Working fewer hours at higher pay sounds like a good thing. It may be better than it sounds. Both high skilled white collar and lower skilled blue collar jobs are requiring less education, offering more perks with less drug testing and above normal wage gains. Listening to politicians one might think these are the worst of times for the working class. Automation, Robotics and Artificial Intelligence (AI) are supposed to kick millions of workers to the curb, shrink paychecks and make bosses more curmudgeonly than ever. Earnings growth was unusually slow for 6 years beyond the 2008 to 2009 recession, but worker compensation is very healthy today.
The 10 year high of over Three percent wage inflation pales by the double digit gains in areas of Healthcare, Trucking and Information Technology. The job recruiter Glassdoor calculates truck driver wage gains at 7% last year while the Department of Labor shows the median annual pay for drivers of heavy trucks was up a whopping 25%, from $42,480 to more than $53,000. Despite good pay, forecasts project the current record truck driver shortage of almost 51,000 will grow to 175,000 in seven years. Already over 70 percent of tonnage is transported by truck and freight volumes are expected to surge by about 37 percent over the next decade according to American Trucking Association (ATA). The 8,000 truckers who work for Walmart are getting nice pay hikes. They hired over 1,400 drivers in 2018 and target another 900 in 2019 requiring exceptional average incomes of $87,500 a year, national TV recruiting ads, shorter hiring process and referral bonuses of as much as $1,500. With an 89 cent flat rate most of Walmart’s long haul drivers will average over $110,000 a year.
Along with the long term shortage of transportation workers needing a solution to smooth the supply chain delays, we can see in this graphic below that shortages are even larger in many other industries. We can personally attest to the challenges finding and training entry level recruits in manufacturing. From our experience, this chart below understates reality as many technical trade schools are garnering more than 5 job offers for each graduate. Even the technical training schools can’t find enough students to teach and are using ambassador programs to connect with elementary school age workers of the future.
With unemployment rates near multi decade lows and unfilled job openings at record highs there is little risk of dystopian forecasts of automation triggering massive unemployment. In fact we need much more robotics and AI just to meet current growth trends. While it might be nice if US companies only hired our citizens to fill positions, this is increasingly a Sisyphean endeavor as companies can’t meet demand without outsourcing to third world countries or expanding the foreign worker visas and immigration levels to the US. Our aging labor force has a flat working age population growing less than a half of one percent a year. We need more bodies to sustain higher economic growth rates. Our economy slowed modestly to 2.6% in the fourth quarter of 2018 and will slow to well under 2% in the first quarter of 2019. As long as this slowdown is temporary, we would view this period as the pause that refreshes allowing supply chain delays to normalize as production and delivery sync with demand for the first time since 2016. Our shallow labor pool can handle 2 to 2.5% GDP growth, not 3.5 to 4%.
With virtually every economist and financial manager forecasting a recession by 2020, we suspect the current European recession and slowdown in the rest of the world will give rise to another US acceleration phase by the 3rd quarter well above 2% GDP growth. However, achieving 3 to 4% growth rates will be challenging with the long term labor shortage acting as a brake to our productive capacity. It’s a challenging time for managers, but a good time for employees who want to work less and earn more with benefits.