Low Nebraska Unemployment: Workers Thrive, Businesses Cope

Harry’s Wonder Bar is a trustworthy old dive bar in Nebraska’s capital frequented by office workers, construction workers, and graduate students alike: the kind of wood-paneled spot with a pool table in the back where phones usually stay in pockets, second fiddle for casual conversation, and beer mugs are matted in every season.

When about a half-dozen happy hour patrons gathered at the bar one afternoon, most had something notable in common: Each seemed to know someone who’d earned a sizeable raise or raises in the past year — and many, if not all had received a raise themselves.

This included early-shift bartender Nikki Paulk, a laid-back woman with flashing pink hair. “I’m in hot demand, baby,” she said, mentioning “desperate” employers with a big grin. “I’ve worked at about six bars in the last six months because I keep getting better and better offers that I can’t refuse.”

Nebraska’s unemployment rate was 2.1 percent in February, tied with Utah as the lowest in the nation and nearly the lowest of any state. Unemployment is below 1 percent in several counties. Even accounting for adults who have retired, the proportion of the population ages 16 and older who is employed in Nebraska is approximately 68 percent, the highest in the country.

After decades of wage and income stagnation, the balance of power between managers and their workers appears to be, at least temporarily, tipping toward work, with employers competing for workers rather than the other way around. Unemployment in states like Indiana, Kansas, Montana and Oklahoma is nearly as low as in Nebraska, testing the benefits and potential costs of an economy with exceptionally tight labor markets.

Ms. Paulk, 35, graduated from college with a graphic design degree during the Great Recession when jobs were scarce. She recalls working 60-hour weeks near minimum wage in Illinois and was “excited to find a neighborhood” that could be used for laundry. In 2013, she moved to Nebraska and took a $12 an hour job in medical data entry.

She started bartending in 2018, and since then, she says, her combined salary has more than doubled to $25 (and sometimes $30) an hour, including tips.

The nationwide unemployment rate was 3.6 percent in March, almost back to pre-pandemic levels, which were the lowest in half a century. Nebraska’s particularly low unemployment rate is due in part to its above-average high school graduation rate and the dominance of industries like manufacturing and agriculture, which are less volatile during downturns than the service or energy sectors. Even at the height of the Covid-19 lockdowns in spring 2020, the state unemployment rate was 7.4 percent, half the national number.

But the job market in Nebraska can also be a harbinger for the country as a whole. Most economists expect overall unemployment to fall further this year. Job openings are near record highs and unemployment rates in January were lower than a year earlier in 388 of the 389 metro areas assessed by the Bureau of Labor Statistics.

Many economic analysts claim that if labor remains tight, wages will rise too quickly and employers will continually pass these increased costs on to consumers. For now, at least, evidence of such a spiral is scant: Federal Reserve data shows that average annual salary increases are well within the range — 3 to 7 percent — that prevailed from the 1980s to the 2007-09 recession.

Still worried, the Fed has started raising interest rates to cool the economy and tame inflationary pressures. The supply chain challenges that emerged during the pandemic linger and the war in Ukraine further complicates the inflation outlook as well as overall economic growth. Consumer spending remains buoyant, but surveys reflect gloomy public economic sentiment.

Meanwhile, even as price hikes plague household coffers and bury the value of some new wage increases, a sizeable mass of workers and jobseekers are gaining more leverage over benefits and conditions.

During a virtual summit on the local economy held by the nonprofit group Leadership Lincoln in February, Eric Thompson, director of the Bureau of Business Research at the University of Nebraska-Lincoln, argued that the job market could simply be rebalanced.

“Obviously it’s still better to be the employer than the employee, or at least most of the time it is,” he said. But the current environment allows some employees to change jobs or apply for higher positions more easily. Local employers are dropping degree requirements for a number of intermediate and entry-level positions.

Many fast-food restaurants struggling to staff locations near the state’s $9 minimum wage have begun offering starting wages of $14. Evidence of automation is rife, as are “Help Wanted” signs: some pharmacies on the main roads and highways seem to have more self-checkouts than staff at any given hour.

Mr Thompson said such moves are not necessarily threatening to the working class, but a reflection of the need for businesses to adapt while workers find jobs that can “maximize their skills and potential”.

Tony Goins, a former senior vice president at JPMorgan Chase who was appointed director of the Nebraska Department of Economic Development by Gov. Pete Ricketts in 2019, said the tight job market could prompt managers to become more flexible and innovative.

“At the end of the day, the market dictates that I have to pay the employees more money,” said Mr. Goins, himself a small business owner with a cigar lounge in Lincoln. “So, I mean, how are you going to balance that?” To remain competitive in hiring, managers need to improve culture, leadership, employee retention and recruitment, he said.

He spoke of his son, an assistant men’s basketball coach at Boston College — a position that he says requires ongoing outreach, as well as a dual promise of “playing for a successful program” and personal growth. “It’s not what CEOs are used to,” he said.

Companies looking to grow have started offering incentives beyond pay. Japanese company Kawasaki Motors is spending $200 million to expand its 2.4 million square foot facility in north Lincoln where it manufactures jet skis, ATVs and rail vehicles. It is adding over 500 employees to its 2,400-strong workforce, with jobs primarily in fabrication, welding and assembly.

The company is becoming more flexible in terms of attitudes and work styles to pull it off. “It used to take a couple of weeks to get hired at Kawasaki,” said Bryan Seck, Lincoln’s chief talent management strategist. “Now it’s only four hours.”

Knowing that many parents are left on the fringes of the workforce due to childcare responsibilities, Kawasaki recently created a 9am to 2pm shift tailored to those who need to pick up children from school and daycare in the early afternoon. Starting wages are $18.10 an hour, Mr. Seck said, with benefits like health care and a 401(k) plan.

In addition to raising wages to retain employees, Todd Heyne, the chief construction officer at Allo Communications, a Lincoln-based cable company, said management had decided relaxing in-person work requirements could expand the pool of available workers. This prompted the company to allow many of its customer service representatives and technical support staff to train and work further afield as it prepares to expand beyond Nebraska and Colorado.

Not all problem solving is easy. The extra labor costs add to pressures in the supply chain, which have increased the price of key materials like fiber optic cable by up to 30 percent. Vendors often charge 20 percent more for their contracted tasks. As a result, the company has taken steps such as hiring its own trucking staff.

In the end, “combined with some automation efficiencies, our team will see significant pay increases with less rudimentary work,” said Mr. Heyne, who is reducing manual paperwork, centralizing back-end systems, and doing more to troubleshoot customers’ network issues remotely. Despite the cost challenges, “I’ve never been more optimistic about our position, our position in the market, how we stack up against our competitors and our technology,” he added. “Which is strange.”

For many, the opportunity of this economic moment is tinged with concern. They include Ashlee Bridger, a 30-year-old student at Southeast Community College’s Lincoln campus who works in administration at nearby Huffman Engineering after being recruited by a job fair.

Ms Bridger left her job as a nurse to pursue a career in human resources because she felt confident enough to bet on herself: “Obviously it was a risk. Leaving any career is.” But in the current job market, she said, “I knew it was easier to work my way up.”

She also had a number of life milestones that coincided. She will graduate with an associate degree in May and begin her bachelor’s degree at Nebraska Wesleyan University in the fall. Huffman’s managers have told her that she is happy to continue working there if her schedule allows and that they would like to hire her in a more senior position after she graduates.

She married in the summer of last year, then moved into a newly built house in Lincoln with her husband in August. Though they feel financially stable, she half-joked that they were lucky the house was mostly built before lumber prices skyrocketed. With prices now up across the board, “I’m more cautious about my spending,” she said.

Ms. Paulk, the bartender at Harry’s who’s benefiting from the better pay, has friends and customers who are upset about recent inflation. “But it’s out of our control anyway,” she said with a shrug.

“All I know,” she added, “is that I’m not broke now — it’s great. Life is good.” Low Nebraska Unemployment: Workers Thrive, Businesses Cope

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