[V]ermont’s unemployment rate is so low this spring that it’s forcing some employers to raise pay.
The average annual wage rose 2.5% in 2017 and 3.1% in 2018, according to the state Department of Labor.
“Competition for labor is increasing, so employers have to pay more or be creative with benefits,” said Vermont DOL economist Mathew Barewicz.
Many areas of the U.S., including Vermont, have experienced very low unemployment for years now, and economists have long been puzzled by the fact that this didn’t seem to be having an effect on wages.
“Strong demand for workers in a tight labor market should push up wages,” said the Federal Reserve Bank of San Francisco in a January white paper on the topic. “Yet, while wage growth has increased since the end of the Great Recession, the increase has been surprisingly modest relative to the pace of labor market tightening.”
Vermont unemployment hit an ultra-low 2.2% in April. The Vermont DOL uses data from the federal Bureau of Labor Statistics to determine the rate, based on questionnaires that the BLS sends to Vermont households. The BLS works with the U.S. Census Bureau to collect the data. People are considered unemployed if they have looked for work in the past month; they say they want a job and would be able to accept work if offered; and they are over 16.
The DOL in a statement said the seasonally adjusted unemployment rate for April dropped by one-tenth of one percentage point from March. It estimated the number of unemployed Vermonters at 7,565. The state’s population is about 620,000.
April unemployment rates ranged from 1.5 in the areas of Burlington and South Burlington and White River Junction to 4.8 percent in Derby.
Public Assets, a public policy nonprofit in Montpelier, said a record 25,059 people were unemployed in May 2009, in the depths of the recession. The 7,565 unemployed in April is a record low.
“But fewer jobless has not meant more employed,” the nonprofit noted. The overall labor force has contracted since 2009, and the number of people working in the state has grown by just 2,782 since 2009.
The group classified as “discouraged workers,” those who are no longer looking for a job because they don’t believe they can find one, is very small – only about 700 in Vermont, Barewicz said.
“Typically we are dealing with individuals with barriers to employment like substance abuse, child care, criminal background, transportation,” he said.
Barewicz noted that at 65.8%, Vermont has higher labor force participation than the country overall, where participation is 63%. But that’s not translating into more wealth for the Green Mountain State.
Public Assets said that at $33.7 billion, Vermont’s GDP was the smallest among the 50 states.
“Vermont lagged behind other states in another important economic indicator: growth in per capita personal income,” the group said. The measure includes salary, wages, and business income, Social Security, disability payments, and employer retirement contributions, the group said. “Personal income in Vermont last year totaled $33.6 billion, or $53,598 per person. The per-person growth rate was 2.8%, which trailed the rest of New England.”