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Red-haired American labor market drives little to seek cooler alternatives

POCATELLO, Idaho (Reuters) – When Sean Luangrath joined Pocatello, Idaho-based Inergy Solar a few years ago, the plan was to…

POCATELLO, Idaho (Reuters) – When Sean Luangrath joined Pocatello, Idaho-based Inergy Solar a few years ago, the plan was to move the portable solar battery charger to his home base in Salt Lake City so he could build it with ankle access to Silicon Slope’s technical talent and venture capital.

Sean Luangrath, CEO of Inergy Solar, poses in Idaho Falls, Idaho, USA on November 1

2, 2018. REUTERS / Ann Saphir

However, when the new CEO looked at labor costs, he drew that plan and decided instead to relying on work drawn from local colleges and the nearby Idaho National Laboratory. Next year, he plans to double the payroll to 50 employees as he relocates the company’s manufacturing operations from China back to Eastern Idaho.

Laungrath says he likes to be the relatively larger fish in a relatively smaller pool. “There is less competition to do things like this in this corner of the forest.”

But Luangrath’s decision also reflects the reality of an American labor market, which with some measures is the hottest decade.

National unemployment rate last week was 3.7 percent, a 50-year low, figures released by the US Labor Department showed Friday. And even though the labor profits fell in lack of expectations, 155,000 in November were still twice what some estimation needed to keep up with population growth.

Wages also rise 3.1 percent nationally during the 12 months to November, the Friday report shows, but it masks much faster growth in larger cities, especially those with technically heavy work basins.

Four of the 10 largest counties with the biggest wage increases in the second quarter of 2018 were in the larger San Francisco Bay Area, recently displaying data from the US Labor Department.

And across the country, many labor markets are so dense that it picks up corporate growth, according to anecdotal data released by the Federal Reserve last week. For example, the Federal Reserve Bank of Minneapolis reported that “labor supply was generally the biggest obstacle to short-term growth”.

Sharpened work increases wages and “payroll earnings are likely to continue to increase until 2019,” says Andrew Chamberlain, chief economist at the online workplace Glassdoor. But he said, “It’s a very varied wage image across the United States”

And it has created openings for some companies that are willing to branch.

Just over a year ago, executives at the e-commerce company Fivestars realized that they had a problem: the San Francisco labor market became too hot and the customer support staff they needed for the next expansion would not be found anywhere.

Then they headed to El Paso, Texas.

In October, the internet marketing company had recruited 65 employees in the border city, about a quarter of their total staff.

Working there is not only cheaper, explains vice president of business Matthew Curl, but it is easier to hire and retain people. In San Francisco, it had recently taken him two months to hire only a customer support agent, who then left within a week for a slightly better paying job.

El Paso is “everything we hoped for: a stable labor market with experienced people who know what they are doing,” he said.

El Paso’s average weekly wage increased 2.4 percent in the second quarter of 2018, to $ 733, showing the US Labor Department’s figures.

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Compared with a 4.4 percent increase in Salt Lake, with an average weekly salary of $ 1,010 and a 9 percent increase in Silicon Valley San Mateo, to an average weekly salary of $ 2357.

With such growth, more companies can try to solve their hot labor relations with a move to a cooler place like the El Paso desert.

The trend may actually happen: At the beginning of the month, Curacubby, a Berkeley, California-based start to automate billing for schools announced that it will open an office in El Paso in January.

Reporting of Ann Saphir; Editing Dan Burns and Diane Craft

Our Standards: Thomson Reuters Trust Principles.

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