One Boston Employer Gave Potential Workers A Math And Drug Test; The Result Was Disturbing

While the Fed's traditionally drab Beige Book described the US economy in conventional terms, growing "at a modest to moderate" pace, one relatively new development was the recurring complaint by employers that they are having an increasingly more difficult time in finding qualified and skilled workers to fill empty positions.

Labor markets remained tight, and employers in most Districts had more difficulty filling low-skilled positions, although labor demand was stronger for higher skilled workers. Modest wage increases broadened, and reports noted bigger increases for workers with skills that are in short supply. A couple of Districts reported that worker shortages and increased labor costs were restraining growth in some sectors, including manufacturing, transportation, and construction.

That said, we have difficulty finding where in the labor market data one can validate the Fed's finding that wages are growing due to rising labor pressures. If anything, the latest jobs report was a big disappointment not only in terms of overall payrolls, but also wages, with real wages continuing their slump...

... prompting Morgan Stanley to caution that "wage growth is leveling off and may be slowing" and leading the suddenly reflationary Albert Edwards to ask "where is the wage growth", we want to bring attention to one amusing anecdote, which we find quite believable. 

According to the Boston Fed the qualified labor shortage is so bad, that the hit rate on hiring after a simple math and drug test, collapses below 50%. To wit:

Labor markets in the First District continued to tighten somewhat. Many employers sought to add modestly to head counts (although one manufacturer laid off about 4 percent of staff over the last year), while wage increases were modest. Some smaller retailers noted increasing labor costs, in part driven by increases in state minimum wages being implemented over a multi-year period. Restaurant contacts, particularly in heavy tourism regions, expressed concern about possible labor shortages this summer, exacerbated by an expected slowdown in granting H-2B visas. Half of contacted manufacturers were hiring, though none in large numbers; several firms said it was hard to find workers.


One respondent said that during a recent six-month attempt to add to staff for a new product, two-thirds of applicants for assembly line jobs were screened out before hiring via math tests and drug tests; of 400 workers hired, only 180 worked out.

In retrospect, the US may indeed have a qualified worker crisis on its hands.