In a world of cheap emerging market labor and ever-more-dexterous robots, inflation – especially the wage-driven variety – seems like yesterday’s news. But maybe not. It’s late in the cycle and things are getting tight, with pretty much the same result as in every previous expansion: Companies are having to pay up and look farther afield for the things and people they need. Two current examples:
Facing Historic Labor Shortages, Companies Snap Up Teenagers
(MSN) – Jerry Stooksbury, the president of Avionics Specialists LLC, needed to produce an airplane instrument panel last fall, but had only two employees able to complete the task quickly.
One was out sick. The other was in high school.
He called the high-schooler, 17-year-old Thayer McCollum.
Thayer, who starts his days drinking chocolate milk and blasting indie rock, works part time operating mechanical-drawing software for aircraft parts. He came in to do the project and still had time for homework.
After the longest stretch of continuous job creation on record—more than seven years—the U.S. faces its most severe worker shortage in the past two decades. Employers, from General Electric Co. and Michelin North America Inc. to a Wisconsin nursing home and an Ohio turbine-parts manufacturer, are expanding their hunt to the labor market’s youngest echelon.
The 12-month average unemployment rate for teens in March was 13.9%, the lowest year-round average since 2001 and about half that in 2010. In July 2017, the month the most teens work, unemployment for 16-through-19-year-olds fell to 13.3%, the lowest midsummer rate since 1969, when the U.S. was embroiled in the Vietnam War.
“An increasingly tight labor market is pulling many workers who had been out of the labor force back in, teens included,” said Abigail Wozniak, a University of Notre Dame labor economist. Teens might wield an advantage, she said, because they “often have better computer skills. They are not all your typical low-skilled worker.”
College-bound Thayer, who first did odd jobs such as cutting grass at Avionics, said he likes knowing his skills can help pay for higher education, and “I’ve never had to work fast food.”
Mr. Stooksbury, Avionics’ owner, said the teen has been “highly integral” to the company. “It’s the right time for people like Thayer.”
Employers are plucking skilled students from vocational programs at high schools. Some companies are dropping age and experience requirements so they can consider teens. Others offer flexible schedules to accommodate extracurriculars and sports.
The share of working teens aged 16 through 19 is increasing for the first time since the 1990s, to 30.7% in March. The unemployment rate for Hispanic or Latino teens is at the lowest level on record back to the 1970s, and the rate for black teens is just above a record low.
Companies are going after teenagers more aggressively, as demonstrated at a high-school machining-skills competition in Cincinnati in January. There, 27 companies showed up to search for talent, about double the number last year, said organizer David Fox, who called the level of interest “crazy,” adding that “it just cranked up.”
GE’s aviation unit was there. Typically, recruiters at its Evendale, Ohio, plant want two years’ work experience for machine-operator jobs, said GE Aviation staffing specialist Betsy Enderle. But too few applicants have the skills, she said.
“It gets very dire,” she said. “We’re willing to branch out.” For the first time, GE plant managers may consider high-school technical training toward the experience required for the jobs, she said. “Then we could bring some of them in as seniors.”
Julian Cornwall, 17, a Cincinnati high-school junior with machining skills, fielded 13 job offers. “They seemed really eager,” Julian said of the multiple companies that pursued him. “They’re all just after us.”
He chose Meyer Tool Inc., which agreed to work around his football schedule and pay his college tuition if he stays on. He will start in June at $13 an hour, up from the $8.57 he makes at a J.C. Penney men’s department. Pay for machinists at Meyer’s, which makes gas-turbine-engine parts, can rise to $45 an hour.
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US Freight Expenditures Surge 15.6% from Year Ago. “Pricing power has erupted.”
(Wolf Street) – Shipment volumes in the US by truck, rail, air freight, and barge combined surged 11.9% year-over-year in March, according to the Cass Freight Index. This pushed the index, which is not seasonally adjusted, to its highest level for any month since 2007 and for any March since 2006.
“Volume has continued to grow at such a pace that capacity in most modes has become extraordinarily tight,” Cass explained. “In turn, pricing power has erupted in those modes.”
This kind of surge in volume has consequences in this cyclical business. During the “transportation recession,” orders for heavy Class 8 trucks collapsed, triggering lay-offs and throughout the truck and engine manufacturing industry. The opposite is now the case: Orders for heavy trucks are hitting records.
Earlier in April, FTR Transportation Intelligence reported that in March, orders for North American Class 8 trucks had surged 103% year-over-year to 46,300, the third highest on record. And orders for the first quarter “were the largest totals of any quarter in history”.
Fleets are attempting to add capacity as fast as possible in a dynamic market. Some OEMs had exceptional order months as fleets scramble to lock in order slots for this year.
The current capacity crisis may be the worst ever. Capacity is extremely tight and expected to remain this way for months. Fleets need more trucks to handle huge freight demand and continue to order trucks at record setting rates. OEM 2018 build slots are quickly filling up.
Freight growth continues to climb at a rapid rate. The vibrant economy is pushing dry van and refrigerated van loads to elevated levels and renewed oil drilling is generating a tremendous amount of flatbed freight.
Concerning this demand in the flatbed market, Cass provides an astonishing chart of the DAT Flatbed Barometer that is “hitting one record-setting level after another,” as this end of the market is “experiencing an unprecedented level of capacity tightness”:
With shipping volumes surging and capacity getting tight, pricing power among transportation companies has “erupted,” as the report put it, and freight rates have increased and the total amount spent on shipping has soared. In March, the Cass Expenditure Index – which tracks the amounts spent on freight by rail, truck, barge, and air, and includes fuel surcharges – soared 15.6%, the sixth month in a row of double-digit increases:
Here’s hoping these two trends don’t intersect to give us teenage truck drivers.
But barring that terrifying prospect, it’s clear that at least some of the numbers the Fed watches to decide whether to tighten are pointing to higher interest rates in the coming year.
Independent Truckers, van delivery, and semi-truck fleet managers on East Coast are fighting the cost of transportation with technology.
A nanotechnology that treats metal in engine, transmission, and axel made a huge difference for three of my friends transportation cost. It lowered fuel cost between 7% to 14%. But, more important, it lowered major repair cost.
I use it in all my cars, lawnmowers, and electric generators.
Bought it at http://WWW.MetalC2.com
There is no doubt that there exists increasing inflationary pressures in
certain skilled sectors of the employment market. However, the
writer misses a key point: the current labor “shortage” is not
only a consequence of unskilled workers, but of more skilled workers
unwilling or unable to work for exploitive wages. The reality is
that an increasing proportion of the formerly skilled participants in
the labor force are giving up in frustration due to their
inability to live a family life within the harsh economic realities
created by the exploitive corporate elite. The young teenagers, who
typically live at home and have very little living expenses, are only
too willing to work in skilled areas for substandard wages…. Until
they realize that they, too, are actually being sheared until such
time that a new eager batch of teenagers can replace them in the
employment treadmill leading to the economy’s ultimate demise with real labor “shortages.” Of course, the corporate elite are only concerned about the current
short-term quarterly results and care not the long-term consequences
for society as a whole.
Sadly,
the bigger picture in the great economic drama is one in which the
Federal Reserve (which is a criminal organization of international
bankers having gained power
through the great soft coup in 1913) has successfully pushed this
nation to the edge of the economic abyss so that it could plunder and destroy
everything in its path in its bloodthirsty desire to rule the world.
thanks for your very honest response to this article. I live in Belgium and always raise my eyebrows when I hear about wonderfull employment figures and everything being great according MSM. Your perspective comes from the real people living in the real world, not those high roller lyers pretending everything is great(for them it may be)
Inflationists are addicted to seeing it everywhere.
I feel the above article overstates the health of America’s economy. Things are not all that great here in the Midwest. Many people are drawn to the illusion put out by the media. It could be said that our culture has become obsessed with avoiding what is real. The article below looks at the five favorite financial myths adding to the idea things are fine.
http://brucewilds.blogspot.com/2017/09/the-allure-of-illusions-five-favorite.html