A situation where the demand for workers exceeds the available supply is characterized by limited unemployment and increased competition among employers for qualified candidates. For example, a surge in construction projects coupled with a limited pool of skilled tradespeople would exemplify this scenario. Businesses in such circumstances often find it challenging to fill open positions, potentially impacting productivity and expansion plans.
This condition can lead to several positive economic outcomes, including wage growth and increased bargaining power for employees. It can also incentivize businesses to invest in training and development programs to enhance the skills of their existing workforce. Historically, periods of rapid economic expansion have often been associated with this type of labor market dynamic, forcing employers to adapt to changing conditions and consider new strategies for attracting and retaining talent.