While the end of pandemic unemployment benefits in September may finally put an end to the most dysfunctional US labor market in recent history, one where 14 million Americans still collect unemployment benefits yet where the number of job openings has soared to all time highs and is now equal to the number of unemployed workers...
... which in turn is prompting the Fed to continue its $120 billion in monthly QE until such time as the Fed finds "significant progress" on the labor front and giving its a convenient smoke screen to perpetuate its unorthodox monetary policy for years, we wouldn't be holding our breath for a quick normalization to the US jobs market, and here's why: according to a survey from Joblist, an employment-search engine, more than half of US hospitality workers wouldn’t go back to their old jobs and over a third aren’t even considering reentering the industry, underscoring the hiring challenges for restaurants, bars and hotels.
It gets scarier: in a page right out of some socialist "black mirror" episode, the survey of 13,000 job seekers found that no pay increase or incentive would make these workers return to their previous workplace. These former hospitality employees cited wanting - what else - higher pay, a less physically demanding workplace and better benefits. In other words, much more pay and much less work.
Good luck with that.
The results, according to Bloomberg, show the extent of the unpopularity of the industry as the economy reopens in fits and starts. Meanwhile, the soaring number of unfilled job openings in the country - most in the service sector - point to an inability to meet surging demand from consumers, threatening to slow the overall recovery.
“The obvious implication is that if firms can’t expand as planned, the outlook for growth will be weaker,” said James Knightley, chief international economist at ING, in a note to clients.
Addressing this issue, Credit Suisse strategist Robert Griffths said that "probably the most telling part of [Tuesday’s] ISM services release (which fell short of expectations, and drove a fresh leg lower in yields) was the following quotation from one respondent: "Some locations cannot open for business or (have) limited hours, as we cannot staff the restaurant to meet consumer demand." The number of people in work in the US is still 7.5m below its 2019 peak: you can always find workers, you just have to pay them enough. But for now, companies would rather cut output and stop operating than pay what is necessary to open up their businesses, perhaps because at the marginal wage required to open, they simply wouldn’t make any money.
Griffiths opines that firms are betting, “probably correctly,” that the worker shortage is temporary and will end in September when the government's emergency unemployment benefits run out. That’s creating a reluctance to pay more now. As a result, firms will either have to push up wages to satisfy demand, driving a potential inflationary spiral, or hold back on expectation that conditions will normalize, he says. Either outcome leads to an economic mess that persists well into next year at least.
In any case, the drop in the ISM services index which Griffiths commented on, posted a sharp drop in June from a record print in May, largely due to an unexpected contraction in the employment measure as more people simply refuse to work.
Separately, yesterday we showed that according to the DOL's JOLTS report, job openings climbed to a record in May, indicating employers were struggling to fill spots. And while the number of people who voluntarily left their jobs declined, it remained among the highest on record at 3.6 million.
Not surprisingly, the accommodation and food-service industry was among the sectors with the highest number of open positions, along with health care and education. Across the U.S., the leisure and hospitality industry is still down 2.2 million jobs from February, a big chunk of the roughly 6.7 million missing jobs across occupations. That’s despite businesses largely reopening and employers saying they’re desperate for workers.
"Widespread signs of labor shortages are real and reflect longer-lasting factors,” Capital Economics senior U.S. economist Michael Pearce said in a research note. “While we are confident all three will ultimately be reversed, that could take many years."
And that's why socialist policies like Universal Basic Income, which decimate the labor market and cripple business growth and hiring plans, yet which millions of Americans are now used to, are generally a very bad idea.