So is there a shortage of jobs, or a shortage of workers?
No two ways about it: The April jobs report was extremely disappointing. And it’s likely to heat up the debate, now preoccupying the White House, over whether government policy might be subtly discouraging unemployed people from returning to work.
Economists and analysts had been expecting around a million jobs to be added on net in April, given the rising share of vaccinated Americans and relaxation of restrictions on business. Instead, employers created a measly 266,000 positions, the Bureau of Labor Statistics reported. Job growth for March was revised downward, too.
The size of the jobs deficit — the difference between how many jobs there are today vs. prepandemic — remains quite large, with employment in April still 8.2 million jobs, or 5.4%, below the peak from February 2020. If April’s hiring pace were to continue indefinitely, it would take 2½ more years before we regained all the jobs we had pre-COVID, and we actually want more jobs than that, given population growth.
The disappointing numbers are almost certain to strengthen the narrative that there’s a labor shortage.
What do I mean by that? Unemployment is still elevated, at 6.1% in April compared with 3.5% in February 2020. So at first blush, that would suggest that there are still a lot of excess workers needing jobs. For about a month, though, a debate has been raging about whether there are too few workers willing to accept the jobs on offer. Restaurants and other small businesses have complained about their inability to hire, which is being disproportionately blamed on, depending on your politics, either Big Government’s too-generous unemployment benefits or stingy employers’ reluctance to raise wages.
The industry that has been complaining the loudest about an inability to find workers — think hotels, restaurants, bars, etc. — accounted for nearly all of the hiring in April, 241,400 new jobs. This might suggest their complaints are much ado about nothing.
Of course, these numbers don’t tell us what the numbers would look like in the absence of the federal supplement to unemployment insurance; maybe hotel and restaurant hiring would have been even stronger without those added benefits. We also don’t yet know how many job openings were posted in April but went unfilled, though we have some clues.
The National Federation of Independent Business’ monthly survey of its members found that a recordhigh share, 44%, reported job openings they could not fill in April. The most recent available Labor Department data on job vacancies are from February, so a bit old, but they showed job openings overall close to their pre-pandemic highs, about 7.4 million vacancies. Accommodation and food services reported about 761,000 job openings that month. Given that safety-related capacity constraints have been eased around the country, vacancies could be higher now.
Average hourly wages rose faster in the leisure and hospitality industry than in the overall private sector, up 1.6% vs. 0.7% from a month earlier. This would be consistent with the narrative that restaurants, hotels, bars and such are having trouble finding workers and must raise pay to fill openings.
On the other hand, in April some 9.8 million workers overall and around 850,000 workers specifically in food preparation and serving-related occupations reported being unable to find work. That suggests there are a lot of people who say they want to take these jobs, whether or not they’re actually accepting them. The number for food-prep workers is not adjusted for regular seasonal fluctuations, as other numbers I mentioned are, so take that with a grain of salt.
It’s also worth noting workers might be reluctant to return to jobs for reasons beyond compensation.
Rand Corp. economist Kathryn Anne Edwards enumerated some of these points in a useful thread recently. They include child care issues, as many schools and care facilities remain closed; problems with wage- and hour-law violations and sexual harassment — the food-services industry in particular has a bad reputation for both; fear of getting sick at work; and risk of being assaulted by customers angered by employee requests to wear masks or otherwise take basic safety precautions.
I’d add transportation issues to this list, given service cuts in mass transit. It might not be worth a two-hour multi-bus trip each way to take a dangerous and unpleasant job, even if the pay rises slightly from, say, $7.25 an hour to $9.
Even so, high enough compensation might change the calculus for workers on the fence about accepting a given job offer. If employers feel constrained by how much they’re able to raise pay, the government could also rejigger other financial incentives to take new jobs. For example, some experts, such as American Enterprise Institute scholar Michael Strain, suggest creating a one-time re-employment cash bonus. Montana recently announced it was creating such a program in lieu of continuing expanded unemployment benefits. But alternatively, policymakers could make both expanded benefits and back-to-work bonuses available.
Alleviating all those other obstacles or disincentives to return to work — by reopening schools, increasing transit services, reducing the risk of illness or assault — would go a long way, too.