Idaho’s employment conditions have improved considerably in the past two years. Even the counties experiencing the most economic challenges are showing improvement. August was the first month since March 2008 that Idaho did not have any counties with double-digit unemployment rates. Eighteen of Idaho’s 44 counties experienced unemployment rates above 10 percent at some time between December 2007 and July 2014.
Idaho’s job growth is moving back to its pre-recession levels. January was the first month nonfarm payroll jobs in the United States exceeded pre-recession levels. This September, they were about 1. 1 percent – 1.38 million jobs – higher than in September 2007, three months before the recession began. In Idaho total nonfarm payroll jobs have not recovered completely. The U.S. Bureau of Labor Statistics estimated 655,400 jobs this September, which was 1.7 percent lower – 11,500 jobs – than September 2007.
Idaho’s unemployment rate has fallen to a relatively low level. Although the rate remains considerably higher than in the three years proceeding the recession – 2005 through 2007 when Idaho’s rate hovered around 3 percent – those were the lowest rates seen in Idaho since at least 1970. Idaho’s September unemployment rate of 4.5 percent was lower than the 30-year pre-recession average of 5.8 percent. The U.S. rate of 6.1 percent in September also was below its own pre-recession 30-year average of 6.1 percent.
Job openings are also on the rise while fewer people are looking for work. The number of job openings listed with the Idaho Department of Labor exceeded the pre-recession level in 2012 and 2013. At 33,138 in the second quarter of 2014, the number of jobs listed is up 22 percent over the same quarter the year before at 27,213. While job openings increased, job applicants fell from a recession high of 191,155 to 159,585 in 2013. Applicants were 7 percent lower in the second quarter of 2014 than in the same quarter of 2014.
Since the recession, it has mostly been an employers’ market where employers can afford to be picky, keep wages low and determine the terms of labor exchange. Now that unemployment rates are falling and fewer people are applying for many jobs, the balance of power is tipping toward job seekers. Employers who want to find and keep good workers need to notice if their labor market is changing and determine what they should do to be competitive.
Churn to Return
During a calm economic period like the mid-2000s, about 65 percent of all hiring comes from “churn” – the movement of workers quitting one job to take another. Economists view churn as a way labor markets reallocate workers towards more efficient ends. In a typical job-to-job move, an American worker will see an 8 percent raise in wages.
During a recession, “churn” drops – partly because fewer businesses are hiring and partly because workers are afraid to quit their current jobs. According to the Bureau of Labor Statistics, the number of workers voluntarily leaving their jobs fell 40 percent between 2007 and 2010.
Churn is starting to return. By 2013, voluntary quits had risen but were still 20 percent below their 2007 level. In August, 3.2 million Americans quit their jobs, about 15 percent fewer than quit in August 2007. More frequent switching helps U.S. workers find the jobs and wages that match their skills, but it also means keeping workers is more difficult.
Also contributing to the churn is “employee poaching.” Employers are increasingly searching social networks, especially LinkedIn, looking for so-called “passive candidates,” who are already employed and not officially on the job market.
Demographics Cause Slower Labor Force Growth
The labor force has grown slowly since 2007. Some of the slowdown has to do with population changes and some with decreased labor force participation by teens, young women and others. If the labor market begins offering more opportunity, some of those labor force participation rates may change.
One of the things that fueled labor market growth in the 1970s and 1980s was the surge of women into the labor force. That is not likely to reoccur.
Idaho’s youth population did not grow significantly between 2007 and 2013 while the population 55 to 64 soared as baby boomers born between 1946 and 1964 continued to age. The youngest boomers turned 50 this year.
The U.S. faces even more severe challenges replacing baby boomers as they retire because its population is not as young as Idaho’s.
The labor force is composed of people age 16 and older while 65 is the traditional age for retirement. The difference between 16-year-olds – the potential additions to the labor force – and 65-year-olds – the potential retirements from the labor force – has decreased considerably in the past 14 years. In north central Idaho today, there are more 65-year-olds than 16-year-olds, as this table based on Census Bureau Data shows.
More detailed information about how the working age population has changed over time is shown in the table below.
Other Factors Impacting Labor Markets
The flood of illegal immigrants into the U.S. over three decades came to a screeching halt when the recession started. Improved economic conditions in Mexico, a decrease in its young population and greater border security are likely to continue to dampen immigration, potentially making it more difficult for farms, hotels, restaurants, low-end manufacturers and other sectors to fill jobs.
The Minimum Wage is not the Market Wage
Fair treatment, a good workplace and market wages are the best ways employers can find and keep workers.
Despite the changing labor market, a few employers are trying to recruit and keep workers by paying the minimum wage. For some occupations in many areas, this precludes hiring the best workers and makes it hard to retain workers. Wages are determined by the supply and demand of workers with the required skills. The state and federal minimum wages both rose to $7.25 in July 2009 and have not changed since despite consumer prices rising about 11 percent since. If the minimum wages had kept up, they would be $8.06 an hour now. It is also important to know that today’s minimum wage is low compared to the minimum wage in the 1960s through the 1990s. The minimum wage’s buying power peaked in 1969, when it was the equivalent of $10.71 in 2013 dollars.
Employers on the Idaho side of the Washington and Oregon borders find wage expectations in their communities are influenced by their minimum wages which are $9.32 in Washington and $9.10 in Oregon and increase every Jan. 1 based on the change in the consumer price index.
Information about wages for many occupations in regions of Idaho is available on the Idaho Department of Labor’s labor market information website at Wages by Occupation.
The High Cost of Doing Business
Many small businesses still are suffering from the aftershocks of the recession, and increasing wages or offering other benefits seems difficult. Some would see other costs fall if they would sweeten their compensation packages. Turnover takes an enormous toll on a business. Recruiting replacement workers is just the beginning of the expense. Consider the cost of enrolling, orienting and training new employees. Even more important is the loss of productivity and change in customer relationships while the new employee is learning the job, making mistakes a more seasoned worker would not and not yet providing the best customer service. Even for basic entry level jobs, turnover costs can easily be the equivalent of paying an extra month’s wages. For more sophisticated jobs, turnover costs can exceed the cost of a year’s salary.
Kathryn.Tacke@labor.idaho.gov, regional economist
(208) 799-5000 ext. 3984