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Employers complain of "skills gap" in tighter job market

Mitchell Hartman Mar 4, 2016

This story has been updated based on the release of the February employment report.

Job growth was strong in February, according to the Labor Department’s monthly employment report. The economy added 242,000 jobs in February—significantly more than economists expected. Job growth figures for December and January were also revised upward by 30,000.

The unemployment rate in February held steady at 4.9 percent. Labor force participation increased by 0.2 percent to 62.9 percent — a 15-month high — as more than 500,000 people entered or re-entered the labor force to take jobs, or go on the job hunt.

Wages, on the other hand, failed to increase at all in February, with average hourly earnings falling $0.03 per hour, or 0.1 percent. That drove the annual rate of wage inflation down to 2.2 percent, from 2.5 percent in January.

But, even with the unemployment rate at or near the level the Federal Reserve and many economists consider to be “full employment,” American workers have yet to see the kind of strong, sustained wage acceleration that often occurs at this stage of an economic recovery — when the labor market typically tightens, job openings abound, and employers have to compete to attract and retain the workers they need.

Amy Glaser, of the national HR and recruitment firm Adecco Staffing USA, said that early last year, employers started complaining in earnest about a growing “skills gap” — saying they couldn’t find enough qualified applicants to fill current job openings. And Glaser said their concerns have only heightened since then, with “problems in the high-demand job areas such as engineering and technology, health care and customer service.”

Glaser lays some of the blame with employers, some of whom she said are not willing to raise wages enough to attract the best talent, even as the job market becomes more of a “candidate’s market.”

Economist Michael Strain at the American Enterprise Institute said many employers also expect to be able to find the perfect candidate — with precisely the skills and prior experience they list on the job description.

“Firms are looking for somebody who won’t require training,” said Strain, “someone who will hit the ground running on day-one. And they’re not able to find that.”

Strain believes the so-called “skills gap” that employers complain about might be mitigated by employers investing in on-the-job training once they’ve hired people with the general skill-set they think is needed.

And Strain said he doesn’t anticipate that employers will start offering significantly higher pay to attract and retain workers in the current slow-growth economic environment. He believes there is more slack in the labor market right now than the baseline 4.9 percent unemployment rate would suggest.

As evidence, he points to the millions of prime-age Americans who have dropped out of the labor force since the Great Recession, and could jump back in again to compete with current job-seekers if the economy keeps improving. He said another large reservoir of potential job candidates that can tip the wage-setting balance in favor of employers right now is “underemployed” workers. This includes workers who have a part-time job but would like full-time work, and workers who are overqualified for their current position, and are looking for a job that better matches their past job experience, training, and salary expectations.

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