The good news for President Biden is that the economy added 850,000 jobs in June, allowing him to claim credit for a booming economy, and the “dramatic progress in vaccinating our nation”, which has reduced the number of people too fearful of Covid to look for work from 6 million to 1.6 million. The bad news for President Biden is that the economy added 850,000 jobs in June, causing many to wonder whether his plan to spend another $4-$6 trillion to grant his Left’s wish to expand the welfare state will overheat an economy already flashing inflation warnings.
Biden argues that with 6.8 million fewer jobs than existed pre-pandemic, and an unemployment rate of 5.9%, there is still “more work to do”, which probably means more spending to do. Note, however, that perhaps as many as half (estimates vary) the lost jobs are accounted for by retirements since the pandemic started, some because of age, some because they jumped at offers of early retirement from companies that could not anticipate the speed at which job shortages would be replaced by a labor shortage, some – usually poorer – because they saw no hope of re-entering the labor market at an advanced age, some because soaring share and house prices have made it possible for them to live their golden years on a golf course or taking those university courses they never had time for.
It’s A New Labor Market
Job creation at the June level signals one of the
fundamental changes going on in the labor market. Bargaining power has shifted from employers to employees in a market characterized by a mismatch between some employers’ expectations and some workers’ aspirations when it comes to what is called “work:life balance”. Many workers are unwilling to return to jobs as they were before the pandemic, which is a partial explanation for the existence of 9.3 million job openings in an economy yet to recover all the jobs lost to Covid.
Cubicles Await – Or Else
Which creates problems for hardline employers. JP Morgan and Goldman Sachs have told their workers to return to their desks this month, with Morgan CEO Jamie Dimon adding a spoonful of sugar to make that medicine go down – starting salaries of $100,000 for new bankers. As pokers players say, Citigroup raised the ante by matching the $100,000 and topping it by offering bonuses in the new coin of the labor-market realm rather than old-fashioned cash: hybrid work schedules of three days a week in the office and up to two at home. The bankers’ $100,000 does not quite match the $200,000 major law firms are offering newly minted attorneys, but, as we say in New York, “It ain’t chopped liver.”
Silicon Valley isn’t as rigid as Wall Street, but Apple’s Tim Cook has ordered employees to return to their desks starting in September – presumably after a relaxed flexible summer – on Mondays, Tuesdays and Thursdays, with permission to work from home Wednesdays and Fridays. Google and Microsoft are offering more flexible arrangements, in some case all work from home, permanently. They all fish in the same labor pool, but it is too early to tell which approach will land the most and best fish.
Taking a hard line in this labor market, says Kate Lister, president of consultants Global Workplace Analytics, is risky: her surveys show that 39% of workers surveyed would consider quitting if denied flexible remote work options. “Remote is the new signing bonus”, Marc Cendella, CEO of a high-end job-search site, told The Wall Street Journal.
Worker Power Pleases Biden
An economy with fewer people trekking to work while employers scramble to find workers does not surprise the Biden team. The President says employers would “find plenty of workers” if they would raise wages, and there is “more than ample room” for them to do just that without triggering inflation. Employers say that ending the weekly $300 federal top-up of state unemployment benefits (set to expire at the end of September) would get workers off the couch.
With the exception of the President’s preternatural calm about the effect of higher wages on inflation and inflationary expectations, both he and the employers are correct. Unemployment rates are dropping fastest in states that plan to reject the Federal $300 top-up, and employers are pushing up wages at an annual rate of about 10% in the historically low-paying hospitality sector in an effort to outbid other sectors such as manufacturing. And adding benefits ranging from health care to free gyms and Thanksgiving turkeys. Not to mention signing bonuses: ZipRecruiter reports that 20% of the job offers posted on its search site carry bonuses, up from 2% in March, with $1,000 for hourly workers common. Some employers tell me their offer of $100 merely for showing up for an interview produces little response. The Federal Reserve Bank of Atlanta reports that pay for workers with only a high school diploma are rising faster than those of college graduates.
No One To Serve Hungry Diners
Even so, and despite hiring 194,000 workers in June, restaurants cannot attract enough workers to operate at capacity. The Labor Department estimates that there are close to one million unfilled jobs at restaurants, and the 5+% quit rates in the food service and hospitality industries are at a twenty-year high and running at twice the 2.7% rate for the economy as a whole. Many workers used time off during the pandemic to “reskill” and move on to positions with better career prospects than are offered by restaurants. The Biden administration, although applauding worker scarcity and increased bargaining power, has decided to expand the temporary foreign worker visa program so that restaurants can operate at closer to their break-even points. Whether this proves inconsistent with the President’s desire to see wages rise will depend on how the program is administered.
Worker shortages, rising wages and other costs are pushing casual dining chains to introduce completely contactless ordering and paying. Deepthi Prakash, who has experience as a restaurant-design consultant, believes tabletop technology can also be successful in higher-end establishments as it allows diners to order what they want without worrying how the waiter will judge them. Some diners seem to live lives of quiet desperation.
And in the tony Hamptons patrons are scrambling for tables so that they can be seen at the area’s famous eateries. One customer is paying $3,000 for an after-dinner table for drinks, another has rented a table for the summer season at a five-figure fee, food and wine not included, still others offer NASCAR tickets, yacht trips and the use of private planes according to The New York Post. “Suddenly, the $100 tip … didn’t seem very impressive,” moaned a starvation-threatened member of the Hamptons proletariat. Labor shortages are forcing many of these much-in-demand restauranteurs to operate at less than capacity levels.
We’ll Know More After The Summer
We will have a better picture of what a new-normal labor market will look like after the summer. The $300 top-up will have expired (unless renewed), schools will re-open freeing many parents to return to the labor market, the summer travel and out-of-home dining frenzies might have calmed, more people will be vaccinated, and workers clamoring for the right to work from home might decide that their castle is an office cubicle rather than a home. “People are seeing the world differently….We’re going to see a massive shift in the next few years”, says Steve Cadigan, a human-resources expert. Whether that shift will satisfy the left of the Democratic Party is uncertain, but early indications are that they will either approach the President with “Please sir, I want some more,” or drop the “Please sir”.