August's employment situation report from the Bureau of Labor Statistics was less than stellar. Only 142,000 jobs were added during the month, the lowest monthly gain so far in 2014. The unemployment rate dipped slightly to 6.1 percent, but that was primarily driven by people leaving the work force.
Whether this is the start of a new trend in employment or just a blip in the economic trajectory remains to be seen. But it reignites the conversation about how this recovery hasn’t been driven by job growth, as so many prior post-recession recoveries had.
But that conversation could change completely in just a few years. A new report from The Conference Board predicts that serious labor shortages in the world's advanced economies will create "unprecedented challenges for business leaders and policymakers over the next fifteen years and beyond."
“Mature economies are facing a historical turning point: for the first time since World War II, working-age populations are declining,” said Gad Levanon, director of macroeconomic research at The Conference Board and a co-author of the report. “The global financial crisis and its aftermath—stubbornly high unemployment in many countries—have postponed the onset of this demographic transformation, but will not prevent it from taking hold. Companies in the U.S., Europe and elsewhere must begin planning now for an environment in which difficulties recruiting and retaining workers will make it significantly harder to control labor costs without losing labor quality.”
The report assessed 32 national economies, 266 industries, and 464 occupations in the U.S. and 40 occupations in Europe. The risk of labor shortages in the U.S. will be moderate in a global context, as its working-age population grows minimally but faster than most mature economies due to immigration. Risks in the U.K., France and Canada will be broadly comparable to the U.S.
Dan Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation, said in a recent webcast that the U.S. should start seeing a shift around 2017. At that point, labor supply and demand should be switching roles, with demand being greater than supply. The good news for workers – and the economy, which is primarily driven by consumer spending – is that we should also see wages start to increase at that time as competition for workers increases.