The Minnesota Job Market – The Bull Economy

The Q4 2018 job vacancy data for Minnesota is interesting. The data showed that there were ~136,000 vacancies statewide, which aside from Q2 2018 was the most vacancies since before 2001. There are a lot of compelling points to be made about this breakdown, but I want to first frame this data within the old addage, “there is no such thing as a labor shortage, only potential workers not willing to work for the wage you’re offering.” I bring this to the fore because I believe the curious lack of inflation we are experiencing in this extending expansion is due in no small part to the flaccid wage growth.

It’s obvious that when we are at a rate of unemployment as low as we are, say the “natural rate” of ~4%, inducing workers to work for you is going to be an ever more challenging task. According to MNDEED, businesses with 10-49 employees are suffering the worst of the labor shortage, with a vacancy rate of 7.1% statewide, followed by micro-firms which have a 6.5% vacancy rate. No surprise then that the companies which have suffered the least are those with 250 employees or more, as their vacancy rate is a piddling 2.9%. The conglomeration of labor is a huge subject which I have to reserve for another post, but there is a wealth of data to support the fact that in this economy, it is the largest companies which are the most well off.

Let’s turn next to the actual areas of the economy themselves which are experiencing the greatest amounts of job vacancies. The chart below illustrates the vacancy breakdown by sector. There are not many surprises for me here, other than I would have expected construction vacancies to be higher since that seems to be all I hear about.

I want to point out a couple of other highlight to the Q4 data that I found really surprising. First, that 37% of the vacancies were for part-time work. Second, the median wage for all vacancies was $15.01/hr, which seems an especially auspicious number considering the “Fight For $15” movement which has inundated Minneapolis and somewhat in St. Paul.

To address the first point – part time vacancies do not normally support a formula for a sustainable, long term growing economy. In any other time I would be absolutely shocked to see a part-time vacancy rate of 37%, but as it is, workers on the farthest side of the employable margin perhaps are not looking for full time work or careers. Those who were tenuously connected to the work force prior to the recession are now toe splashing their way again into the labor force, or at least that is what employers are banking on. Are they right? Will we see a part-time or contingent workforce test the labor economy? Or, will the lack of benefits and wage growth induce them to stay out of the labor pool?

To the second point – I cannot imagine at this point that a $15 dollar/hr wage is highly competitive in the MN labor market where unemployment hovers above 3%. I want to stress again that this is the median wage percentile, meaning that half of the wages fall below this. This may explain why it is small and micro employers are experiencing the largest vacancies- they do not have the economies of scale to deliver workers away from higher wages and benefits offered by large corporations. So, as the ongoing trend of labor conglomeration continues, we should expect more small and micro firms to exit the market, ceding their workers to larger firms and further exacerbating the conglomeration trend. What does this portend for Minnesota’s economy? That is for another day, but I will say that Minnesota is not alone in experiencing this dynamic, and if it remains true that small businesses employ the most workers overall, we would be wise to take heed of this trend.