And then some
Sometimes you read that about relationships. Right now it applies to the relationship all of us have with the economy.
This headline from The Washington Post seemed to sum it up: “Pick your economy: Booming labor market or fizzling growth”
It’s hard to wrap your head around economic conditions that are so seldom seen in tandem.
The backdrop for the recent wage increases is very complicated, which is frustrating because everyone would like a very simple answer, and even easier solutions.
A recent paper from The Hamilton Project examines where all the workers have gone. In the most simplistic of summaries:
- • The U.S. Labor Force is down between 3 to 3.5 million people from what was expected
- • Over 250,000 pandemic-related deaths were those aged between 18 and 64
- • Government policies have limited immigration
- • The child-care crisis worsened during Covid and has diminished women’s labor force participation
Before panic sets in about a recession, perhaps look for opportunity? If other companies are laying off, it could be for a host of reasons that has nothing to do with your organization. External economic pressures can expose internal flaws in firms. Maybe they’ve just laid off someone with that specific skill set that you haven’t been able to find?
Remember, there are still approximately two job openings for every available person, which gives people the confidence to leave jobs. As the Atlanta Fed’s chart shows us monthly, the job switchers make more than the job stayers.
Many very smart people have been working overtime trying to make sense of the May jobs numbers. Economists have been poring over them. Journalists have tried to translate them – some to explain to those who aren’t economists, some to soothe the fears of the average American, and of course, some to play to their audiences.
Compensation consultants comb over the numbers looking for clues. Will they affect IT jobs? Will this relieve pressure over in another industry? Will job gains overall, regardless of industry, drive people back to stores and restaurants?
Suddenly the image came into focus. Regardless of who you are, economist, journalist, or comp consultant, we all keep looking to the past for contextual clues to interpret these numbers. That is about as sophisticated as the sorting toys that you gave toddlers in the 1960s.
But that is how everyone IS looking at the jobs numbers. “Oh, we have this many jobs openings and this many people out of work, so let’s just stack them up, and we know they will fit in this order. DONE.”
Kids sorting toys evolved. In the 1970s, toys emerged that required you fit several different shapes into the space. Far more analogous to trying to match skills and openings. Then came the toy with the crazy shapes fixed upon wavy wires – they wouldn’t stay in place, very representative of today’s labor force. Today, kids’ sorting toys are so complex that they demand collaboration, one of those soft skills.
We all need to get that simple ring stacking sorter out of our head. It will never be that simple again.
Despite the headache caused by all of the labor market reading done for our last post, we’ve persevered.
Some Chicago economists have had their thinking caps on, and their musings are worth sharing. They are asking the right questions as we contemplate labor markets and human capital post-pandemic.
The Chicago Fed’s April paper focused on this: Why didn’t more people from affected industries move over to industries that were NOT affected by the pandemic? “One sign that Covid might have increased the need for labor reallocation is the fact that even while unemployment rose substantially, firms reported an increase in job openings, the opposite of what normally happens in a recession.”
That article raised a nagging question: Do workers lack the ability to retrain? The resources? Or the incentives?
One of Chicago’s most wry economists, Carl Tannenbaum, addresses the risks if people do NOT retrain. Solving these problems will not be easy, but he rightly points out, failing to address them will lead to even larger problems along geo-political lines. His piece’s topic sentence sums it up: “Renewing human capital is as important as renewing physical capital.”
Solutions depend on cooperation and innovation. Education needs to orient to life-long upskilling, supporting a different concept of education before 18 and after 18, with government support. Companies must put their money where their mouth was when they signed the Business Roundtable document in 2019. If they create that ecosystem, they will retain workers for far longer—hiring based on competencies for life-long learning—and partnering with employees committed to constant up-skilling.
This past weekend seemed a perfect time to catch up on some labor market reading.
First topic: the real unemployment in the U.S. This article does a great job of explaining the difference between the monthly numbers released by the BLS, U3, and the more accurate measure of U6, which includes those whose unemployment benefits have run out, or who are too discouraged to look for jobs. After reading their estimate on actual unemployment, anyone would be discouraged.
Next was an article in Crain’s Chicago Business regarding staff shortages in Chicago restaurants. Many factors contribute to this, including the current, enhanced unemployment benefits. In addition, until fully vaccinated, some are very reluctant to come back to the workplace, especially one that demands constant interaction with the unmasked public.
Finally, the most recent Economist issue featured a special report about the future of work. These articles point out some bright spots, including how quickly employment rebounded despite dire predictions, to how many jobs were NOT automated during the pandemic. The newspaper’s overall take is this: “Today, as the economy emerges from the pandemic, a reversal of the primacy of capital over labour beckons – and it will come sooner than you think.”
So, the only conclusion for this firm? We will be spending much more time pouring over even more jobs data to make sense of how the labor markets are affecting our clients.