Big tech isn’t the US economy, folks.
A few ostensible “experts” seemed surprised Friday by a robust update on US hiring and wages in the context of recently announced layoffs and hiring freezes across tech companies.
Unfortunate as this most assuredly is, America is a place where modern day serfs toil for low wages in the services sector, not a utopian society of well-paid knowledge workers who float to work every day in self-driving, hydrogen-powered, Jetsons-style flying cars.
In short: The leisure and hospitality sector matters more for aggregate hiring and probably for wage-setting than whatever Meta, Microsoft, Twitter and Snap might be doing during a given month.
Although leisure and hospitality added 88,000 workers in November, the sector still hasn’t recovered all the jobs lost to the pandemic. With November’s additions, the sector remains down almost 6% from February 2020 levels (figure below).
That represents a shortfall of nearly a million workers.
If you want to fill open leisure and hospitality positions, you’ll need to pay up. That’s particularly true if you’re trying to lure workers away from competitors.
Job openings in the sector remain extraordinarily elevated, and the quit rate quite high (figure below).
At 5.5%, the quit rate there is more than double the overall rate.
One of the biggest “surprises” (and the scare quotes are there for a reason) in Friday’s jobs report was the hot pace of wage gains. Average hourly earnings grew at double the expected monthly rate, while the 12-month pace, at 5.1%, was sharply higher than anticipated.
5.1% sounds very high (and it is), but consider that for non-managers in leisure and hospitality, the annual pace of hourly earnings growth was more than two full percentage points higher last month, at 7.2%. It was the first month of re-acceleration in the 12-month rate since March, and only the second month-to-month increase in the annual rate this year (dark line in the figure below).
The figure also shows median annual pay growth for the industry from ADP’s “pay insights” data. On ADP’s figures, the YoY rate of pay growth in leisure and hospitality is still double digits (red line in the chart).
To the extent this is contributing to ongoing distortions in the labor market, and if those distortions are contributing to persistent inflation, we have only ourselves to blame. This is payback. And also back pay. We created an unsustainable economic model on the back of low-paid services sector workers who, in the pandemic, found cause to finally revolt against a system that consigned them to a paycheck-to-paycheck (or shift-to-shift for tip-based work) existence in perpetuity.
Of course, the tragic irony is that their demands for higher pay to reengage in menial, thankless jobs are now contributing to the same inflation impulse which hurts them the most given the concentration of non-managerial services sector employees in lower income cohorts. They’re also the people hurt the most by the Fed hikes aimed at curtailing inflation.
Quite a bit of the above represents anecdotal, off-the-cuff editorializing. You can, of course, slice, dice and parse the NFP report to determine precisely (i.e., quantify) which workers and which trends contributed the most to whichever aggregate you’re aiming to explain.
By contrast, my remarks here are simply a casual, ad hoc lament for the plight of millions who toil in obscurity across the vast US services sector, complimented by a few charts. Take it for what it’s worth.