In towns where workers are scarce, employers are boosting pay and perks and stepping up recruiting all while trying to avoid raising prices. What will happen when the U.S unemployment rate falls below 4 percent, which is expected to occur by this summer? One way to tell is to look at cities where joblessness is already lower than that. Bloomberg news reporters traveled to Lowa, Georgia and Maine.

They discovered that employers have found ways to cope with tight labor markets and still make money. Businesses have pulled in workers from the sidelines including retirees, immigrants, and the homeless and retooled processes to use less labor. Some have raised pay considerably for certain jobs, but so far there are no signs of an overall wage explosion. That Should embolden those at the Federal Reserve who want to raise interest rates slowly to give growth a chance.

From polished sea salt caramel balls to truffles packaged with hand-tied bows, the treats on sale at wilbur´s of Maine Chocolate Confections in Freeport exude artisanal charm. While that´s a source of pride for owner Andrew Wilbur, whose parents started the business, he´s staring down a dilemma. Manufacturing workers are hard to come by in Freeport, which is 15 miles north of portland and part of its statitiscal area. At 1.8 percent, the unemployment rate is the third-lowest in the country. “It´s made me think, do i go to more mechanization,” Wilbur says from inside his production plant, where three employees are making candy in what look like mini cement mixers. 

Wilbur has raised wages for his 40 employees by more than 20 percent over the past three years, but he´s passed hardly any of his costs onto consumers. Business at his three brick and mortar outlets is already unchanged or down, and he would have lost online and wholesale customer if he´d raised prices substantially, he says. 

It takes a full year for these employees to get up to speed and five for them to hit what Wilbur, without a hint of irony, calls “the sweet spot”. With inexperienced workers starting at $12 to $14 an hour, onboarding is becoming a major expense. Lowering his voice a little, Wilbur admits that he´s changed some of his packaging to make it less labor-intensive, including doing away with hand applied labels. 

Shipwreck & Cargo, a souvenir shop in downtown Portland that stocks items such as lobster printed boxers and Maine blueberry tea, staffed its floor with only two sales assistans during the busy summer season instead of the usual three. The supply of workeers has dried up just as the tourism industry is on an upswing, says store manager jennifer Smith. “You want the right people, standing and smiling in front”, says Smith, who adds that the applicant pool has gotten smaller and less qualified in the five years she´s been running the shop. 

The leisure and hospitality sector is the backbone of the local economy, but professional and business  services have been engines of growth in recent years. Weekly wages in the Portland region have been moving up gradually, climbing in line with the national average through the first three quarters of 2017, the latest figures show. inflation in the northeast has been running below 2 percent. 

One big reason employers are struggling to fill slots is that Maine´s growth has leveled off. The state has the highest median age in the country at 44. “Last year, I was unable to get how many people i needed. I was probably short one and a half people”, says Tammara Croman, the manager of Portland´s Pomegranate Inn, whose eight guest rooms are outfitted with exuberant floral wallpapers and works by local artists. She says the operation ran at full capacity last summer, though with too-few housekeepers, it wasn´t able to accommodate as many early check-ins “We end up having to hire people who we wouldn´t normally”, says Croman, who´s already put out feelers for the summer. 

Applicants with no relevant experience are asked to come in for three week trials, which gives Croman a chance to see if they´re cut out for the work a mix of housekeeping and custumer service. “It allows you to see the person´s work ethic, if they´re showing up on time, if they´re doing a good job,” She says. 

The workforce challenges have been “top of mind for a while, and i don´t know if we see an end in sight”, says Quincy Hentzel, head of the portland Regional Chamber of Commerce. That said, it isn´t all bad. “Businesses are extremely appreciative of their good employees and working really hard on retention, “she says. That´s wonderful”.

A tight labor market also means that employees can afford to be picky. At Wilbur´s chocolate shop, two store managers left last year because they had better prospects in administrative work. While the business managed to hire replacements, mounting payroll costs are weighing on profit margins. Pointing to a large, hand-painted chocolate Easter bunny in his factory, Wilbur shakes his head. “We probably make a lot of people happy,” he says, “but i´m not sure  that we cover the bills.” – Jeanna Smialek. 

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