Whats The Deal With The Jobs Market?

[Gregmal]

So Im trying to make sense of this and curious if anyone has a take on what is going on here...

 

The past couple months there have been experiments with some states cutting the additional unemployment benefits and a lot of press about how it didnt improve the jobs figures at all. I dont know if this is accurate but thats what Ive heard. Recently, I saw a couple articles talking about further federal benefits ending. I also saw a bunch lambasting Ted Cruz for tweeting something to the extent of "get a job" to people complaining about benefits ending. However every single place I go, whether a Main Street town center or big highway, there's "Now Hiring!" signs up, literally EVERYWHERE. So what is going on? Where are the people? I recall a decade ago how folks considered it an honor to have a job, period. Didnt matter where it was and even bank teller or restaurant work was highly sought. This was with minimum wage at what? $9??? Now even the clerks are making $14-$17 an hour and I see plenty of entry level stuff offering $20-25. Are there not enough people to work? Or is Ted right because theres an inherent craziness to refusing employment but whining about losing freebies? Or is it a bunch of things? Literally every business owner I know needs labor. I dont know anyone out of work. But thats all anecdotal. Whats up here?

[LearningMachine]

Looks like all the free money directly to people hasn't stopped yet, right? I saw an article about democrats considering extending child tax credit till 2024.  There might also be a lag between free money stopping and people looking for a job. 

 

Also, all the free money indirectly through bond-buying hasn't stopped yet, resulting in low interest rates and inflated asset prices, including inflated home prices. Buffet explained well about a decade ago how significant percentage of employment is linked to housing industry.  When there is euphoria in housing prices like there is now, laborers, plumbers, electricians, architects, roofers, framers, tilers, excavators, lumberjacks, realtors, brokers, truckers, and workers to support them, e.g. day care workers, food workers, etc., etc. are all in high demand.  We were able to hit 2 million housing starts last time, which resulted in peak employment.  When that resulted in building 0.8 million extra homes per year beyond 1.2 million new households to create an extra-supply of 3-5 million homes, prices and employment all came crashing down.   We are currently at 1.6 million construction per year.  I think we should hit 2 million soon.  See https://fred.stlouisfed.org/series/HOUST.

Edited September 10, 2021 by LearningMachine

[KJP]

Regarding the effect of ending enhanced UI on employment, the question is, as usual, complicated due to confounding factors like the overlap between the states that ended enhanced UI early and the states that have had high Delta-related COVID rates:  https://www.econlib.org/well-that-didnt-take-long/

 

In February 2020, there were roughly 152.5 million non-farm employees in the US.  Now there are roughly 147.2 million.  (Source:  https://fred.stlouisfed.org/series/PAYEMS )

So, that's about 5 million people who previously worked and now are not.  So I think you're asking why these people aren't working.  I don't think anyone knows the full answer to that.  For example, how many of those "missing" workers are from two-income families that have shifted to one-income families due to childcare needs/reluctance to send children to daycare or school in light of COVID?  How many of the "missing" workers are relatively older workers who decided to retire earlier than they otherwise might have because of their view of COVID risks in the workplace or an increased desire to live/consume now rather than later? I don't think anyone knows the answers to these questions.

 

At the end of the day, 5 million out of the February 152.5 million is only about ~3.3%.  (The labor force should have grown from February 2020, but I don't the the roughly ~2 million expected increase changes the analysis much.  https://www.calculatedriskblog.com/2021/09/the-employment-situation-is-worse-than.html )  So, it's a quite small percentage of the workforce that has gone "missing".  But that could ultimately have a big effect on wages because they are determined at the margin, i.e., the prevailing wage in an expansion is going to be what is necessary to coax the marginal worker into the workforce.  If wages are rising, as they appear to be, that suggests to me that the preferences of these "missing"/marginal workers have changed, and thus it's going to take more money to coax them off the sidelines.  But I don't think we really know whether those preferences have changed because the opportunity cost of working has increased (COVID risk of workplace, lost time with family, childcare duties) or because the oppotunity cost of not working has gone down (increased employment benefits and child tax credit). 

 

 

[patience_and_focus]

1 hour ago, KJP said:

Regarding the effect of ending enhanced UI on employment, the question is, as usual, complicated due to confounding factors like the overlap between the states that ended enhanced UI early and the states that have had high Delta-related COVID rates:  https://www.econlib.org/well-that-didnt-take-long/

 

In February 2020, there were roughly 152.5 million non-farm employees in the US.  Now there are roughly 147.2 million.  (Source:  https://fred.stlouisfed.org/series/PAYEMS )

So, that's about 5 million people who previously worked and now are not.  So I think you're asking why these people aren't working.  I don't think anyone knows the full answer to that.  For example, how many of those "missing" workers are from two-income families that have shifted to one-income families due to childcare needs/reluctance to send children to daycare or school in light of COVID?  How many of the "missing" workers are relatively older workers who decided to retire earlier than they otherwise might have because of their view of COVID risks in the workplace or an increased desire to live/consume now rather than later? I don't think anyone knows the answers to these questions.

 

At the end of the day, 5 million out of the February 152.5 million is only about ~3.3%.  (The labor force should have grown from February 2020, but I don't the the roughly ~2 million expected increase changes the analysis much.  https://www.calculatedriskblog.com/2021/09/the-employment-situation-is-worse-than.html )  So, it's a quite small percentage of the workforce that has gone "missing".  But that could ultimately have a big effect on wages because they are determined at the margin, i.e., the prevailing wage in an expansion is going to be what is necessary to coax the marginal worker into the workforce.  If wages are rising, as they appear to be, that suggests to me that the preferences of these "missing"/marginal workers have changed, and thus it's going to take more money to coax them off the sidelines.  But I don't think we really know whether those preferences have changed because the opportunity cost of working has increased (COVID risk of workplace, lost time with family, childcare duties) or because the oppotunity cost of not working has gone down (increased employment benefits and child tax credit). 

 

 

 

+10

 

Anecdotally: 3 of my friends / acquaintances have gone from both spouses working to now only the husband working and wife leaving the work force for now. All of them are well to do and have gotten even better off financially as husband's worked in tech companies that did much better than other companies due to Covid. Also kids are in middle / high school and need helicopter parenting to aim for ivy leagues / good colleges. So mom's decided to focus on kids education needs, at least for a few years until they are off to college.

 

My suspicion is that lots of different stories like that, different motivations and even financially not in the same boat but end result is the same.

 

 

 

[Gregmal]

So that issue comes down to...are there just not enough workers, or are lazy people being leeches. I am not talking about the types of folks who put in more work trying to avoid actually working than they would if they just got a damn job...those will always be there. What the million dollar question is IMO is...drumroll, are there simply not enough workers out there? Because the narrative is that its freeloaders but I am not really sure thats the case. I agree there seems to be a lot of anecdotal evidence that something changed with a reasonably sized group of people. We may have what I think is a very healthy situation for people, but not exactly companies. More workers than jobs is brutal, but the opposite may actually promote some economic benefits in certain areas. 

[Mephistopheles]

I have a family member, who was earning more in UE last year (when enhanced UE was $600) then he did at his regular job. So when the regular job asked him to come back, of course he said no. And his job was a manager of a fast food restaurant. Think about it, a manager, and yet he was still collecting more in UE than he did through salary. 

 

So I am sure there are other people out there with the same economics with the $300 extra UE. Take that away and incentives will draw the people back to the jobs. 

 

On top of that for those getting a free ride without having to pay rent, you take that away as well and it will for sure force all these people back into the labor market.

[muscleman]

This is how socialism drives into people's heart and activates their worst part of characters. People want to get handouts. Not money after hard work.

[Spekulatius]

2 hours ago, Mephistopheles said:

I have a family member, who was earning more in UE last year (when enhanced UE was $600) then he did at his regular job. So when the regular job asked him to come back, of course he said no. And his job was a manager of a fast food restaurant. Think about it, a manager, and yet he was still collecting more in UE than he did through salary. 

 

So I am sure there are other people out there with the same economics with the $300 extra UE. Take that away and incentives will draw the people back to the jobs. 

 

On top of that for those getting a free ride without having to pay rent, you take that away as well and it will for sure force all these people back into the labor market.

Those expanded benefits have ceased this month and in many states a while ago. I don’t think the states that reduced the benefits earlier have seen much relief in the labor markets.

 

I with the company I work for, I have seen some employees asking for reduced hours and some retirements. I think the well performing stock market has a lot to do with the matter. I don’t really work at what would be considered tech company - with the stock option packages atex I think many families have decided that they can well do with one income rather than 2.

 

The company I work for is trying to get some retired people back to work, but so far none have come back. I think the childcare issue has lead to some people dropping work out of necessity but now are not coming back, because they don’t have to.

 

My wife is nurse  and she is seeing some college uses living after the COVID-19 surge is over, Reason is burnout and some older workers just have enough. The remaining staff has to work more hours than ever because they can’t get new staff hired. I don’t think it’s just the money or UI. COVID-19 has stressed out many workers and some are calling it quits because they can afford to do so.

Edited September 11, 2021 by Spekulatius

[fareastwarriors]

5 hours ago, Mephistopheles said:

I have a family member, who was earning more in UE last year (when enhanced UE was $600) then he did at his regular job. So when the regular job asked him to come back, of course he said no. And his job was a manager of a fast food restaurant. Think about it, a manager, and yet he was still collecting more in UE than he did through salary. 

 

 

I hope he will use some time to find a better job. Fast food is shit and has always been shit. I never understood why people bother with it. If you can speak okay English and don't mind hard work, it always pay more to be a server at any old place. 

 

The food industry is always hard work for low pay with no benefits (for most places). It's especially bad in the back of the house (cooks/dishwashers/preps). 

 

My dad worked as a cook all his life and I did too for some years. Pre-covid, I made $19 an hour as a cook in the SF Bay Area with no benefits. I worked 10-12 hour days. That's crazy low but especially bad since I'm in the Bay Area.  I hope many of my peers will never come back to this shit show of an industry. Please do something else. Go make More or at least similar pay, work not as hard, work less hours, and have benefits elsewhere please. Go work for USPS/ FedEx/ Target/ etc than this terrible industry. If you want to make real money then go work a construction trade. We have a shortage of construction workers/contractor types of a decade+ now... 

 

Okay, I'll chill now

 

 

Edited September 11, 2021 by fareastwarriors

[Gregmal]

haha I think the main thing here, is to let the politics influence where they will, but ultimately figure out what this means and how to make money from it. What Im leaning to is that its going to be incredibly good for the consumer and especially the lower-middle end. RICK probably benefits a ton! 

[Viking]

3 hours ago, patience_and_focus said:

 

+10

 

Anecdotally: 3 of my friends / acquaintances have gone from both spouses working to now only the husband working and wife leaving the work force for now. All of them are well to do and have gotten even better off financially as husband's worked in tech companies that did much better than other companies due to Covid. Also kids are in middle / high school and need helicopter parenting to aim for ivy leagues / good colleges. So mom's decided to focus on kids education needs, at least for a few years until they are off to college.

 

My suspicion is that lots of different stories like that, different motivations and even financially not in the same boat but end result is the same.

 

 

 

Greg, great question. 
 

KJP, patience and focus and Spek - +1 - my guess is your responses are on to something…

 

The virus is causing severe supply chain disruptions pretty much everywhere. Including the labour market in the US (and all countries).
 

If you are an older person or someone with health issues and you do not need to work why would you work in a covid world? Why take the health risk? Especially a retail or food service job where you have to interact lots with the public and the pay is low. Risk does not equal the reward. 
 

Or perhaps you have a family member in your house who is at risk.
 

Pre-covid perhaps you were working largely to get out of the house and interact with people socially. 

 

 

 

 

[spartansaver]

20 minutes ago, Viking said:

Greg, great question. 
 

KJP, patience and focus and Spek - +1 - my guess is your responses are on to something…

 

The virus is causing severe supply chain disruptions pretty much everywhere. Including the labour market in the US (and all countries).
 

If you are an older person or someone with health issues and you do not need to work why would you work in a covid world? Why take the health risk? Especially a retail or food service job where you have to interact lots with the public and the pay is low. Risk does not equal the reward. 
 

Or perhaps you have a family member in your house who is at risk.
 

Pre-covid perhaps you were working largely to get out of the house and interact with people socially. 

 

 

 

 

If this is the case, shouldn't the labor population's average age be dropping? No idea if this is the case or not, just a way you might be able to test this. 

Edited September 11, 2021 by spartansaver

[fareastwarriors]

4 minutes ago, spartansaver said:

If this is the case, shouldn't the labor population's average age be dropping? No idea if this is the case or not, just a way you might be able to test this. 

 

In addition to older folks not working for health reasons, many teenagers and young adults no longer work jobs. This has been the trend even pre-pandemic.

 

If you're parents with some means, do you really want your kids out there making minimum wage right now? Some won't mind sure but I bet majority do. 

 

I don't have the data so maybe it's my own bs.  

[Gregmal]

2 minutes ago, fareastwarriors said:

 

In addition to older folks not working for health reasons, many teenagers and young adults no longer work jobs. This has been the trend even pre-pandemic.

 

If you're parents with some means, do you really want your kids out there making minimum wage right now? Some won't mind sure but I bet majority do. 

 

I don't have the data so maybe it's my own bs.  

Thats kinds of what Im reading at the moment. Things economy wise right now are pretty good. With a lot of cash/people on the sidelines. When their comfort level and quality of life starts declining(or god forbid they get ambitious), I think the terms in which they come back will be quite favorable. Where does this bleed into? Rentals and housing probably. Strip clubs. Probably a bunch of others LOL

[ANP301191]

Coming at it from another angle, a few of my friends in the Midwest have been looking to hire (fast food franchisees - college towns) and even after increasing the hourly by 3-4$ are unable to to attract even 50% of the applicants that they usually would get when Universities would start again. The general sentiment seems to be that people dont want to take the risk of getting covid while working a part-time job and studying.

 

Additionally, as @KJP suggested the US seems to be near full employment, in terms of whomever wants to work can find a job, and it is probably going to require an increase in salaries to coax new workers into the workforce again.

[Viking]

12 hours ago, ANP301191 said:

Coming at it from another angle, a few of my friends in the Midwest have been looking to hire (fast food franchisees - college towns) and even after increasing the hourly by 3-4$ are unable to to attract even 50% of the applicants that they usually would get when Universities would start again. The general sentiment seems to be that people dont want to take the risk of getting covid while working a part-time job and studying.

 

Additionally, as @KJP suggested the US seems to be near full employment, in terms of whomever wants to work can find a job, and it is probably going to require an increase in salaries to coax new workers into the workforce again.

Menu prices have also increased (to cover rising costs including wages). And it looks to me like people are paying the higher prices (not just restaurant meals but pretty much everywhere). Making it possible for businesses to pass through higher costs. Covid seems to have made people ok paying higher prices (for now). Just wonder how this plays out if it continues… 

[lnofeisone]

Greg - great question. I work a fair amount with UI (mostly on the fraud side) and I see this a lot. Few comments:

 

Let me start by saying that there have been a couple of UI studies done and they showed absolutely no cause and effect between UI (including increased Federal payments) and people going back to work. Most of the recovery has been in the lower payment band of jobs. If someone can point me to another study, I'd love to read it. 

 

As far as tighter labor markets, there is a confluence of things:

 

1) There have been excess retirement across the board in all job sectors for workers 55 and older (across college degree spectrums, i.e., no degree to advanced degree). Way in excess of what was expected (https://www.economicpolicyresearch.org/jobs-report/the-pandemic-retirement-surge-increased-retirement-inequality) 

 

2) Most gains in jobs post-pandemic have been in the hospitality industry. I recall seeing that L&H lost about 8 million jobs (about 50%) and currently sits at at -2 million from pre-pandemic, so figure 70-80% of lost jobs have been recovered. This is a good place to look at the recovery. https://fredblog.stlouisfed.org/2021/08/the-recovery-in-leisure-and-hospitality-employment/

 

3) Most jobs where you see help wanted are low(er) paying jobs with most not offering health insurance. So in essence, it's a high risk job with a low pay and no health insurance. If I am a child (or parent thereof) or a worker with an option such as UI, I am making a rational risk-adjusted decision and staying home. 

 

4) Women without children was one of the strongest demographics to rebound from job losses but have trailed off. Women with children have seen a rebound (not as strong) but are now leaving the workforce. Likely the result of focusing on children's education, crazy hours demanded by employers, and having spouses earn enough to afford single income home. 

[TwoCitiesCapital]

16 hours ago, fareastwarriors said:

 

In addition to older folks not working for health reasons, many teenagers and young adults no longer work jobs. This has been the trend even pre-pandemic.

 

If you're parents with some means, do you really want your kids out there making minimum wage right now? Some won't mind sure but I bet majority do. 

 

I don't have the data so maybe it's my own bs.  

 

 

This. I think in general remote schooling options have meant kids stay home. I know a few masters students going to school comply remotely. Can live with their parents and don't need a job to pay rent and etc. I imagine same is true for many undergrads. 

 

Also, the data is fairly conclusive that higher minimum wage does absolutely lead to higher YOUTH unemployment. So maybe some of this is on the companies too. If you're paying $15/hr, do you really want the unreliable highschool/college student with limited experience and a school/sport/weekend schedule to work around?  Or are you gonna hold off for someone with experience and flexible scheduling? How many of those people are out there to fill these roles?

 

Seems like most of the shortages I'm seeing tend to be in the entry-level service industry which supports this thesis. The McDonalds near me is closed erratically due to staffing shortages, the Starbucks today was only serving plain coffee to avoid overwhelming the single person who showed up, restaurants in the area are limiting seating due to not having enough servers/bus boys, etc.  Doesn't seem like we're having trouble finding workers for the financial firm I work for though

 

 

 

[SharperDingaan]

For most service sector workers, it is less the money, and more the number of hours scheduled, their reliability, and ability to plan.

The 5-hour shift that habitually suddenly shrinks to 3 (despite guarantees of a minimum 4 hours) because there is no business. You screw up, you wear it - the worker is NOT there as a business partner, to share YOUR business risk.

 

To be competitive, offer ability to plan. Reliably guarantee X hours/week for Y weeks, and deliver on your promises. In oil/gas, drill crew workers are routinely turning DOWN temporary, but high paying jobs, in favour of lesser paying but more reliable ones. Jobs being refused, that would pay more in 2 weeks, than you might in an entire semester.

 

Claiming ‘it’s just the terms of the gig’ has long been the management cop out. Managements have now been called on it, and have deservedly come up short. Most other parts of the world do this quite differently, and have far less of a problem. Management’s failure to recognize that they are in a people business – at BOTH the customer AND worker level.

 

The full employment thing is also a misnomer, as a worker is counted as 'employed' - if they work as little as one hour. If that same person then works 3 separate jobs of a few hours each, he/she will be counted 3x.  

 

SD

Edited September 12, 2021 by SharperDingaan

[hasilp89]

Personally not seeing wage increases entice people to come back to work in hospitality nor steady hours as demand has picked back up. Anecdotally believe we have lost people to other industries for good. Curious if anyone has any data/experience on how/if immigration/visa bans have worked against entry level positions during covid. 

[ERICOPOLY]

You got states like Utah and South Dakota, where unemployment is below 3%. And then you have states like Nevada, heavily dependent on tourism, where unemployment's pushing 8%.

 

https://www.npr.org/2021/09/06/1034631849/what-the-end-of-unemployment-aid-means-for-the-job-market-and-economy

[ERICOPOLY]

After five years of little turnover, the restaurant lost several employees in the past couple of months to larger operations, including luxury hotel restaurants that could pay kitchen staff $37 per hour,

 

https://calmatters.org/economy/2021/08/labor-shortage-hiring-incentives-yoga-therapy-401k/

[SharperDingaan]

A university/college student has a number of options. They could work part-time in a bar/restaurant earning salary + tips, in fast food earning salary only, work in the university/college itself as a tutorial assistant, in a hospital as an assistant of some type, or simply choose NOT to work - and just finance their school. A semester of foregone part time earnings is not a lot of money.

 

If you can guarantee a student a minimum 10 hrs/wk for 13 weeks @ $15/hr, you have created a very attractive option.

At 20% deductions/taxes, a reliable takehome of $120/week + tips + potentially more hours, or a minimum $1,560 + tips + upside over a semester.

 

Owners should be pretty good at forecasting their labour needs up to 2-weeks out.

At worst, maybe 15% (20 hrs) of the 130 hours (10 hs/wk x 13 weeks x 15%) end up as paid time off - total cost of $300 (20hrs x $15/hr). Over the 110 hours actually worked (130-20), this is the same as a raise of $2.73/hr (300/110) to 17.73/hr - which most bars/restaurants would be willing to pay in return for stable labour. The problem isn't lack of labour - it is primarily poor ownership/bad management. The industries very high 1st year failure rate, exists for a reason. 

 

Labour votes with its feet, everytime it enters your doors.

If they are NOT walking in your door, it is because your work proposition doesn't cut it.

 

SD 

Edited September 12, 2021 by SharperDingaan

[bizaro86]

4 hours ago, SharperDingaan said:

A university/college student has a number of options. They could work part-time in a bar/restaurant earning salary + tips, in fast food earning salary only, work in the university/college itself as a tutorial assistant, in a hospital as an assistant of some type, or simply choose NOT to work - and just finance their school. A semester of foregone part time earnings is not a lot of money.

 

If you can guarantee a student a minimum 10 hrs/wk for 13 weeks @ $15/hr, you have created a very attractive option.

At 20% deductions/taxes, a reliable takehome of $120/week + tips + potentially more hours, or a minimum $1,560 + tips + upside over a semester.

 

Owners should be pretty good at forecasting their labour needs up to 2-weeks out.

At worst, maybe 15% (20 hrs) of the 130 hours (10 hs/wk x 13 weeks x 15%) end up as paid time off - total cost of $300 (20hrs x $15/hr). Over the 110 hours actually worked (130-20), this is the same as a raise of $2.73/hr (300/110) to 17.73/hr - which most bars/restaurants would be willing to pay in return for stable labour. The problem isn't lack of labour - it is primarily poor ownership/bad management. The industries very high 1st year failure rate, exists for a reason. 

 

Labour votes with its feet, everytime it enters your doors.

If they are NOT walking in your door, it is because your work proposition doesn't cut it.

 

SD 

 

Financing your education becomes a much more palatable option vs working if your post-grad probability tree includes a branch with the loan getting forgiven.

[JRM]

The rent moratorium is ending soon (or has already ended recently?) so that should change the calculus for many.