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Declining Unemployment Will Alter Dynamic for Workforce and Talent Supply in Lehigh Valley

By Don Cunningham on August 18, 2015

This column, written by LVEDC President and CEO Don Cunningham, originally appeared in Lehigh Valley Business on August 17, 2015. (Click here to read Cunningham’s previous columns.)

Don Cunningham

Don Cunningham

The most recent unemployment report for the Lehigh Valley shows a continued trend in declining unemployment. The unemployment rate for June 2015 was 5.5 percent. That is down from 6.2 percent last June. The Lehigh Valley rate matches the national and state rate of 5.5 percent.

Nationally, unemployment rates are lower than a year earlier in 351 out of 387 metropolitan areas in the United States, according to the U.S. Bureau of Labor Statistics.

Clearly, these trends are good for workers, and are what most analysts want to see as they measure the strength of an economy.

These trends, however, will continue to alter the dynamic for workforce and talent supply in the nation and across the Lehigh Valley. Since employers began hiring again following the downturn of the Great Recession, the most common concern among employers has been availability of trained workers.

Business expansion and hiring post-recession, combined with the start of Baby Boom generation retirements and the rapid growth of technology and automation on shop floors and offices has created a demand for new workers and new skills.

Unfortunately, that doesn’t also come with bargain basement prices for employers.  Too many employers still think of standard hourly wages or annual salaries in terms of what they could pay from 2008 to 2012, during and immediately following the recession.

The employers willing to invest more than the market average in wages, benefits and training will likely be the companies with the most labor stability and productivity, analysts have begun to report.

Ekkhard Ernst, senior economist at the Geneva-based International Labor Organization, recently told Bloomberg News: “We will see a massive slowdown in labor supply in the coming years. Wage growth will have to accelerate, especially in those high skilled occupations where there is high demand.”

The laws of supply and demand will likely do for workers what all the protest and discussions about wage inequality could never do. The bottom line is one of demographics. There is an aging, slower-growing labor force with fewer new workers and a need for increased skills, even in traditionally non-skilled jobs. The translation will mean higher pay.

We have begun to see it already in the Lehigh Valley. Due to its unique location, infrastructure and access to the full East Coast consumer market, the Lehigh Valley, including parts of Berks County, has become one of top three logistics and transportation regions on the East Coast. During the last five years, the sector has added more than 5,000 jobs, diving total employment to more than 20,000 workers.

Wages have increased from an average of about $12 per hour in 2008 to about $16 per hour today.

The total labor force in the United States has grown just 1.6 percent since the recession ended six years ago, according to Labor Department data. During the previous decade, the labor force grew by more than 10 percent.

The key to economic success for regions like the Lehigh Valley and for employers is the supply and talent of its workforce. In the end, employers will be forced to go to where the talent supply exists. The regions that can attract and/or retain talented people to meet the needs of its employers will be the ones that lead the way in economic growth and stability.

It’s important to recognize that competition today is across the globe, and technology makes it easier every year for companies to innovate and find ways to meet employment needs from Bethlehem to Bangladesh.

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