices workers are actually making. Costello of the American Trucking Association says pay is going up in his industry, but many drivers are taking advantage of that to improve qualify of life. “It used to be commonplace to drive 125,000 miles per year,” he says. “Now it’s more like 100,000. When you raise pay, a lot of drivers say, ‘I’ll work less and make the same amount of money.’”

Middle-skill jobs going unfilled

In blue-collar fields such as construction, there’s some evidence that employers are so accustomed to cheap labor—including undocumented workers—that they’re reluctant to increase pay, no matter what. But employers also don’t want to pay more unless they’re going to get workers with better skills, and those can be hard to find.

Scherer says he needs more workers such as welders and CNC programmers able to operate technical machinery. Those are “middle-skill” jobs that don’t require an engineering degree but do require specialized training. So an out-of-work coal miner from Appalachia can’t just show up in northern Indiana and get hired for $25 an hour. “If I could get really qualified labor, I would pay more,” Sherer says. “But there aren’t enough good workers. There are a lot of missing skills.”

So displaced workers who stay put instead of moving to one of the nation’s new boomtowns may be acting rationally, in a way—since moving alone won’t necessarily lead to a job. In the past, when millions of lesser-skilled manual-labor jobs were more or less interchangeable, following the work was a reliable way to get ahead. But with technology now suffusing jobs far down the economic food chain, the right skills are more important than ever, and not always transferable from one place or industry to another.

Trump insists he can boost the nation’s economic growth rate from the meager 2% range we’re at now to 3% or more, which would be great news for the middle class. But every order that’s not placed because a manufacturer doesn’t have the workers to fill it, every house that doesn’t get built, and every truckload of freight that sits waiting for a driver is economic activity not happening. That’s how economies stall, and it has nothing to do with China or Mexico.

Confidential tip line: rickjnewman@yahoo.com

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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman