August 20, 2021
You see it outside the local kebab place… at the fancy shoe store in the next village over… in a lot by an apartment building construction site (also in Spanish, for good measure) off the highway… at the nearby nursery… at the gas station convenience store… in the window of the drugstore… and at least twice at even the most run-down strip mall in the sketchy parts of town…
No, I don’t mean people lost in their iPhones… faded green ’02 Toyota Corollas… hairy overweight men wearing short shorts… or discarded Miller Lite cans.
I’m talking about the increasingly ubiquitous “Help Wanted” sign.
Why are there so many jobs – just months after jobs were as scarce as atheists at church? And is it just for now – or forever?
Jobs, Jobs Everywhere
As of June – the latest data available – there were a record 10.1 million jobs available in the U.S. economy. That was 590,000 more than May, which then was the highest ever. What’s more, now there are more jobs than there are unemployed people (just under 9.5 million).
(A quick definition check: Someone is considered unemployed if he’s available to work, doesn’t have a job (obviously), and has “actively” – that is, contacted a potential employer, filled out job applications, answered job ads – sought work. The Bureau of Labor Statistics has 11 questions that it asks to determine whether someone is jobless or just eating chips on the couch and binging on Netflix by choice.)
And yet… as recently as April 2020, the unemployment rate in the United States hit its highest level since the Great Depression, at 14.7%. (Then, 23.1 million Americans were without a job.)
But in July 2021, the unemployment rate stood at just 5.4% (down 0.5% from June). A total of 8.7 million people who want a job don’t have one.
It’s been a whipsaw from historic unemployment… to epic job creation… and now, more jobs than out-of-work would-be employees.
‘Take This Job and Shove It’
One of the more interesting corners of labor statistics – which is kind of like the winner of a beauty contest of flightless dung beetles – is data on what the U.S. Bureau of Labor Statistics, flashing a shadow of a sense of humor, calls “quits.” That’s when, as you might expect, an employee voluntarily and willingly leaves his place of work.
In June 2020, 2.64 million Americans (1.9% of the workforce) submitted their resignation to the manager. In June 2021, 3.87 million people – a jump of 46%, and equivalent to 2.7% of all employees – told the boss to take a long walk off a short pier. That’s more than ever before in a single month… And it’s a record for the third month in a row.
In a developed economy where changes of a few percentage points in an economic indicator are treated with the kind of shock and awe usually reserved for close calls on narrow mountain roads, a near 50% increase in the number of people who told the man to shove it where the sun doesn’t shine is like tectonic plates smashing into each other.
Figuring out what it means – reducing and condensing nearly 4 million different “the day I quit my job” stories so as to convert anecdotes into data – isn’t straightforward. And of course, quits are only one dimension of the pandemic (yes, that word) of “help wanted” signs.
Why are so many jobs vacant? Here are some popular reasons, including those that are on target and others that are like a blind man at a shooting range…
Ken Langone, the co-founding billionaire of Home Depot, went on CNBC recently to explain the biggest threat for Americans and their money.
Wrong: Lazy Poor People Are Getting Too Much Money
As the argument goes: Unemployment benefits are too generous, so poor people aren’t bothering to work.
This line of thought is popular with the crowd that thinks that helping out those in need is pure, unadulterated socialism (and who don’t realize that we were already there… well before a Democrat returned to the White House).
Indeed, several rounds of “stimmy” – COVID-19 economic stimulus checks – have made unemployment more tolerable. So did an unemployment insurance top-up (“The $300 weekly subsidy for not working was a terrible blunder,” complained the Wall Street Journal in June.)
But is this cash really keeping people from taking a job?
In short, no. “Study after study has debunked the myth that the emergency benefits and occasional payments provided by the government are disincentivizing people from returning to the labor force en masse,” explained the Washington Post in May.
Recent history suggests that cutting benefits does not result in more people looking for jobs. A paper released by the National Bureau of Economic Research in February found that the “sharp, and unprecedentedly large, reduction” in unemployment benefits, when they were cut by $600 last summer, “did not lead to any sizable increase in employment.”
A Federal Reserve Bank of New York examination of how the first round of COVID-19 stimulus was spent found that more than 70% of distributed funds went toward debt repayment or savings. (Some of it may have gone into GameStop shares in the form of kamikaze capital.) Just 29% went towards consumption – that is, buying stuff that you’d otherwise buy with a paycheck.
And let’s not get carried away… Someone else paying for a few fill-ups at the gas station, plus a Kroger cartful of meat loaf ingredients, paper towels, and store-brand ice cream – poof, there goes three Ben Franklins – isn’t going to change anyone’s lifestyle. What’s more, with even low-skill jobs paying $15/hour across the United States, the relative value of an extra $300 has fallen sharply to just 2.5 days’ work, before taxes.
And no one – not even, you know, poor people – imagines that extra support will continue indefinitely. So few people are living like it will.
Correct: The New Opportunity Cost Calculation
“Opportunity cost” is the value you give up by making a choice. The real cost of a choice – sleeping in late, eating a pint of Ben & Jerry’s, getting a job – isn’t just the time and money you spend on it… Rather, it’s the value of the alternative: What you could be doing otherwise (getting the early worm, jogging around the block, not getting a job).
And in the COVID-19 world, these economics have changed, as an economist in the New York Times explained recently…
The virus reduces the value of jobs to workers – by making many jobs riskier for workers and their loved ones… the value of being home increased both because of increased child, elder, and sick-care responsibilities and additional unemployment insurance benefits. What’s being called a labor shortage is still a health shortage, a wage shortage and a care shortage.
If your kid is attending school remotely, suddenly your cost of working (even if it’s from home) has increased sharply: It’s a lot more difficult to ensure that your child isn’t playing Fortnite instead of doing his geometry. Getting childcare is a lot harder. And more to the point for many of the lower-paid jobs that are most thirsty for labor, the potential health cost – of getting sick on the job – outweighs the benefits of getting paid.
Not surprisingly, the quit rate in the accommodation and food-services industry – where interacting all the time with (potentially contagious, non-mask wearing) people isn’t just part of the job, it is the job – is by far the highest of any sector of the economy. In June, 5.7% of the sector’s entire work force quit. And that was after the same percentage walked off the job in April and May… and just slightly less in February and March.
Correct: Fewer Foreigners
One of the secrets of the success of the American economy, as I’ve written before, has been its enduring ability to be able to attract foreigners. The United States has more immigrants (with 45 million) than any other country, who have played an essential role in driving economic growth.
As U.S. President Ronald Reagan declared in 1981 – and it’s at least as true today – “Our nation is a nation of immigrants. More than any other country, our strength comes from our own immigrant heritage and our capacity to welcome those from other lands.”
And those immigrants do good work: Nearly two of every five people in Silicon Valley were born outside the country. According to the immigration think tank New American Economy, as of 2018, about 44% of Fortune 500 companies were founded by an immigrant or the child of immigrants.
In addition to taking on some of the most taxing management jobs that the workplace has to offer, immigrants – both documented and undocumented – also do a lot of the grinding, hard labor that native-born workers don’t want to do. That includes jobs in some of the industries facing the biggest shortfalls in employees right now, such as leisure and hospitality.
But here’s the problem: The Bureau of Labor Statistics shows that the size of the foreign-born labor force in the U.S. has barely grown since 2016.
Since last year, that’s been partly because of COVID-19 travel restrictions that have closed America’s borders to most of the rest of the world. And it’s also due to the deceleration in overall levels of immigration to the U.S. that was sharpened during the Trump presidency, during which the average number of immigrants to the U.S. fell by around 43,000 per year.
(The 2004 mockumentary – that is, a satirical documentary – called “A Day Without a Mexican” imagines what would happen in California, where at the time around one-third of the population was Latino (as of 2019, it was 39%), would just disappear overnight. Life pretty much grinds to a halt because the hard-working people who do the building, cleaning, child-minding, cooking, washing, waitering, etc… aren’t there. Due to this, funny-not-funny economic, political, and social anarchy ensues. That’s not the future of America, but if you squint, it’s not so far off.)
What it adds up to is fewer workers to do the jobs that native-born Americans don’t want… and more help wanted signs.
Part of the current surge in employment demand is the post-COVID-19 economic rebound. (Whether we’re actually in the post-COVID-19 era remains to be seen… But second-quarter economic growth of 6.5% in the U.S. says that, for the moment at least, we seem to think we are.) Cyclical demand is pushing up demand for workers.
Now part of the shortage of workers is cyclical. But increasingly it’s going to be structural – that is, a permanent part of the scenery – and not going to end anytime soon.
For decades, the rising number of working-age folks in the U.S. (considered people aged 15 to 64) has been a big driver of the American economy. From 1980 to 2020, that figure jumped by 45%, to nearly 206 million people, encompassing both immigration and native-born people joining the workforce.
But in 2019, the number of people who are of working age in the U.S. went into reverse for the first time since being recorded. It declined by just 0.11%, and in 2020, it fell by 0.14%… And in 2021 so far, it’s down 0.31%.
Those are rounding-error changes. But they’re signaling a change in direction – that’s only going to accelerate, because there are fewer workers being made… that is, fewer future workers being born.
America’s Help-Wanted Destiny
The fertility rate in the U.S. hit a 35-year high in 2007, at 2.12 births per woman. That was just above the “replacement level” fertility rate of 2.1… In other words, the average number of children born per woman so that a population (or, a workforce) replaces itself from one generation to the next.
And since then, the fertility rate in the U.S. fell steadily to 1.93 in 2010, 1.84 in 2015… to a record low of 1.64 in 2020. Last year there were more deaths than births in half of all 50 states. The only two states today that are birthing above the replacement level are Utah and South Dakota – while the least fertile are Rhode Island and (would-be state) Washington, D.C.
Workers come from two places: Home or abroad. Fewer children born today in the U.S. means that those (unborn) children can’t join the workforce 15 years later. And unless there’s a big political and cultural shift in America, immigration isn’t going to rise to fill the worker gap.
If “demography is destiny” – a quote attributed to 19th-century French sociologist Auguste Comte – all those “help wanted” signs aren’t going anywhere anytime soon…
And stimulus money for the unemployed is just background noise to a far bigger trend that’s not changing.
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August 20, 2021