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Is there a shortage of labor? What the May Jobs Report tells us

A help sign was displayed outside the plant before Remembrance Day along the promenade in Wildwood, New Jersey.

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The report on weaker-than-expected jobs in April fueled speculation of labor shortages in the United States and prompted some government officials to announce an early end to increased unemployment benefits.

Still, forecasters, hoping for clarity from the May rally, may be left scratching their heads.

According to data released on Friday, it is difficult to draw conclusions about persistent weakness or problems with labor supply, according to economists. The May report offers something like a mixed bag and somewhat contradictory data, they said.

“This is a Rorschach test,”

; according to Nick Bunker, an economist at Job Really. “It’s a pile of ink on a sheet of paper and everyone sees different images.”

May report on jobs

For example, there is a headline number: The US economy added 559,000 people to the payroll in May.

On the one hand, some observers may use the data point to assume that workers are not joining the workforce as quickly as might be expected.

The number of jobs is estimated by economists at 671,000. At this rate, it will take more than a year to regain all the jobs lost by February 2020.

On the other hand, job growth accelerated in May – the new payroll doubled since April. And the last few recessions have been characterized by long job recovery, economists said.

May’s operating earnings are also roughly equivalent to the average over the past three months – suggesting they were in line with what they might have been, Bunker said.

“I think it’s a story of expectations about reality,” he said. “What is a good growth rate is something in the eye of the beholder.”

Labor force participation

Wage increase

Perhaps the clearest evidence of labor shortages in the May Jobs Report is wage growth, especially in the labor and hospitality sectors, according to Daniel Zhao, a senior economist at Glassdoor, a job and recruitment site.

Rising wages suggest that companies struggling to hire may pay more to attract workers.

Unfortunately [May] report will not end this debate on labor shortages. Both sides have ammunition to support their arguments.

Daniel Zhao

senior economist at Glassdoor

Hourly pay has jumped nearly 9 percent in the past year, to $ 15.87, for non-managerial workers in the sector, which includes restaurants, hotels and bars, for example. (Profits have risen $ 0.19 an hour since April.)

That growth is significant because entertainment and hospitality seem to be where employment challenges are most often reported, Zhao said.

However, the boom may not be due solely – or even mostly – to wage-raising businesses.

Instead, the councils are likely to see pay increases as restaurants and bars return to customer capacity before Covid, according to Josh Beavens, director of research at the Institute for Economic Policy, a left-wing think tank.

“Since December 2020, the increase in gratuitous income, rather than the increase in the basic salary, may fully explain the acceleration of salaries for production and unsupervised workers in restaurants and bars,” he wrote on Friday.

In addition, leisure and hospitality jobs grew by 292,000 in May, the largest share of any industry, and potentially undermined the supply of workers. At the same time, it was a delay of 328,000 jobs added in April.

Critics of the labor shortage argument point to other data points, with average hours remaining relatively equal. (Companies tend to increase hours for existing workers if they can’t get on other staff.)

“Unfortunately [May] the report will not end this labor shortage debate, “Zhao said.” Both sides have ammunition to use to support their arguments. “

What causes supply restrictions?

As labor shortages exist, the employment challenges are likely to be temporary, economists say.

Twenty-five states are stepping up increased federal unemployment benefits earlier than their official expiration on September 6 to try to encourage a return to the workforce.

The earliest state, all led by Republican governors, did so was June 12.

“The most vocal source of speculation [for labor shortages] is that the supplement to weekly unemployment benefits entices many people to stay at home, “said Erika Groschen, a labor economist at Cornell University and a former commissioner of the Bureau of Labor Statistics during the Obama administration.” I think that’s too simplistic. “

Economists point to a number of other factors that may also make it difficult for workers to return to the workforce: childcare obligations, continuing health risks, health complications for long-term Covid carriers, early retirement, career changes or revaluations, and a high historical share of workers. who are frightened and expect to be recalled to their previous job.

However, it is impossible to quantify the extent to which any of these factors play a role during economic recovery, experts say.

“These factors interact with unemployment insurance, which can allow workers to take more time to rethink their careers, try to find jobs in new industries and negotiate higher wages – but they can also slow growth. employment and prolong long-term unemployment, ”according to Harvard University economists Jason Furman and Wilson Powell III.

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