August 29, 2005On Thursday, the Bureau of Labor Statistics reported that initial jobless claims fell by 4,000 the previous week, data that may indicate strong demand for labor, especially in the small business sector.
William Dunkelberg, an economist with the National Federation of Independent Business, said that small businesses have been having a harder time finding the employees they need to grow. Earlier this month, the NFIB found that 21% of businesses surveyed have job openings they cannot fill. Seventy percent have encountered difficulty finding qualified people.
Looking forward, the NFIB survey found that 20% of businesses plan to increase their workforce. "There's no question that labor markets will stay tight," said Dunkelberg.
The pace of hiring has already accelerated. According to figures from the Bureau of Economic Analysis, the average monthly rate of hires increased to 3.6% of total employment in 2005, up from 3.4% in 2004 and 3.1% in 2003.
Also, the Conference Board announced on Thursday that its Help-Wanted Index, a broad measure of the number of job openings across the country, rose to 39 in July, up from 38 a month earlier.
As employers compete to find workers, they may bid up wages and salaries, according to Sophia Koropeckyji, an economist with Economy.com.
"You are going to see wage pressures in certain occupations where there isn't much slack in the supply of labor," said Koropeckyji. In coming months, Koropeckyji expects to see high demand for professionals like accountants and engineers as well as specialized construction workers like electricians, carpenters, and masons.
Labor dynamics differ from region to region, however. Koropeckyji said that some states are struggling to keep up with national growth trends -- in particular, Michigan, Ohio, and Massachusetts -- and are unlikely to experience labor and wage competition.
But on a national level wage pressures are mounting already. The Bureau of Economic Analysis reported that disposable income, adjusted for inflation, increased .5% in June, the fastest rate this year.