Don’t expect any massive swings in the employment numbers when next month’s jobs report comes out.
A piece from the Washington Post over the weekend sets out the issue at the center of the American economy right now: “There are 10 million job openings, yet more than 8.4 million unemployed are still actively looking for work.”
There’s one obvious explanation for this imbalance, which is that the government is paying people to not work. As of yesterday, the federal unemployment-insurance supplement has officially ended. The expiration of that $300-per-week benefit should push some people currently on the margin into available jobs.
But don’t expect any massive swings in the employment numbers when next month’s jobs report comes out. There’s more than perverse incentives keeping jobs vacant.
The Post story includes Labor Department data that indicate many sectors will face problems no matter what government benefits are available because there simply aren’t enough people to fill all the openings. “For example, there are 1.8 million job openings in professional and business services and fewer than 925,000 people whose most recent job was in that sector,” the story says. They found that other sectors (education and health services, wholesale and retail trade, leisure and hospitality, and manufacturing) also had more job openings than unemployed people whose last job was in that sector.
There’s a few different reasons for this imbalance. One is that consumer spending is way up, which means companies want to make more consumer goods and need to hire more people to do so. The vacancies in consumer-goods-adjacent industries are likely new positions created in response to those trends. Another reason is that many people have quit or retired early, especially in sectors like education and health services. Vacancies in those sectors are likely in positions that existed before the pandemic.
Companies have done the sensible thing to attract new workers by raising wages. From the Post:
Average pay for rank-and-file workers is up 2.8 percent in the past five months, outside the pandemic that’s the fastest rate of increase since 1981.
There has been especially fierce wage competition for lower-paid positions, especially since many former service sector workers say they won’t return at any price due to long hours, grueling work and increased exposure to the virus.
Pay is up 8.8 percent for nonmanagerial workers in the restaurant-and-hospitality sector and 6.1 percent for warehouse workers in the past five months. It appears to be helping lure some workers back. Of the 3.1 million jobs gained since March, almost half are in hospitality, though hiring in the sector stalled in August as the delta variant surged.
But again, that’s not going to be enough. If someone isn’t skilled to do a job in the first place, offering him or her higher wages isn’t going to help.
In the aftermath of the Great Recession, “the number of unemployed far outstripped jobs available in every sector for years,” the Post reports. This time around, it’s going to be different: “To find enough workers, companies may need to train workers and entice people to switch careers, a process which generally takes longer, especially in fields that require special licenses.”
The other time factor is how long people have been unemployed. People who are unemployed for a short time have an easier time being rehired than people who have been unemployed for a long time. Put yourself in a hiring manager’s shoes: You have two candidates with the same qualifications, even the same number of years of experience, but one has been unemployed for a month and the other has been unemployed for a year. You’re probably going to go with the one who has been unemployed for a month because he or she would have less catching up to do.
To fill the existing jobs, the U.S. needs more people with the right skills to fill them. There’s a few ways to do that. You can retrain Americans and give them new skill sets. You can eliminate restrictive licensing requirements so more Americans are eligible for more jobs with their current skill sets. You can increase immigration for workers in the sectors that need help.
But there’s another solution to the present imbalance that’s still off on the horizon. At the end of a sentence, the Post says that “there’s been a boost in entrepreneurship that has caused the biggest jump in years in new business applications.” It doesn’t seem they fully realized the importance of that information. There’s a bunch of dissatisfied people out there — that means there’s profit to be had for satisfying them. Entrepreneurs will create new opportunities for employment in response to the new patterns of trade and specialization created in the wake of the pandemic.
The Post is calling this period of adjustment “the Great Reassessment.” (It’s unclear why everything in economics writing must be called “the Great ____,” but it does, so play along.) “Reassessment” is a pretty good word for what’s going on. Businesses and workers are reassessing their options and making decisions about the future. That’s the fundamental cause of the present job imbalance, and it’s going to take some time to solve — for capital and labor alike.
Editor’s note: This article originally referred to the expiration of a $300-per-month benefit. It is actually a $300-per-week benefit.