Unemployment Nearing the Natural Rate of Unemployment

In a brief report to the Southeast Workforce Development board recently, Wandy Miezio, economist for the Wisconsin Department of Workforce Development, explained that the unemployment rate is nearing the natural unemployment rate (somewhere in the 4% range). This is the point at which there is virtually no unemployment because all those who are able and willing to work are already working. The rest are unable to work for disabilities, mental illnesses, diseases, etc. Employers who wish to maintain or attract workers will need to seriously consider increasing wages or other benefits.  To see the slides from this report, click here. The issue of wages is a hot topic of conversation these days, as it relates to the skills gap. Some would argue that if you raise the wages high enough, there would be no skills gap. Others argue that while this may contribute to part of the problem, it doesn’t account for the lack of interest in many of the technical fields. There appears to be a huge disconnect between the perception of available careers with the careers that were popular years ago, especially among parents who are urging their children to get four-year degrees in fields that don’t necessarily have plentiful jobs. Contributing to the wages argument are factors such as people’s unwillingness to take on too much credit or tap their home equity after the last recession. This unwillingness for people to spend more than there income will allow means that 70% of the economy is riding on how fast pay rises, according to a recent article in Bloomberg News. Click here to read more. This isn’t good news to the business community, but increasing employee turnover is even worse news. Employers need to give serious consideration to the predicated wage increase and how this might impact their businesses.