The US Labor Market Is Now A Funhouse Mirror

If you were looking for additional evidence to support the notion that the US labor market is woefully out of balance, you got it on Tuesday.

Job openings jumped to 9.286 million in April, an almost unfathomable print that made a mockery of consensus (8.2 million).

In addition to representing a one million+ upside surprise, the headline JOLTS number was a record. And, as the simple figure (below) shows, the word “record” seems somehow inadequate.

The gap (with hires) exceeded 3 million in April.

This is about as amenable to the prevailing narrative as data gets. As Bloomberg’s Cameron Crise quipped, “The ‘pandemic benefits are depressing employment’ thesis got another, err, bump this morning.”

Obviously, this suggests labor demand isn’t the problem. We have ourselves a bonafide imbalance. Job openings in accommodation and food services jumped by a record to a record (figure below).

Indeed, the report is chock-full of records. It’s probably easier to list what didn’t register an all-time high than to catalogue what did.

The data compliments the color that accompanied the NFIB small business report, which described an acute labor shortage. The quit rate in April was the highest ever, at 2.7% (figure below). For leisure and hospitality, the figure was 5.3%.

You can spin this a number of ways. The easy way out is just to say that enhanced unemployment benefits are creating an enormous disparity with open positions. And that’s clearly a semblance of true.

On the bright side, as Bloomberg’s Crise put it Tuesday, it also “suggests the official payroll data substantially underestimates the underlying strength of the labor market, though it will still be some time before that gap closes.”

That, in turn, could give the Fed additional cover when it comes to dragging out the policy normalization discussion, although I’m not sure the optics are great when it comes to citing a record quit rate in explaining labor market slack.

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8 thoughts on “The US Labor Market Is Now A Funhouse Mirror

  1. Is it possible a lot of jobs are going unfilled because the latino community is still afraid that they’ll be torn from families if they go to work in the service industry?

    1. there are any number of possibilities, all of which are probably at least a little bit true. that’s what makes this such a difficult article to really “dig” into. pretty much every plausible explanation is contributing. this could have been 5,000 words long if i’d wanted it to be. mercifully, i spared folks. 🙂

  2. I think another factor is that the food service and hospitality jobs are generally “last resort”. With labor in demand any reasonable person is going to shoot for that better job they’ve been dreaming of first, then if that doesn’t pan out they’ll work their way down the rung until all that is left is that $2.30 an hour job taking people’s grief and begging for tips.

  3. A number not bantered around much is the number of people receiving cash (under the table) for work.. In the real world small business / private parties can advantage themselves by this practice as can the worker for many obvious reasons. Owner operators in trucking can be an example due to shortage of drivers .. Yard work is a classic as well. These are all real hard workers by the way but they have an entrepreneurial culture .. Opportunities proliferate with current circumstances and it was as predictable as rain.

  4. Lack of seasonal and immigrant employment is a large factor here. All the summer jobs are available b/c the people who usually show up to live in a dorm like setting and wait tables in Bar Harbor arent showing up. I dont know where I could find confirming info on this though.

    Additionally, the meme that unemployment is holding people back just doesnt hold water. In FL there are 130k people with continuing claims; TX has 280k, CA 667k, and NY at 387k. IF there was no one on unemployment, there would still be 8million openings????

    How many ‘openings’ are there in anticipation that they think people are about to quit?

    THIS is the peak in the employment problem, a bizarre print comprised of ghost positions that either dont exist or wont get filled/will disappear after July4.

    the bulk of jobs being filled are low wage food service and unemployment. As those get filled will aggregate income/wages rise? Probably not, getting off the dole and into work that pays slightly more but now, gas and child care eat up gains.
    Unless aggregate wages (and AHW goes up) climb at an accelerated rate, this is just a one time summer flash of weird labor stats. current sentiment, extrapolating current revenue growth into october, would have us SUBSTANTIALLY higher than october 2019….which isnt going to happen as agg wages are about to stutter.

  5. The quits rate is certainly the key here. I recall from previous tech boom cycles, as a hiring manager, having to fight for hires, jack up salary offers, and grant crazy pay raises to keep staff. Now, it’s happening in leisure and hospitality. The Apr NFP AHE table shows leisure&hosp went from $14.58 in May ’20 to $15.68 in Apr ’21 – up 7.5% yoy. We had some leading restaurant companies announce $15 floors in some trying-not-to-sound-desperate press releases. And now we see the huge 5.3% quit rate in leisure&hosp.

    Coincidence?? I think not! (I always wanted to say that)

    Labor mobility is wonderful thing and, at the moment, you don’t have to be a millennial software nerd to take advantage of it.

    Hopefully, the sad-looking employment-population ratio data will start turning up when enough people start hearing howls of anguish — coming from employers!

  6. I dunno, with a highly infectious virus still far from contained and a bunch of knuckleheads saying I won’t wear a mask, dammit, and I don’t care to get vaccinated, dammit. take this job and shove it seems like a very rational economic decision to me.

  7. Some part of the quit rate is likely job hopping to jobs with higher pay and signing bonuses ($1,000 for a dishwasher etc).

    The labor supply should improve markedly when pandemic UE benefits end (Sept at latest) and in person schools reopen (fall). So, by 4Q.

    The labor demand is likely to remain strong, given pent-up spending, businesses reopening and new businesses starting. Even if the JOLTS peak is now, JOLTS is 4Q is likely to still be pretty robust.

    This is good, at least if one’s measure of economic health extends beyond deflation trades. UE is still very high, a “hot” jobs market is what is needed.

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