WASHINGTON (Reuters) - Just as improving job growth has given America's 7.6 million unemployed reason to hope, analysts are starting to worry about the dark side of the job market: skills shortages and the specter of inflation.þþIt may seem absurd to discuss the downside of employment gains so soon after the end of the jobless recovery. But the financial markets' focus has shifted from jobs to inflation -- and talk of ``full employment'' and rising labor costs has begun.þþA recent survey by outplacement firm Challenger, Gray & Christmas found 44 percent of human resource executives struggled to hire in the first six months of the year due to a shortage of qualified workers.þþ``We may have overwritten the slackness in the labor market before. As unemployment gets down around 5 percent, we do start to see shortages appearing, especially in the skilled labor force,'' said Challenger chief executive John Challenger.þþMore than 3.5 million jobs have been created in the last two years and the unemployment rate fell to 5.1 percent in May from 6.3 percent two years ago.þþAlthough that's still well above the 3.8 percent hit in 2000, the jobless rate is heading toward what economists believe is ``full employment'' -- the lowest rate consistent with stable inflation.þþWhile zero unemployment may seem ideal in theory, competition in such a tight labor market would send wages through the roof, and inflation would spiral out of control.þþAlready, rising employment costs have sparked concern. Unit labor costs rose at a swift 7.7 percent annual rate in the fourth quarter of 2004 and at a 3.3 percent pace in the first quarter of 2005, implying the greatest inflation pressure stemming from the labor market since late 2000.þþBut while some unemployment is needed to keep prices in check, it's hard to pinpoint how tight labor can get before inflationary trouble begins.þþ``A reasonable estimate now would have full employment somewhere around 4.5 percent,'' said Ken Mayland, president of ClearView Economics in Pepper Pike, Ohio.þþGetting to that level in a workforce of 150 million means about a million fewer workers need be unemployed -- or a million more hired -- before all the job slack is absorbed. þþTAKE ME, TAKE MEþþJames Murphy, 61, wants to be one of the million. Laid off from his California programing job in 2001, he has had only three job interviews in three years.þþMurphy is skeptical about claims of skill shortages. Most job ads, he says, don't include a phone number -- a sign employers are simply going through the motions to advertise locally for a job before hiring an overseas worker.þþ``To me that's a smoke screen to allow them access to cheap foreign labor,'' Murphy said.þþWhile hiring has picked up in some sectors -- notably construction, where the housing boom has helped add 141,000 jobs this year -- high-tech remains a high-profile exception.þþAccording to the U.S. branch of the Institute of Electrical and Electronics Engineers, more than 220,000 computer and engineering jobs were lost between 2000 and 2004, and 2005 is shaping up only a little better.þþ``Hiring has picked up a little bit but nowhere near enough to make up for the losses that we've had over the last few years in these sectors,'' said Ron Hira, IEEE's vice president of career activities.þþHe said underemployment is masking even higher joblessness in the sector as engineers and programers become self-employed ``consultants'' or take huge pay cuts to work in less-demanding fields until they can find something better.þþ``They're not getting the kinds of assignments nor the billable hours you would normally see,'' Hira said.þþMeasuring underemployment is no easy task for the Department of Labor.þþThe participation rate, which measures the proportion of the working-age population either with a job or looking for one, has inched up to 66.1 percent from a 17-year low in March, but remains far below the 67.3 percent hit in the 2000 boom. That suggests some 2.8 million people would have to join the labor force this year just to match 2000 participation levels.þþAnother 4.4 million work part-time because that's all they can get.þþDon't talk to Sally Saunders about labor market slack.þþAbout three years ago Saunders, 52, was making $130,000 a year as a computer programer in Sacramento. After losing her job and struggling through two years of on-and-off unemployment, she gave up on the field and became a loan officer. She hopes to make $20,000 this year.þþSaunders said her circle of friends is proof enough the economy is far from full employment. Some friends are working part-time or ``under the table'' for companies that want to avoid paying taxes or benefits. Others have changed careers as she has, while some have simply retired.þþ``They would still be employed today if they hadn't just opted out completely,'' she said. þþ
Source: NY Times
