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Employers seeing tighter labor pool

WASHINGTON – The balance of power in the job market is shifting slowly toward employees from employers.

Bob Funk sees it firsthand from his position as chief executive officer of staffing agency Express Employment Professionals.

“We’re short of people in a number of cities,” he said.

So he’s changing the focus of his $2.5 billion, Oklahoma City business. Instead of concentrating on finding jobs for those who want them, Express Employment is putting more effort into finding workers for companies that need them.

“We’re back in the recruiting market again,” Funk said.

The 74-year-old industry veteran isn’t the only one to notice the change. Americans who have been hunting for employment for more than six months are finding they’re having better luck landing a job, while people who had given up looking are returning to the labor force to resume their search.

Companies, meanwhile, are beefing up their in-house recruiting teams and increasingly using complicated computer algorithms to scour the Web for prospective job candidates.

This is all good news for the economy, according to Nariman Behravesh, the Lexington, Massachusetts, chief economist for IHS Inc. He said the United States has entered a “virtuous cycle” where job gains are leading to increased household expenditures, encouraging employers to hire more workers.

Consumer spending rose in June by the most in three months, according to Commerce Department data published Aug. 1.

The expansion “is self-reinforcing and is very solid,” Behravesh said. “Growth of around 3 percent, plus or minus, is well within the cards for the remainder of this year and much of next year.”

The economy has advanced at an average annual rate of 2.2 percent since the 18-month recession ended in June 2009.

The shift in the labor landscape also has implications for Federal Reserve Chair Janet Yellen and her colleagues at the U.S. central bank. If a tightening job market starts to spawn broad-based wage gains, the Fed probably will bring forward the timing for its first interest-rate increase since 2006, according to Behravesh, who currently sees it coming in the middle of next year.

So far, compensation increases are the missing ingredient in what has otherwise been a strengthening jobs recovery. Payrolls rose by more than 200,000 for a sixth straight month in July, the longest such period since 1997, according to the Labor Department. Openings in May climbed to an almost seven-year high, reaching 4.64 million.

Average hourly earnings, in contrast, increased just 2 percent in July from a year earlier, barely keeping up with the rise in inflation.

Employers in general have been “pretty stubborn” about increasing wages, said Jeffrey Joerres, executive chairman of ManpowerGroup, a Milwaukee staffing company with $20.3 billion in revenue last year.

That might be about to change as the pool of available candidates shrinks.

“You can see a little anxiety among employers,” he said. “I can feel the inflection point is coming.”

Michael Durney, CEO of Dice Holdings Inc., agrees.

“I think you’re going to start to see wage inflation,” said Durney, whose company provides specialized websites that match employers with potential employees in industries such as technology and financial services.

In a sign of the changing dynamics, some 450 businesses have signed up for Dice’s Open Web product since it was introduced in December. The computer algorithm allows them to search 130 public sites for people with specific skills, such as Java software development. The sites include Stack Overflow, a question-and-answer forum for programmers, and Twitter Inc.’s online social-networking service.

Companies have used Open Web so far mainly to look for tech talent, though Dice is working on versions that could be married with its health care, finance and energy job sites, Durney said.

He defended the New York company against the idea it is snooping, saying the information it gathers is already public and noting that job recruiters have long used Web searches to screen potential employees.

“We’re aggregating the information and putting it in one place,” he said. “The stuff is there, so you might as well know it’s accessible.”

Critics also charge that such search processes can be too discriminating, weeding out viable job candidates because they don’t exactly meet the required criteria.

Like some of its customers, Dice feels the pinch from the tighter market: It added two recruiters in the last two months to help it fill 60 open positions, Durney said.

ManpowerGroup also is taking on recruiters and increasing “recruiting dollars” to find the workers its customers need, Joerres said. It is encouraging its staff to go beyond social media and get out of the office to meet prospective job candidates at forums, trade-association meetings and other public gatherings.

Companies recognize it’s getting harder to find employees, so they’re making their hiring decisions more quickly, Joerres added. Employers now take about three months on average to hire a worker from the time they put in a request with Manpower. That’s down 30 percent from about 18 months ago.

Businesses also are more inclined to hold onto staff. Conversions – giving full-time jobs to the temporary employees Manpower provides – are at a three-year high, according to Joerres.

Kaelyn Malkoski already sees the benefits from the changing labor environment.

After more than a year of freelancing in Los Angeles and Chicago, the 23-year-old will start her first full-time job as an advertising strategist this month. Though she has little experience in the field, her new employer was willing to take the risk, she said.

The more-permanent position in Chicago will offer her a greater sense of financial security, paying almost double what she’s currently making.

“I’m affording my rent and I’m living independently, but I haven’t saved a penny,” Malkoski said.

The job also offers vacation time and benefits, and cuts her commute in half.

The improving job market is helping the long-term unemployed, too. The number of Americans without a job for 27 weeks or more fell to 3.16 million in July from 4.25 million a year earlier. That’s still more than double the 1.32 million in December 2007.

“While long-term unemployment remains at exceptionally high levels and is a grave concern, I do think we are seeing improvements as the job market is strengthening,” Yellen told the Senate Banking Committee on July 15.

The workforce has grown by 1.09 million workers so far this year, according to figures from the Labor Department.

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