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May 14, 2018
Edited by
Cristina Lindblad
Businessweek.com○ Some indicators are flashing
red, but there’s still a little slack
in the system
Want ads for truck drivers to haul crude oil in Texas
are touting salaries as high as $150,000 a year. Some
nurses are getting $25,000 signing bonuses. The
U.S. unemployment rate just fell to 3.9 percent,
one tick away from its lowest since the 1960s. And
on May 8 the Bureau of Labor Statistics reported
there are 6.5 million unilled jobs in the U.S., the
most on record. Some employers say they’re
feeling the squeeze. “Rising labor costs remain the
primary contributing factor to our margin erosion,”
Chatham Lodging Trust, a company in West Palm
Beach (Fla.) that owns more than 130 hotels either
by itself or in joint ventures, said on May 1.
Is the U.S. economy overheating? Yes and no.
There are plenty of inlationary bottlenecks, and
not only in the labor market. Backlogs of orders
are the highest since 2004, according to the
Institute for Supply Management. Transportation
costs have jumped in part because of driver
shortages. Strong U.S. oil and gas production has
helped push up the prices of essential inputs such
as steel pipe and specialty sands used in fracking.
On the other hand, the bottlenecks aren’t yet
causing high inlation across the economy, which
would require the Federal Reserve to speed up its
interest rate hikes. The U.S. central bank passed
up the opportunity to raise the federal funds rate
at its May 1-2 meeting while noting that the rate of
inlation has “moved close” to the bank’s 2 percent
target. “In my judgment, the Fed is ready to accel-
erate [rate hikes] if they need to, but they’re not
getting ahead, which I think is appropriate,” says
Josh Wright, chief economist at ICIMS Inc., which
makes software to ind and hire talent.
Some of the factors driving up the U.S. inlation
rate—in particular, the jump in crude oil prices to
about $70 a barrel from less than $50 a year ago—
have external causes and don’t relect overheat-
ing in the domestic economy. Rising commodity
prices caused in part by new steel tariffs cost
General Motors Co. and Fiat Chrysler Automobiles
NV at least $200 million each in the irst quarter.
Tarifs have also helped drive lumber prices to a
record. Other external factors are the high price
of imported alumina for aluminum smelters and
the weather-related runup in prices of vanilla from
Madagascar and cocoa from Ivory Coast and Ghana.
The U.S. economy performed below capacity for
so long that it can be hard for managers to remem-
ber how to operate without lots of spare resources.
Half of the surveyed members of the National
Federation of Independent Business say there are
CONTENTS
○ Trump drives Iran
deeper into China’s
embrace
○ Privatization is no
longer a dirty word
in Brazil
Bottlenecks Are Emerging…
The
unemployment rate
has been lower
than this just once since 1970.
The
share of small-business owners
reporting few or no qualified job applicants
has climbed.
A measure of the
backlog of orders
is at its
highest point in 14 years.
60%
40
20
65%
40
15
1/1970
4/2018
4/2007
4/2018
4/2007
4/2018
Current rate
11%
7
3
Backlog increasing