The Biggest Challenge Facing Businesses in 2017
Businesses’ biggest problem in 2017 won’t be weak sales, soft pricing, or even too much regulation, all problems that have plagued companies at different times over the past ten years. No, their biggest problem next year—and more often than not for the foreseeable future—will be a lack of qualified labor.
The job market is already very near what economists call full employment. That is, most of the 4.6% of the labor force that are currently unemployed are simply in between jobs. A similar number—approximately 7.5 million—is underemployed, including part-timers who want more hours and those who aren’t looking for work and thus are not counted as unemployed. Overall, this number isn’t much higher than it was in the best of economic times—a good sign for the economy overall.
If there are any remaining unemployed workers in the job market, they will be quickly absorbed at the current robust pace of job growth. Businesses added a stellar near 2.5 million to their payrolls in 2016, about double the growth in the working age population. This is the sixth year of consecutive positive job growth, among the longest streaks in the nation’s economic history. All kinds of jobs are being created. Lots of low-paying jobs in the retail and hospitality industries are appearing, as well as many middle-paying healthcare and construction jobs, and high-paying jobs in professional and financial services.
In this environment, businesses are having an increasingly tough time filling open positions. There have never been so many openings, especially in the construction, financial services, healthcare, and retail industries. Even manufacturers are having a tough go of it.
To be sure, businesses have been slow in increasing wages more quickly to attract more workers. But this is changing fast. Wage growth, which had been stuck at close to 2% per year for much of the recovery, rose to almost 3% this year, and will certainly top that in 2017. Businesses will have little choice but to raise wages more quickly if they want to hold onto their existing workers, let alone expand their payrolls.