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Sunday, 24 December 2017 17:26

Economists, economic developers mull over next steps in tight labor market

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GRAND RAPIDS — Employers continue to struggle to find people to fill open positions and drive growth in their business.

That’s a continuing reality borne out in the latest data for the Grand Rapids metropolitan statistical area (MSA), where the unemployment rate is 3.6 percent and only about 21,000 people are actively looking for work. 

The MSA has one of the tightest labor markets in the country, which poses challenges for economic developers tasked with corporate retention and attraction projects. 

The labor market in West Michigan is now tighter than comparable “aspirational” metro areas like Knoxville, Tenn., Louisville, Ky., Charlotte, N.C. and Portland, Ore., according to data from the Bureau of Labor Statistics that was presented at the annual economic forecast event hosted by The Right Place Inc. earlier this month. 

Executives at The Right Place must walk a fine line between seeking to attract new jobs to the area and helping companies fill their open positions. 

“Your question is a very valid one: When do you stop talking about job creation and start talking about workforce development? It’s not an either/or proposition,” Birgit Klohs, president and CEO of The Right Place, told MiBiz. “If the labor market loosens up, you’re going to ask me what I’m going to do about it. We need to continue to do our work so that when things (change), we haven’t lost our spot in the lineup. Other communities around the country aren’t stopping either. It’s a real delicate balance right now, to be honest.” 

Economists quickly point out that reaching “full employment” marks a natural high point of any economic cycle. But in past recoveries, monthly job creation would be in the range of 300,000 to 400,000 new jobs, according to Jim Robey, director of regional economic planning services at W.E. Upjohn Institute for Employment Research, a Kalamazoo-based think tank. 

Over the past several years of the current recovery, however, employers typically have added just 150,000 to 170,000 new jobs each month. 

“While a recovery has been happening, it hasn’t been an incredibly strong job recovery,” Robey said during The Right Place’s economic forecast event. 

JOBS KEEP COMING

Nonetheless, job growth remains on an upward trajectory in West Michigan. For 2017, The Right Place completed 22 corporate expansion or retention projects, resulting in 1,442 new or retained jobs around the region. 

By comparison, the organization reported 782 new or retained jobs in 2016 over 22 projects, according to its annual report. 

Tim Mroz, a vice president at The Right Place, pointed to one major job retention project — Advantage Sales and Marketing’s plans to consolidate its West Michigan employees at one Wyoming office –– as accounting for this year’s spike in job metrics. 

Despite the increase, sources say finding enough workers locally continues to be challenging. 

“What people are starting to do, they’re starting to deploy technology that’s labor-saving,” Klohs said. “So some make it work, but I also know some companies could grow faster if they had the skilled labor, underline ‘skilled’ labor.”

The notion of deploying technology to help offset labor shortages in manufacturing rings true to Upjohn Institute’s Robey, who noted that 40 percent of jobs in the U.S. are deemed “low skilled” and susceptible to automation and other technologies. 

“Part of the question is, how are we creating enough jobs that pay well enough for people to live? And my question as a researcher is: Can we continue to sustain those jobs?” he said. “If Geico can eliminate two thirds of their workforce and those are pretty good paying jobs, what does that mean for the future of not only college-educated people but people between that high school and associate’s degrees and other things. This is one of the things that keeps me up at night.” 

TENSION ABOUNDS

With hundreds of thousands of Baby Boomers seeking to retire or having already exited the labor force, the attention to jobs locally becomes more important than ever, according to Greg LeRoy.

“We need to focus a lot more on the quality of the jobs than we have,” said LeRoy, executive director of Good Jobs First, a Washington, D.C.-based policy organization that tracks economic development deals around the country. “This whole problem of wages not keeping up with productivity gains is a deep chronic problem and a big driver of inequality. 

“If you look at the occupations … it’s plumbers, bus drivers, counselors, and all kinds of other unglamorous jobs that aren’t Silicon Valley whizz kid job titles that need lots of replacement and can earn good paychecks if people are sufficiently qualified to be productive in them. So I think … a lot more attention to the quality of jobs getting created is where the focus should be shifting.” 

The labor market also remains more dynamic than the job creation statistics indicate, according to economists. Even in a tight labor market like Grand Rapids, job creation and job cuts occur simultaneously.

For example, a November report from the Bureau of Labor Statistics found that from December 2016 to March 2017, the U.S. labor market lost 6.7 million private sector jobs, but that loss was offset by the addition of 7.2 million new jobs. 

Justin Wolfers, a professor of public policy and economics at the University of Michigan, wrote about this trend in a 2016 New York Times column shortly after then President-elect Donald Trump boasted about saving 1,000 manufacturing jobs at Carrier Corp. in Indianapolis. 

Wolfers notes that it’s largely a fruitless effort to attempt to retain a handful of jobs given the millions that are inevitably lost every few months as part of an active labor market. 

The U-M economist compared the labor market we have presently to an active parking garage wherein some new cars arrive every hour as others exit the structure, creating a healthy amount of churn. 

Given those market realities, Wolfers says it’s not worth much time or energy at any level to try to stem the flow of jobs. 

“The deal at Carrier is akin to Mr. Trump’s intercepting a driver on his way to his car, and trying to persuade him to stay parked a little longer — perhaps by pointing to the enticing Christmas specials at the nearby stores,” Wolfers wrote. “It’s an approach that no parking business bothers trying.”

In the end, Carrier cut hundreds of jobs at the plant anyway, according to reports. 

STRIKING A BALANCE

Nonetheless, Klohs with The Right Place sees some hope for employers, given the many state initiatives seeking to get more workers trained for the jobs that need to be filled. She said her nearly four-decade career in economic development has been focused on striking a balance of seeking jobs via corporate attraction projects and finding better ways to train workers for existing openings.

“In all the years I’ve done this work, there’s always tension between job creation and the labor force,” Klohs said. “If we were sitting here eight or nine years ago, you’d ask me why unemployment is 9 percent and not 3 percent. I have this conversation with friends literally all over the country in successful regions like Raleigh or Columbus. We’re all having that same issue.” 

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