By Alex Vuocolo
Employment is on the rise in Delaware. Conventional wisdom says that’s a good thing. But like most economic markers, the story behind the numbers is more complicated.
Delaware’s seasonally adjusted unemployment rate dropped from 4 percent to 3.4 percent between February 2018 and February 2019. That places the state below the national average of 3.8 percent, and below neighboring states Pennsylvania (4 percent) and Maryland (3.8 percent).
New Castle County led the state at 3.2 percent unemployment. Kent and Sussex trailed behind at 3.8 percent and 4 percent respectively. The total number of unemployed was 16,400 people in February.
While this is good news for Delaware’s overall economy, low unemployment can lead to tighter labor markets and wage pressure, especially in high-demand industries such as health, education and tech.
“It makes it very challenging for employers who are looking to fill positions, said Luke Tilley, chief economist for Wilmington Trust. “If Delaware’s dynamic is following the U.S. dynamic, then the rate is pushing wages considerably higher.”
He added that around 5.5 percent is where you begin to see wage pressure, so Delaware is well past that threshold. Indeed, Tilley predicts that the current pace of growth won’t continue unless more people join the job market.
“The number of workers is really the limiting factor,” he said. “Young cohorts have really stepped up their level of participation over the past few years. We really need that increased participation to keep up this level of job growth.”
In health care, which is among the fastest growing sectors in Delaware (2.7 percent over the last 12 months), a number of factors control the flow of new doctors and nurses, such as the availability of educational and residency programs. But with countless professions falling under the umbrella of healthcare, the sector is not immune to shifts in the wider labor market.
“It’s been tight and not just for clinicians,” said Wayne N. Smith, president and CEO of the Delaware Healthcare Association. “We employ thousands of IT people. There are a whole bunch of skilled positions.”
Beebe Healthcare has struggled to fill positions, but it has kept up job growth through aggressive expansion.
“The labor market has definitely been challenging, but we’ve been successful in attracting applicants,” said Catherine Halen, chief human resources officer at Beebe. The company hired 395 people and received 5,000 applications in 2018. A quarter of those hires came out of recent expansions across southern Delaware, according to Halen.
In tech, the pressure is even greater. In February, the national unemployment rate for IT positions stood at 2.3 percent, compared to 3.8 percent for the entire economy.
“It absolutely does make it tougher to fill job openings,” said Steven Ostrowski of CompTIA, a tech industry research firm, on rising employment numbers. “The persistent gap between the demand for and supply of tech workers is a potential ‘dark cloud’ hovering over a generally positive outlook for tech employment.”
While economists agree that rising employment can put some pressure on both employers and job-seekers, the labor market is not a zero-sum game.
“For certain skills, there are bottlenecks, and for a certain period of time there can be shortages or surpluses,” said George Sharpley, chief of the Delaware Office of Occupational and Labor Market Information. “But overall I don’t think that’s a hindrance to the economy.”
Looking at the margins of the labor market broadens the picture. Over the last 12 months, an average of 288,200 working-age (ages 16 and up) Delawareans were no longer actively seeking employment. Out of that total, 12,200 still wanted a job. At the peak of the recession, in 2011, that number was about 16,000 who wanted to work but weren’t looking for a job.
Sharpley said the unemployment rate has dropped due to new job creation, not people leaving the labor market. He added that a robust economy can shake up that equation.
“It’s not like there’s just a fixed number of worker and potential workers and therefore the more that get hired, the fewer are left. It’s more fluid than that,” Sharpley said. “There are typically people on the sidelines who are not actively seeking work, but if they see people getting hired and getting good wages, they may reenter the job market.”
Beebe is trying to do just that. Instead of sitting back and waiting for applicants, the healthcare system is hitting the pavement to draw new talent.
“With a tighter job marker, you don’t have a lot of people actively looking for jobs,” said Christy Duda, human resources specialist and recruiter for Beebe. “So we’re taking on the passive candidates by reaching out.”
One way it’s done that is by developing partnerships and internship programs with local schools and colleges, including Delaware Technical Community College and University of Delaware. The system has also expanded its footprint by holding job fairs throughout the state and greater region.
Tilley noted that another positive side effect of a tight labor market is that companies put more money into efficiency and capital investments. That means new machinery, software and innovative processes.
Employers may also find other ways to appeal to employers without pushing up wages, he said, such as more vacation time and better benefits.
“When you’re unable to find people, then the next logical move is to become more efficient,” he said.