The strange phenomenon of “labor shortage” when 7.1 million fewer people are working
Strange Phenomenon # 1: Labor.
By Wolf Richter for WOLF STREET.
Amid reports of hiring bonuses, even for jobs at the bottom of the pay scale, and amid reports of companies raising wages to attract workers, and amid widespread complaints about ” ‘labor shortages’ and hiring difficulties, and amid reports of supply chain problems because critical jobs cannot be filled, and amid a historic spike in supply jobs, there is the tidbit of the Ministry of Labor that 14.7 million people still claim state or federal unemployment benefits, including 11 million people on federal PUA or PEUC benefits – however marred by a epidemic of fraudulent claims and poor accounting this figure can be.
These benefits were supplemented by the additional $ 300 per week in federal unemployment benefits, which are now being phased out in 26 states, but they were mostly still in effect when data from today’s employment report. hui were collected in mid-June.
This is the bizarre convoluted backdrop to today’s employment report from the Bureau of Labor Statistics.
The # 1 weird phenomenon as a result of it all: the workforce
The economically active population consists of those who were employed during the survey period or who were actively looking for a job in the past four weeks. A person who might possibly want to work but who was not actively looking for a job during those four weeks is not considered to be in the labor force.
Thus, in June, the labor force increased by 151,000 people, after declining in May, and was still down by 3.5 million people compared to December 2019, with little improvement since last August.
In June, 6.4 million people wanted a job in broad terms but had not actively looked for a job in the past four weeks, or were not available to take a job, according to the BLS. They were therefore not included in the labor force. This increased by 1.4 million compared to February 2020. They are on the margins of the job market.
There are many reasons why people do not return to work, look for work and therefore are not part of the workforce. This includes having to look after children in areas where schools and daycares are not fully open; and that includes what is now called the “retirement boom,” where people decided it was no longer worth it and went for quality of life.
# 2 strange phenomenon: Upward pressure on wages during an unemployment crisis.
Rarely is there upward pressure on wages during an unemployment crisis. But this is what we have.
The wage pressures that employers talk about and the pay increases they have implemented are starting to show up in the numbers despite the fact that many hires have taken place at the lower end of the salary scale in the hospitality industry, which lowers the overall average.
The average hourly wage of salaried workers in the private non-farm sector rose 10 cents per hour in June, from May, to $ 30.40, after increasing 13 cents in May and 20 cents in April, for a increase of 43 cents per hour in three months, or 5.7% annualized.
In the graph below, note the peak of May 2020. There was no peak in salary. This was the result of the dismissal of many lower paid workers, especially in the hospitality sector, while many higher paid workers kept their jobs and switched to working from home. This raised the average.
Today, the opposite is happening, with the lowest paid workers being sent back in large numbers to jobs, which should lower the average hourly wage. The fact that the average is rising despite the influx of lower paid workers shows how much pressure there is on wages.
Employment in the leisure and hospitality sector – catering services and drinking places, hotels, casinos, etc. – jumped 343,000 jobs in June, after jumping 306,000 jobs in May, as restaurants, hotels and casinos desperately try to hire workers. Total employment in the sector is down by around 2.18 million people, from the peak in February 2020, but this is still a huge improvement from a year ago.
Employment in the manufacturing sector only increased by 15,000 jobs after the 39,000 job increase in May, amid widespread complaints from manufacturers that they are struggling to fill orders because they are struggling to “find suitable candidates for current vacancies ”, according to the IHS Markit Manufacturing PMI, and this growth has been weighed down not only by tangled supply chains, but also by“ labor shortages ”.
In June, the number of workers in the manufacturing sector was still down 481,000 or 3.9% compared to February 2020:
But manufacturing output in May fully recovered from February 2020. With each downturn, manufacturers have cut costs by investing in automation and outsourcing production. While employment in the sector peaked in the 1970s and has since fallen by about a third, production, boosted by automation, continued to increase until the end of 2007. During the Great Recession, manufacturers have massively outsourced their production. Adjusted for inflation, output never returned to its 2007 peak. Then in March 2020, it fell off a cliff.
But by May 2021, manufacturing output had returned to February 2020 levels – despite 3.9% fewer jobs in the sector:
Concert workers quitting concerts to become employees?
Employers – businesses, governments and nonprofits – said they added 850,000 workers to their payrolls in June, according to the BLS today. It’s a big job gain. The total number of jobs at these establishments rose to 145.8 million, but it is still down 6.76 million from February 2020 (green line in the graph below).
Households, however, reported that the total number of people working, including concert work, fell from 18,000 in June to 151.6 million, still down 7.1 million from February 2020 (red line). And that includes the self-employed.
Even as employment has risen sharply, according to establishment surveys, households have been reporting slower improvements since the end of 2020. And the gap between the two has narrowed by 2 million workers in six months. This suggests that over the past six months, employers have hired many people who were self-employed.
# 3 strange phenomenon: “labor shortages” with so many people not working.
There are a lot of potential workers in the United States to fill all of these jobs, and there is no shortage of people. There may be a shortage of certain skill sets – and there always is, and this is where on-the-job training, education and learning come in.
But more importantly, there appears to be a shortage of people willing to work with current salary levels, benefits and working conditions. It’s like a quiet strike.
And this time around, more than 14.7 million people are still clamoring for unemployment benefits, including the additional $ 300 a week from the federal government. In many cases, beneficiaries earn more by not working. OK, that 14.7 million figure is marred by an epidemic of fraudulent claims and questionable data. But even with those removed, there would still be a very large number of people receiving unemployment benefits. And in mid-June, employers still had to compete with those unemployment benefits, including that extra $ 300 a week.
But employers understand that the $ 300 a week is already cut in about half of the states and will expire in the rest of the states on September 6, that it will make it easier to compete with unemployment benefits and that hiring at lower levels of the economy. salary scales could also become easier.
Do you like reading WOLF STREET and want to support it? Use ad blockers – I totally understand why – but you want to support the site? You can donate. I really appreciate it. Click on the beer and iced tea mug to find out how:
Would you like to be notified by email when WOLF STREET publishes a new article? Register here.
Many experts agree that metal roofs are an excellent defense against forest fires. Click here or call 1-800-543-8938 for more details on our sponsor, the folks at Classic Metal Roofing.
Classic Metal Roofing Systems, the leader in fire-rated roofing for residential applications, manufactures products that weigh 1/20 the weight of most tile products and are eligible for specified Class A, B or C fire ratings. by preparing the roof.