Fed: "To Fill Job Vacancies, Some Employers Are Relaxing Drug Tests"

A little over two years ago, when the labor market was just as tight as it is now (yet "oddly" the Fed was well on its hiking path and not about to cut rates), we quoted the April 2017 Beige Book to demonstrate just how bad the labor shortage was: what we found is that the hit rat

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.

Our conclusion then was that "in retrospect, the US may indeed have a qualified worker crisis on its hands."

Fast forward to today, when as we noted earlier, the latest Beige Book indeed confirmed that the "qualified worker crisis" is raging. And, more importantly, it also appears that employers have found some simple, if radical, solutions to the escalating labor shortage. Simply said, if it was drug tests that was the underlying cause for weeding out a growing number of potential candidates well then just do away with the drug tests entirely, and voila - skilled workers emerge... as the following anecdote from the San Francisco Fed published today reveals:

The labor market remained tight and employment growth was modest. Some contacts reported that employment growth would have been higher if not for persistent shortages of qualified labor. In Eastern Washington, a large employer in the utility sector shifted some of its existing workforce into information technology-related functions, given the difficulty of hiring for those roles. To fill vacancies in construction positions, some employers in Idaho discussed whether to relax certain hiring standards related to drug testing.

Because surely there can be no possible adverse consequences from hiring high construction workers.

But wait there's more, because while no other Fed explicitly discussed hiring junkies, there were some other amusing anecdotes when it comes to America's unique labor challenges such as this from...

The Boston Fed:

Five of seven contacts reported flat or reduced employment. A frozen fish manufacturer said it was unable to find workers. A manufacturer of electronic components said it had laid people off as a result of the tariffs, with headcount declining by about 10 percent. For example, the firm had moved an assembly line from the U.S. to Germany because most of the components in the product came from China and making the product in Germany allowed them to avoid the tariffs.

Philly Fed:

Commercial real estate contractors have stepped up training programs to replace their experienced workers as more baby boomers retire. A shore contact noted that the tight labor market nationwide led to greater demand for H-2B visas—widely used by seasonal vacation spots

Minneapolis Fed:

Wage pressures were moderate overall, but varied. Despite strong hiring demand and tight labor, nearly 70 percent of respondents to the ad hoc poll of greater Minnesota businesses said wages rose less than 3 percent over the past 12 months, and a notable share said they rose less than 1 percent. Their wage expectations for the coming 12 months were slightly lower.

But fear not, all of that will be magically resolved once the Fed cuts by 25 (or 50) basis points, because as everyone knows, every day before going to bed, both unemployed workers and short-staffed employers pray to the Fed to cut rates.