Jobs ‘paradox’: Companies warn of worker shortages
Economists say any disparity temporary
As the U.S. job market comes roaring back, there’s a growing debate about whether there are enough workers to power faster economic growth.
Companies from fast food chains like Chipotle Mexican Grill to chicken producer Pilgrim’s Pride and MGM Resorts International say they can’t find — or entice — enough workers. In earnings calls and business surveys, executives often blame stimulus checks and generous unemployment benefits for hampering hiring efforts.
But economists and policymakers are unclear about what’s really causing this gap and how long it will last. Hiring remains robust for now, indicating these labor disparities aren’t necessarily a problem. The worry is if labor shortages do persist — especially in the leisure and hospitality industry — that could slow demand and possibly lead to price increases.
Friday’s employment report, which is projected to show the economy added about 1 million jobs in April, should offer new insight into this mismatch and whether it’s deterring growth.
“There is definitely a job paradox that’s going on,” said Joe Song, senior U.S. economist at Bank of America. It’s difficult to quantify, “but it’s clearly a challenge that’s weighing on a quicker pace of recovery.”
While the unemployment rate probably fell to 5.8 percent last month, according the median estimate in a Bloomberg survey of economists, the labor force participation rate remains well below pre-pandemic levels.
Lingering health concerns, ongoing child care responsibilities and the inability to do some jobs from home are just some of the reasons why Americans are reluctant to return to work. Some are also retiring early.
And anyone who previously made less than $32,000 per year is better off financially in the near term receiving unemployment benefits, according to economists at Bank of America.
Zoraida Rodriguez, a cleaner at the Bernard B. Jacobs Theatre in New York for 15 years, says she can’t find a retail job with steady work and collecting unemployment is a better option until Broadway theaters reopen and she can return to her old job.
“Is it worth it to go to a $10-an-hour job without benefits?” said Rodriguez, who lives in New Jersey.
But fiscal stimulus isn’t the only problem. Many of the unfilled jobs in the restaurant and retail industry underscore the fact that employers aren’t paying adequately or giving workers enough hours, according to Economic Policy Institute’s Heidi Shierholz.
“Employers are like: ‘Why the hell, if there are so many people who need jobs, can’t I find somebody really awesome, really cheap?’ ” said Shierholz, who worked as chief economist at the Labor Department under President Barack Obama.
The pandemic has also exacerbated shortages of skilled workers in certain industries, like manufacturing and construction, that existed before the crisis.
Filling vacancies remains a widespread challenge, especially for low-wage and hourly workers, and many firms have had to increase pay or offer signing bonuses to attract applicants, according to the Federal Reserve’s latest Beige Book.
All of this could hamper economic growth. Already, the Biden administration is grappling with challenges posed by this labor market disparity.
“If we’re having that kind of job shortage at a time when the economy is still in front of what almost everybody thinks is going to be a very substantial boom over the next six months, I am concerned about inflation and inflation expectations,” said former Treasury Secretary Larry Summers in a Bloomberg TV interview.
But policymakers including Fed Chair Jerome Powell say the mismatch is temporary and that workers will likely eventually return to the labor force, including after extended jobless aid programs end.
Case in point: Payrolls among private employers surged in April across most industries, bolstered by gains in leisure and hospitality, according to ADP Research.
Also, wages are rising as employers seek to attract more workers. The government’s report last week on employment costs showed first-quarter compensation, which includes pay and benefits, registered the strongest advance in nearly 14 years.
As the labor market continues its gradual return to normal, weekly jobless claims hit a pandemic-era low for the fourth consecutive week. The Labor Department reported Thursday that 498,000 Americans filed for initial unemployment benefits during the week ended May 1.
That’s down 92,000 from the previous week, a bigger decrease than economists expected and the lowest figure since March 2020. The streak of declines, which started with a surprise drop in mid-April, suggests the recovery is gaining traction, pulling scores of people back into the folds of the labor market as business restrictions continue to loosen and vaccination numbers climb.
“We’re seeing a rapid recovery,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “It’s a workers’ market.”