At the end of the first quarter of 2018, the national economic picture is pretty rosy, especially when it comes to jobs and employment. The unemployment rate in the U.S. is 4.1 percent, low enough to cause a double-take for anyone who looks at the numbers.
So what challenges could possibly exist for the rest of 2018 when the job market is so strong? How about this: The way employers dealt with high unemployment a decade ago has essentially created a bunch of jobs most workers aren’t qualified to fill.
That’s at least one way to look at things, says Ryotaro Tashiro, regional economic advisor at the Federal Reserve Bank of Philadelphia. Tashiro will be one of three presenters at the Mercer County Economic Summit on Wednesday, March 28, at 5:30 p.m. at the Boathouse at Mercer Lake. The summit also features presentations by James Hughes, dean of the Bloustein School at Rutgers in New Brunswick, and Mercer County Executive Brian Hughes. They will speak on state and county economics, respectively, while Tashiro discusses how the economy looks at the national level. Cost: $60. Visit www.princetonchamber.org.
Tashiro was born in Japan, where his father was a diplomat for the government. The family immigrated to the Bay Area when he was about 12, and his father is now a lawyer in New York.
Tashiro always wanted to be an economist. He never really worried about understanding his drive to be one, he just knows he always found economic trends and discussions interesting, “just because it changes every day,” he says. “Nothing is static.”
Tashiro moved east as his education and career developed. He taught high school economics while he earned his bachelor’s in the subject from Kenyon College in Ohio in 2009. He then got his master’s from the University of Michigan-Ann Arbor in 2011. A year later he became a business analyst at Bloomberg in Skillman. Two years ago he joined the Fed in Philadelphia as an outreach associate. He has been a regional advisor at the Fed since January.
When Tashiro looks at the current employment market, he sees a strong one that has built a solid base over the past two years. Unemployment hit 4.1 percent last October and has not moved either way since. And while Tashiro calls the unemployment rate “unnaturally low,” he also says “it’s not a number we haven’t seen before.”
In fact, according to the federal Bureau of Labor Statistics, 4.1 percent is where the U.S. was 18 years ago. In 1953 it got down to 2.5 percent, so even if 4.1 percent is atypical, it is not far from the usual 5 or so percent.
Action equals reaction. While it is true that solid economic trends in sectors like, say, housing or tech make people nervous that a bubble will pop, Tashiro says employment doesn’t really work like that. The problem is not that too many people have jobs. It’s that employers have created an interesting alternative problem that needs to be addressed.
“The challenge for 2018,” Tashiro says, “is how do we get job openings to be filled by qualified people? There are more jobs to be filled than people who get hired.”
Another look at BLS data shows that for the past two years the jobs-open rate has outpaced the hires rate. Tashiro says, though, that the problem this has caused might not be as problematic to fix as it sounds. He says that one reason employers are having trouble filling jobs is because they “upskilled” their qualifications for jobs they had when the market collapsed in the years following 2008.
Say, for example, there was a job that required a bachelor’s degree in 2007, when unemployment was about 4.5 percent. Well, by 2010, unemployment hit 9.6 percent, which meant a lot more competition for whatever job a person could get. In that kind of buyer’s market, employers needed to weed out as many candidates as possible, so that job requiring a bachelor’s degree suddenly asked for a master’s.
That got a lot of employers some highly credentialed workers, but, Tashiro says, it created an interesting counterproblem: It created requirements for getting hired that were, pragmatically, artificial; you don’t need a master’s to actually do the job, but you need one to get the interview in the first place. This, he says, has simply made a lot of people under-qualified according to the requirements set for the job but not for the actual job.
Employers seem to have finally caught on, Tashiro says. More companies are now “downskilling” their requirements to put people on the payroll.
But on the flip side … Another employment issue to watch out for as we roll through 2018 is the effects of people having taken jobs in areas they thought would be secure in an insecure economy, but have become more competitive over time.
Take retail. Ten years ago you might have seen a job ad for a store that wanted cashiers, stockers, or other entry-level workers, Tashiro says. Today, though, with the boom in e-commerce, retailers might be looking for people who know how to design websites or engage customers through social media. For a lot of workers, he says, changing sectors have generated a lot of “skills mismatch” issues for people who have worked one way but are now in a different world.
One important thing to remember, Tashiro says, is that all of these ideas about the economy are anecdotal. The Fed is, he says, a data-driven animal and not one that trades in anecdotes.
Preliminary or not, though, Tashiro says the numbers do suggest some interesting talking points. For one thing, 4.1 percent is not zero, so clearly there is room for more improvement. For another thing, there is the vexing question of why the U.S. has such a strong job market but such little growth in overall wages.
Anecdotal evidence from some Fed colleagues in San Francisco suggests that anyone looking at averages would draw the conclusion that there is no wage growth. But if, Tashiro says, you were to eliminate the expensive Baby Boomers who are retiring and the much less expensive Millennials who are entering the workforce, you would find a set of people who have seen their wages grow comfortably.
But like Tashiro already said, that’s anecdotal. “And anecdotal evidence doesn’t equal data.”