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 But explain that to Bernie Hesse, projects director for the United
Food and Commercial Workers Union. For every bright spot - the 5
percent across the board pay rise just negotiated for the union's
nursing home workers - there is a drag in the other direction.
Retail workers, who account for 6,000 of the union's 10,000
Minnesota members, agreed to keep wages flat to avoid an increase in
health care premiums.
Health care is "where our members are in demand...There are no
bodies," Hesse said, while "the retailers are saying: 'we will
bargain pay for health care'."
That push and pull has played out statewide in what may offer a
cautionary tale for Federal Reserve officials debating whether to
raise interest rates for the first time in a decade.
After more than five years of steady national job growth and with
the U.S. economy perhaps approaching full employment, sustained
pressure on wages is a final missing piece for the Fed's puzzle -
necessary to conclude that the economy is near full capacity.
No rate increase is expected at the June 16-17 meeting, and that
timetable may slip further into next year unless there is a clear
sense that a wage increase cycle has taken hold.
There have been recent positive signs, including one indicator this
week showing wage growth above 4 percent so far in 2015 compared to
last year.
But Fed officials have become worried that the headwinds which
slowed the U.S. economy at the start of the year may prove stronger
than expected, and stall progress in repairing the job market and
ensuring sustained wage growth.
If Minnesota holds any clues, it may still be a while until that job
is finished.
Unlike neighboring North Dakota, which has ridden a commodity boom
to low unemployment, Minnesota has a diverse economy more reflective
of the nation's, with a substantial manufacturing base, a strong
medical, service and management sector, and a growing technology
presence. If low employment fails to ignite wages here, it could
deepen a sense that it will not happen nationally any time soon.
"The labor market is doing well – basically a full recovery," said
Minneapolis Federal Reserve bank research director Sam
Schulhofer-Wohl about Minnesota's performance. "It should make us
cautious about what our assumptions are when we see a recovery
nationally,” he said in an interview conducted before the blackout
period for the upcoming Fed meeting.
At 3.7 percent, the state's unemployment rate is well below the
national average, and the lowest since the peak of the tech bubble
at the start of this century. By contrast hourly wages have been
rising by less than 1 percent a year on an inflation adjusted basis
since the bottom of the last recession. (Graphic:
http://link.reuters.com/gew84w.)
The low unemployment rate may mask the fact that levels of part time
work still remain high compared to before the recession, with
estimates of as many as 100,000 workers underemployed. The fact that
50,000 workers joined the labor force in recent months to hunt for
jobs is a healthy sign, but it also can hold down wages.
Rising wages "are just around the corner - I have been saying that
for a year," said Steve Hine, director of Minnesota's Labor Market
Information Office, adding that unemployment rate was close to
levels where one would expect wage pressures to emerge. "The fact
that we are not (experiencing it) is the reason people are wondering
what is different about this recovery."
Diminished worker bargaining power, companies' efforts to stay
competitive not just regionally but nationally and internationally,
could all conspire against rising wages, he said.
[to top of second column] |
"NORTH STAR" STATE CREATING LOWER PAYING JOBS
Even among competitive, high-pay industries in the Minneapolis-St.
Paul area, companies say turnover is low, workers are available, and
there is little pressure on wages.
"It is probably a matter of when and not if, but it has not happened
yet," said Jason Bristow, chief financial officer for the cyber
security company Code42. "We still get a huge number of applicants
for each position...And we are not having to constantly rehire
people after six months or 12 months because they can jump to the
next hot start up."
Overall signs point to a tight labor market. Minnesota compiles its
own job vacancy data, and the most recent report showed a narrow
margin of 1.1 job seekers for each opening, with the numbers dead
even in the Minneapolis-St.Paul area and below 1 in some parts of
the state.
That compares with a ratio of 1.6 nationally, according to the
latest data.
But a 46 percent increase in openings over 2014 skewed towards lower
wage jobs, said Kevin Ristau, education director for Jobs Now, a
coalition of groups active on labor issues in the state. Half of all
the vacancies at the end of the year were in occupations with a
median wage below $13 an hour, according to state data. Janitorial
openings had nearly tripled compared to the year before, for
example.
A recent increase in the minimum wage had helped, Ristau said, but
not enough to offset the larger number of lower paying jobs on
offer.
There is concern now that a window for wage increases may have
already closed. Between 2009 and 2014, the state added high end
management, law and computer science jobs in numbers equal to the
positions being created at the bottom of the wage scale, according
to Bureau of Labor Statistics data.
Early this year, however, a reorganization of Target cost the state
1,700 jobs at the retail chain's Minneapolis headquarters.
The state's "iron ore belt" also lost well-paid jobs because the
strong dollar sapped demand for U.S. steel. In addition, Minnesota,
while not an oil producer, was hit by low crude prices and a
collapse in demand for "fracking sand" supplied by several local
businesses.
Economic growth in the state slowed in 2014 to 1.4 percent from 2.1
percent in 2013, below the national average of 2.2 percent,
according to just-released federal estimates.
As the Fed considers its next steps, even a hyper-low unemployment
rate offers little certainty.
"Our unemployment rate is where everybody wants to arrive," said
Ristau. "That is supposed to magically unlock everything. But we see
that it doesn’t.”
(Reporting by Howard Schneider; Editing by David Chance and Tomasz
Janowski)
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reserved.]
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