Help (Still) Wanted

There were nearly 11 million job openings in the US economy at the end of July, closely-watched data out Wednesday showed.

The 10.9 million headline JOLTs print far exceeded estimates and marked another new series high.

The increase from the last business day of June was nearly three-quarters of a million. Hires were essentially flat, at 6.7 million, leaving a new record-wide disparity with vacancies (figure below).

The largest increases in job openings were in health care and social assistance, finance and insurance and accommodation and food services.

Needless to say, Wednesday’s figures did nothing to allay concerns about persistent labor market frictions.

The spread of the Delta variant complicated an already convoluted situation. Those opposed to the extension of generous federal unemployment programs insisted the prolongation of emergency benefits was the proximate cause of labor shortages. While that narrative doubtlessly has a lot of explanatory power, it fails to account for myriad other factors, not least of which are child care needs, diminished activity in some parts of the services sector and, most recently, another COVID wave.

Leisure and hospitality hiring flatlined in August, while food services lost 42,000 jobs, the first monthly decline since the winter virus wave. Openings in leisure and hospitality jumped to 1.8 million as of the end of July. In food service, openings rose for the sixth month in a row (figure below).

I’d suggest (again) that the game has forever changed for restaurants and bars. That industry is held together by a unique kind of glue, and once you tear it apart, putting Humpty Dumpty back together again is quite difficult.

I’ve gone into considerable detail on that previously, so I won’t regale readers with it again here, but suffice to say the figure (below) suggests the situation isn’t improving. I can’t imagine the onset of winter will help, especially if there’s yet another virus wave (or just a continuation of the current wave).

It’s possible that workers are just holding out for a better “bargain,” but that’s not how servers and bartenders think.

Admittedly, my firsthand experience is so antiquated as to be mostly irrelevant, but as late as five years ago, my unofficial psychiatrists were bartenders and I made a point of befriending restaurateurs (as it turned out, I should have been befriending doctors instead, but hindsight is 20/20). Servers and bartenders care about tips, not wages and benefits. To get tips, you need customers. If there’s a nationwide shortage of servers and bartenders, part of the problem is surely that many of the folks formerly employed serving tables and mixing drinks aren’t confident in the industry’s recovery prospects.

Coming back to the overall report, quits and the quits rate were little changed in July at 4 million and 2.7, respectively. Layoffs and discharges were similarly unmoved (figure below).

This suggests labor has quite a bit of bargaining power, a situation that continues to irk capital, and more so at the small business level than at the mega-corporate level.

As ever, I’m sympathetic to the small business owner who can’t find enough labor to keep the doors open. But then again, I’m not. It’s not so much that I harbor a sarcastic “Sorry. Not sorry” attitude. It’s just that the idea of an entire nation of services sector workers refusing to work for a living wage seems wholly implausible to me.

Sure, you might have tens of thousands of such recalcitrant workers, but not millions of them. Frankly, the average worker just doesn’t care enough about “the cause” (the cause of “labor,” as a collective economic actor) to be swept up in any kind of uprising. Most working people (often synonymous with struggling people) don’t have time to worry about any “causes” beyond the “cause” of putting food on the table and paying rent. If you offer them enough money, they’ll probably work.

So, my (admittedly simplistic) explanation for America’s labor shortage is that between the boost to incomes from federal unemployment benefits and the fact that most employers are still trying to see how little they can get away with in terms of compensation and benefits, scores of workers are waiting it out, especially in sectors where there’s a direct connection between foot traffic and pay. A retail worker still gets $15 per hour no matter how many people come in the door (until a shortage of customers forces the store to close anyway). A server, on the other hand, can work an entire six-hour lunch shift and walk away with just $25 in tips if hardly anyone shows up to eat. Two weeks of that and suddenly there’s not enough money for rent.

That’s reality. I’ve never personally experienced it (my actual work in that industry was during the heyday of fine dining and big tipping — Grasshoppers were still popular, if that gives you a temporal point of reference), but by virtue of decades spent perched at bar tops, I can generally sketch what life’s like for “modern” restaurant workers.

Ultimately, the expiration of federal pandemic unemployment programs this week will serve as a litmus test for the extent to which emergency assistance for the jobless was, in fact, keeping workers sidelined. My guess is that those who insisted that the expiration of those programs would amount to a panacea for scarce labor supply are in for disappointment.


 

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5 thoughts on “Help (Still) Wanted

  1. Another reason. excerpted from Bloomberg this morning. I recall that Goldman recently estimated that this dynamic explained about 25% of the drop in the labor participation rate.

    “How long do you plan to work? Americans say they’re increasingly unlikely to still be working deep into their 60s, New York Fed data show. The figures reinforce other research pointing to a wave of early retirements triggered by the pandemic—some due to a rethink about priorities and nest eggs boosted by juiced financial markets, but others driven by a lack of employment prospects.”

    As to pushing lazy bums off of the couch by curtailing benefits, the anecdotal evidence from states which terminated them earlier suggests the impact will be less than right-wingers would like you to believe.

  2. I’m sure the contraction in commercial real estate space and all those vacant buildings suggest that all those amazing job opportunities being posted are in places other than places where jobs used to be? I live in a small PNW town and the amount of vacant buildings is stunning. The jobs in my area are tied to schools that have decreasing student populations, walmart, costco and 2 grocery chains, a very small handful of fast food places, a goodwill and several consignment places and then an invisible number of mom and pop businesses that are virtual. Beyond that, exploding home prices and a common theme of working people having no place to live. The concept of a living wage is a total joke for the vast majority of people here.

    At least a decade ago there were concerns that future labor shortages would become an issue, but that thinking didn’t foresee massive increases in home values. As more communities experience what I see now, it’s challenging to understand how things will go back to normal.

  3. I’ve spent the last few weeks traveling around various parts of California, Oregon and Washington.

    Labor shortages seem, if anything, more dire in the smaller towns. Fast food places are offering $15-18/hr but only have enough staff to keep the drive-through windows running.

    In general, the sit-down eating and drinking places I saw were shortstaffed and bustling with customers. That would be everything from local diners to resort restaurants. The servers are, I suspect, doing well financially even if they are harried. The back of house staff, traditionally not tip-receiving, may not be feeling so compensated.

    There are, surely, many factors in the reticence of labor. However, the scale of unemployment benefits relative to wages certainly has a lot to do with it. When I asked the folks who were at work why more people weren’t back at work with them, no-one mentioned Covid or childcare. Granted, there was no requirement for anyone to answer me accurately or completely, but the reasons they did gave me were always some version of financial factors.

    Most memorable to me was the night clerk at a hotel, who told me she made twice as much on unemployment than she did from her job, but had wanted to come back to work anyway.

    The end of enhanced UE benefits won’t immediately put people back to work. Standard UE benefits are still available, eligibility is hardly being checked, it takes time for jobs and workers to get matched, and many people – especially in the drinking and dining industry – have found other kinds of work, and may not return to serving or cooking. For those who want or need to work, 18 months is a long time to be on ice.

  4. There’s a work comp stat, after 6 months off work, chances of returning a worker to work in any capacity is less than 50%. I can’t find the actual stat for being off greater than one year, but recall from several seminars, it’s around 1% chance of returning the worker to work.

    I spent some time working at a work comp work hardening rehab. We had a time clock for clients. They had to clock in at 8 and complete their “shift”. We had a psychologist on staff along with PT, OT and MSW. My take-away from my time there was that psychological barriers to returning those clients to work were usually greater than the physical barriers

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