October’s US jobs report was solid, but businesses are still struggling to find workers.
Like so many other pandemic distortions, labor scarcity isn’t a problem that’s likely to resolve overnight.
Employers will be frustrated for several more months (at least), but you’d be forgiven for suggesting that after four decades in decline, labor (as an economic actor) deserved an opportunity to reclaim some leverage. It’s tragic that a pandemic was the catalyst, but here we are.
There are competing explanations for why workers aren’t coming back faster. Until recently, it was all too easy to blame pandemic unemployment benefits, but as those programs roll off, we need new excuses.
“The return of in-person schooling, the effective COVID vaccine and the ending of extended and uprated unemployment benefits was supposed to see potential workers come flooding back,” ING’s James Knightley said Friday. “There is no sign yet and remember that half of all states ended these benefits in July,” he added.
Although the idea of “excess savings” is plausible, I find it unconvincing. While it’s true that many Americans rediscovered frugality during the crisis (if only because they were terrified), headlines touting cash “buffers” belie reports that one in five households lost their entire life savings.
Relatedly, the wealth effect that accompanied meteoric gains in stocks and house prices (figures below) doesn’t accrue to people who don’t own equities or a home — by definition.
In the course of speculating about where the workers went and why they’re not flooding back, ING’s Knightley cited the figures illustrated in the two charts.
“One reason may be that with household wealth having increased by $26 trillion between end-2019 and June 2021, there isn’t the urgency to go and find work,” he said, before suggesting that although “those gains will not have been spread evenly over the income spectrum, [it’s likely] that many individuals have built up a financial buffer [and] don’t need to go out and immediately get a job they may not especially like.”
There’s doubtlessly some truth to that. But, as ever, I’d contend we should be cautious about extrapolating our own fortuitous economic circumstances onto others. Most people’s circumstances aren’t fortuitous. The term “fortuitous” entails happenstance and in many cases, it implies a lucky deviation from the norm.
As difficult as this is for the upper-middle class to come to terms with, the norm in America is something that feels like precarity. Everyday people worry about money — specifically, the possibility they might run out of it.
That reality is most assuredly not captured by math which suggests that every person became $79,000 richer as a result of the above-mentioned gain in household wealth.
So, if it’s not enhanced unemployment benefits, and it’s not school closures, and it’s not savings buffers, and it’s not financial windfalls, then what is it?
I’d postulate the dearth of labor in the post-pandemic era is a function of something far more nebulous: Fatalism, apathy and generalized despair, all of which have been gestating for decades.
Have a look at the figure (below). “What’s not coming down yet is the group that isn’t looking for work and says it doesn’t want jobs,” Bloomberg’s Matthew Boesler said Friday.
“The thing is, we saw a similar dynamic in the last expansion, where that group took the longest to recover,” Boesler added, before noting that “eventually — from 2015 on — they started returning to the labor force and became a major driver of overall job gains for several years.”
I’m not a labor economist. It would be absurd for me to suggest I have something new (let alone novel or groundbreaking) to add to a debate that’s consumed brighter minds than mine for decades.
But what I’d not-so-gently suggest is that, over time, Americans have lost interest. In the labor market, in their communities and in life in general. Americans just don’t care anymore.
Briefly, it appeared the pandemic might finally lift the veil obscuring a simple reality: Precarity is the great unifier in America. Inequality of opportunity isn’t just about race or gender, but about a system that’s designed to perpetuate a social hierarchy and insulate those at the top.
Unfortunately, that lesson was left untaught as prejudice and culture wars quickly consumed the underclass which, as alluded to above, is pretty much everyone when the economy is defined by hyper-capitalism.
But what I’d not-so-gently suggest is that, over time, Americans have lost interest. In the labor market, in their communities and in life in general. Americans just don’t care anymore.
The ongoing opiod crisis would seem to confirm your thesis.
I’m an engineer, not an economist, and definitely not a labor economist. But I can’t help to feel the notion that this is much like what has been going on for years in the former Soviet Union. Last I heard, Russia has the highest suicide rate among 20-30 males globally. Those folks not only don’t want to work – they don’t even want to live. I cannot buy that this is all due to lack of opportunity – something else is afoot. Perhaps this is natures way of culling the herd, zeitgeist? – I don’t know, but it would be interesting to read a smart economist (wink-wink) explore other sources of hopelessness.
Do you read the minds of all of your subscribers, or just me?
Same
A hundred and fifty years ago we had a name for folks who didn’t really want the responsibility of a regular job. We called them “drifters.” They would move from town to town, generally moving west, picking up a few week’s work, getting a “stake” and then moving on. Today we call such folks “gig workers.” I have a 43 year-old nephew who has finally settled down and gotten his first regular job this year.
Some years ago when “Newsweek” was still an actual magazine I saw a column whose title was memorable. It said, “Kids today don’t want a killer job, they want a killer life.” The point was that the young people of that day, maybe 20 years ago, wanted to be able to work somewhere that allowed them to skip out for a day or two when the surf was up or the fresh powder was deep, and come back when they were satiated. These were folks for whom a job was a means to an end, in the form of something like eternal youth. Sounds a lot like those drifters, huh. Being forced to drop out and cope because of COVID, individuals with this attitude have simply left the workforce. That doesn’t mean they don’t pick up enough money to live, but what they do is below the radar and this approach won’t get them any safety net later in life. In another 20 years, as this group ages, I fear a massive disruption as they discover that for many millions, life will quickly become impossible.
Good comparison between drifters and gig workers there.
It’s interesting – at first the explanations for the drop in the workforce participation rate centered on older, higher income people who increasingly opted to retire after their pandemic experiences. We’ve seen a lot of that among local accountants and lawyers where they are retiring or moving over to jobs where compensation is not tied to maximizing billable hours. It’s become a problem at many law and accounting firms.
But just this week I’ve started to see explanations grow to include the similar change in attitudes among a younger cohort. Time magazine, for one, also brought this up.
Meanwhile, something similar is happening in China as well. (Supported by Xi, to a limited extent.)
Imagine that. Some people don’t believe in the ideology of living to work. There must be something wrong with them.
You’re positing that people do gig work because they want to? Someone has drunk the prop 22 kool aid…
One compelling theory I saw recently is that child care is still at much lower capacity than before the pandemic. Child care for young children so a parent could work a full-time job was always tricky and expensive, and I can imagine it is even more so now. One of my coworkers has worked from home 4 weeks in the last 6 months just because the day care quarantines children who come in contact with others who test positive. Most probably people don’t have the ability to work from home like that. Maybe the lack of participation is partly people who still feel they can’t work because their child care isn’t reliable/cheap enough yet?
I can think of lots of reasons why people are choosing not to return to “regular” work. Some still do not feel safe returning to work because of Covid, especially if the have decided to remain unvaccinated. Some will not return to work because of vaccine mandates. Some still are struggling to find affordable, “Covid-safe” child care to allow them to return to work. Some learned during the pandemic that time at home with their loved one’s was more important than the money they earned at their low-paying jobs, allowing them to care for their own children for free, and also allowing them to thumb their nose at the IRS a little. Maybe one parent returned to work, but the other did not–to care for the kids–and they are managing to scrape by for now.
Then there is the growing alternative economy: house-flippers; YouTube content creators; the new 20-something day-trading crowd (gambling on Bitcoin and “meme” stocks); those who choose to exchange services in barter-like fashion (“you fix my car, and I will prepare your taxes”); semi-retired freelancing seems to be a real thing now; and there are lots of new on-line, work from home, small business start-ups. I know one woman who buys clothes wholesale, models them on-line from home, and then sells them on E-bay.
There are also all of those adult children who have decided to return home and/or continue to live with their parents just a little longer (like until they are thirty) because of the times and the cost of housing. Extended families living together seems much more common now than I recall in recent years perhaps out of simple necessity.
I retired two-years ago and my wife lost her job at the start of Covid. We have learned to live more frugally and she has decided not to return to work–she is 51. She now spends her days cooking, bargain shopping at thrift stores, and baking the most marvelous cookies and bread from scratch. I manage our finances, brew my own beer, and play golf on the cheap when I can. The times remind me a little of the way life was back in the 70’s. Recall then we were also dealing with a recession, an energy crises, an uncertain period of stagflation, and political upheaval.
You sparked a thought…perhaps some households are increasingly occupied by one parent at home helping to “weaponize gamma” with their child tax credit checks. I know people who are fortunate enough to not have to pay for childcare and are shoving those checks into their trading accounts. So a half share of TSLA soon becomes a full share, and so forth. If we get a sizable pullback in the markets maybe we see more people actively look for work again. Or maybe the fortunate just start tapping into home equity to support their new trading habit. Who really knows?!?
Quarter of a percent here, eighth of a percent there, etc., etc. Mr H and all of the above
We are still in a pandemic also, i.e. Germany
Immigration
“Americans have lost interest. In the labor market, in their communities and in life in general. Americans just don’t care anymore.”
Nailed it. A combination of toxic politics and productivity ‘enhancements’ are destroying the shared sense of family/community at work.
I used to consider my coworkers friends, for the most part. Now it’s gotten weird. It’s hard to go to coffee and make smalltalk with someone after you’ve read their insane social media screed.
And there’s no more going to coffee. No time, have to meet the raised productivity requirements. Meetings I used to hate got moved to zoom, or cancelled altogether. Now I realize how much of those time wasting meetings were actually bonding time. I used to go to lunch with coworkers regularly, now there’s no time
People I thought would never leave are talking about early retirement. My wife and I are both scheming ways to drop to part time. The work remains the same, but the fun has been squeezed out. Covid accelerated a trend that’s been building for a long time
Could it be that there is a real angst being felt by the younger members who see disaster looming in the future… driven by climate change, an American political system being taken over by a bunch of authoritarian autocrats, a general failure of the schools for their children, a social media out of control, the dream of a stable financial footing for their family drifting farther out of reach, an uncertain world order taking shape with China as a dominant and dangerous adversary…
Yes.
Many theories, little data.
The current estimate is that 3 million of the 6 million who have vanished from the labor force have simply retired. You can take Social Security at 62, and a lot of people with lower incomes have done this. Waiting an extra five years for a few bucks more is just not worth it, especially since at the low end SS pays a higher percentage of one’s working income. Others have been working into their 60s and COVID has made their retirement decision for them. Thanks to the baby boom, there are a lot of people in their mid-60s in the US.