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Thursday, May 6, 2021
One year after carnage, the strongest labor market on record.
The April jobs report tomorrow morning should be a barnburner.
But outside of a big number for job gains last month — consensus estimates are that nonfarm payrolls grew by 995,000 last month, according to the latest data from Bloomberg — we also see a labor market recovery that continues to be an almost mirror image of the post-financial crisis era.
Data published Wednesday by the Institute for Supply Management and IHS Markit on activity in the services sector both revealed that the economy today is working through a simple supply and demand imbalance — employers have a soaring demand for workers and the supply of labor just isn't there.
"Thanks to the cocktail of a successful vaccine rollout, the reopening of the economy, ultra-accommodative monetary policy and injection of fresh fiscal stimulus, businesses are reporting the strongest surge in demand seen for at least a decade," said Chris Williamson, chief business economist at IHS Markit. "The upswing in demand has led to one of the strongest months of job creation yet recorded by the survey as business prepares for better times ahead." (Emphasis added.)
One contact in the food services business told the ISM, "Consumers have pent-up demand; sales are increasing, and the labor pool is tight. Supply chain is challenged at every level as businesses across the U.S. ramp up."
If the recovery out of the financial crisis was defined by PhD's working at Starbucks because there were so few jobs to go around, this recovery is being shaped by businesses that can't keep the lights on because workers are so hard to come by.
Unlike available labor willing to work if offered wages, however, there is no supply issue when it comes to news stories about these pressures hitting local economies.
Recent reports from Cape Cod and Colorado mountain retreat Breckinridge both outline labor challenges ahead of what's expected to be a busy summer. In Pittsburgh, one ice cream shop found out that one simple trick could attract the workers needed to handle the summer surge — the shop more than doubled its starting wage to $15/hour.
In addition to competing with enhanced unemployment benefits, employers looking to staff up for the season are also pulling from a smaller pool of workers than official data might suggest.
Nick Bunker, economic research director at Indeed, said in a note published earlier this week that the huge number of workers put on temporary layoff during the pandemic flatters headline jobless data and also depresses the number of workers looking for jobs.
"Only 33% of workers on temporary layoff in March 2021 were looking for a job," Bunker notes. "Now, that number is almost twice the share of furloughed workers searching in March 2020 (17%) but it still means a significant number of unemployed workers aren’t actively looking for a job. This could be part of the reason why many employers seem to be having a hard time finding new employees. Many unemployed workers are still attached to their former jobs... In other words, the group of workers least likely to search these days may be the most likely to quickly return to work." (Emphasis ours).
And so while data through March showed that overall employment in the U.S. was about 8 million below the February 2020 pre-pandemic high water mark, this data does not fully capture the dynamic Bunker is exploring. A dynamic that indicates a significant chunk of that total employment shortfall will be filled by still-attached workers returning to their jobs.
Leaving today's hiring managers, perhaps, in a situation not all that different from what prevailed pre-crisis. Meaning it is once again a great time to be looking for a job in America.
