Jobs report mayhem
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| Think that Now Hiring sign right in front of the entrance is big enough? I suppose they're hoping people aboard the International Space Station would see it. Don't want to leave any rock unturned. // photo my own |
In early May, a disastrous jobs report for April was released. A million jobs were expected to be added to the economy following Biden's multi-trillion dollar stimulus package, but the number was closer to a quarter of a million. Additionally, the numbers for March were revised down from 770k to 146k. Considering that 127k new jobs a month are needed just to keep up with population growth (by 2009 numbers; a higher number is certainly needed today), much less a return to normal, these numbers are rather dismal. Any normal person would see this as terrible news, but only a politician could see it a different way, with Biden calling it "on the right track". If you hired a market analyst that projected a 20% year-over-year growth in a certain market segment, and you only gained 5% year-over-year growth after investing a million dollars into the market segment while inflation was 4%, you would fire that person immediately. If you hired me to build a one-million-dollar four-bedroom house and I ended up building a one-hundred-million-dollar tiny home studio for you, I would probably be serving time. But alas, politicians seem to operate on a standard where this complete failure would be "on the right track".
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| No snarky caption needed. // graph by EconInternational |
Looking around town, I'm sure everyone has noticed all of the "now hiring" signs all over the place. Businesses are hiring. They need labor. I was at lunch with some coworkers two weeks ago and the topic came up. Without looking, I bet that the restaurant we were at was hiring. Sure enough, I turned around and saw the "now hiring" sign on the window. It's not a shortage of jobs. It's a shortage of labor. A University of Chicago study shows that 42% of people on unemployment make more now with the $300/week enhancement (reduced from $600/week) than they did actually working. Further, the savings on opportunity costs is gigantic. Having an extra 40 hours per week of free time is a gigantic benefit. Let's say someone on unemployment insurance finds a job that pays $2/hour more than unemployment insurance. Even though the job pays more, that would essentially be working for $2/hour. Why spend 40 hours a week toiling away at a job when they could take a small pay cut to relax at the beach all week? I had a friend who was laid off in 2008. He coasted through the extended unemployment benefits even though they were significantly lower than his base salary and right when his unemployment benefits expired, he magically found a job within a week. His story is not an isolated one. Although unemployment benefits require a person to look for work, it is a condition that is, for all intents and purposes, impossible to enforce.
To be clear this is not the only culprit. It is a scale from rare to never that a change in the economy can be attributed to a single thing. Fear of the Coronavirus may still be high. The lack of in-person schooling and daycare could also play a role. Both of these have been negatively affected by the government. But the generous unemployment benefits likely are a major reason for the substandard jobs report.
On the other hand, progressives have been complaining that employers should just pay more. As if small business owners have not been suffering greatly themselves, or that profit margins, labor costs, or price elasticity exist. It's as if none of them have ever taken or passed a business course before. These extended benefits are set to expire in September 2021 though some states have opted out with the extended federal unemployment benefits expiring soon, if not already. The number of filled positions are probably not likely to rebound in a significant way until about a month or so before they expire, with some people probably looking to get a jump on the labor competition.
Kamala Harris took the woke angle, screeching about how much higher female unemployment had risen compared to male unemployment. Well, maybe if the government hadn't shut down all the public schools for so long, with no tax refunds for failure to perform services, I might add, this may not have been such a crisis level issue. Like it or not, female workers tend to be the ones quitting to take care of the child if child care options fall to the wayside.
The May jobs report released recently looked better, but despite the spin put on it by the Biden administration, it still looks pretty bleak. While the economy added a little over half a million jobs, it still fell short of economists' estimates, though not by such an embarrassing amount as April's. Still, the United States is over 7 million jobs short of where it was pre-pandemic. Additionally, the gains this May is remarkably similar to the gains in previous years. In a recovery year, particularly due to the government response to the pandemic, job recovery should show gains significantly higher than previous years.
Biden also touted the 0.4% gains in wages, but I'm not sure that he's seen a price tag in months. Possibly years. Hell, he may not remember seeing a price tag for decades, when he bought his first item on a senior discount. Prices had been spiking for months now. The regional president of a national home builder told me that they have been seeing 1% price gains in new housing month over month. Anyone paying attention has noticed prices increasing across all industries as well. Food prices are up, restaurant prices are up, gas prices are up, car prices are up, lumber prices are up, steel prices are up. I've drastically reduced restaurant outings for lunch since some restaurants I used to frequent have had 30% price increases. Filling up my gas tank has gone up 25% in the past few months.
There are various reasons for these. For one, shortages across supply chains have contributed to rising prices. The pipeline ransomware attack didn't help, but gas prices rose drastically in states not affected by that pipeline as well. The insane amounts of government spending and suppression of interest rates over the past year has likely also contributed to spiking prices. Labor shortages have also forced businesses to raise wages. For low margin businesses that require cheap labor to keep prices down, what exactly does Biden think would happen?
"When it comes to the economy we’re building, rising wages aren’t a bug, they’re a feature," he replied.The rise in wages, as always in this case as well as others, lags the increase in costs of living. In this case, the rise in wages doesn't even cover inflation during "normal" periods, much less the drastically rising prices today. Although people's wages have risen, their purchasing power has actually declined, not to mention a desecration of their savings. So take your 0.4% wage increases and shove it.
It would seem, then, that Biden's response is simply a denial of reality. That would also appear to be a feature, not a bug, in the subconscious minds among the DC aristocracy.
