Jobs, Quits, Omicron, New Normal

Making sense of the new reports released by the Bureau of Labor statistics is not easy. The BLS says employers report they created 199,000 new jobs in December, while households report that 483,000 unemployed persons found jobs. The disappointing employer report suggests a weak labor market, while the fall in the unemployment rate from 4.2% in November to 3.9% in December, and the recent rise in average hourly earnings at something like a 6% annual rate suggests a strong one. A labor market this tight relieves the Federal Reserve Board of fears of triggering a recession if it raises interest rates and unwinds its bond and mortgage buying programs.

Turn To Chico Marx

Time to believe our eyes rather than those confusing statistics, to borrow from Chico Marx.

The American economy ploughs forward, surmounting obstacles created by the new Covid variant which is laying low about one million Americans every day. Well, not very low, at least not for the vaccinated and boosted, but with short-lived symptoms akin to a bad cold. Consumers are buying stuff at a rate that has the world’s trade routes cluttered with about 1,000 vessels struggling to land their cargoes and send that stuff on its way to warehouses and shops. Builders are delaying accepting orders for new homes until they can get their hands on materials and workers to meet demand. Consumers continue to spend.

Workers Are In The Saddle And Ride Employers

There is an acute shortage of workers. Employers are so eager to hold on to staff that they tolerate about 5 million absences while they await the expected peak in infections, due to arrive in a few weeks and be followed by a rapid fall-off. Workers are so certain of the availability of jobs – over 10-12 million openings remain unfilled – that we are witnessing what is called “The Great Resignation”.

Between April and September of last year 24 million  workers advised their employers to take their jobs and shove them, a record quit rate of 3%. They are confident they can find a better combination of pay and working conditions elsewhere, or have joined the 1.4 million who started new businesses in the first three quarters of last year.

Workers are insisting on working conditions they dared not demand before China included Covid among its many exports. Employers who, like Barbra Streisand, have “misty watercolor memories of the way we were” before Covid are largely confined to executive suites on Wall Street. It is acknowledged by many employers that work-from-home is part of the new normal, and that Friday is no longer considered part of the work week. JPMorgan Chase CEO Jamie Dimon once said “People don’t like commuting, but so what?”. But The Wall Street Journal reports that Dimon now “accepts that some staff won’t work five days in the office going forward.”

Inflation Makes Real More Important Than Nominal

Nor is it likely that workers will treat the threat of inflation as they did before the pandemic. With the inflation rate as people experience it at 6.8%; with it not likely to abate soon from a rate that is wiping out gains from higher wages, workers no longer regard the difference between nominal and real wages as something best left to academic papers. Which is why there has already been a  return of COLAs  – no, not the drink, but Cost of Living Adjustment clauses, found in 67% of collective bargaining agreements at their peak in 1976, but not much seen here for decades. Both agricultural equipment maker Deere and cereal maker Kellogg have reluctantly – after long strikes – agreed to include provisions that will have pay follow the upward trajectory of prices. More such deals will follow.

Unions Are Lovin’ It

Another emerging change that will make the labor market very different from the one with which we grew familiar in the past is the revival of trade union power. That clout has been in decline, to the point were only 6.3% of private sector employees are members of trade unions. Workplace changes induced by Covid lockdowns, soaring corporate profits and share prices, union support by the Biden administration are resulting in increased worker militancy.

Graduate students at Columbia and Harvard Universities struck for higher pay for performing teaching and research chores, undeterred by the fact that they will soon graduate into a world in which they are virtually assured of monetizing their degrees. Some Starbuck baristas, a thin edge of the proverbial wedge, find life behind the counter too hectic as they struggle to distinguish between a Pistachio Latte and a Salted Carmel Cream Cold Brew. They voted to have a union represent them in the hope of reducing work demands and adding new benefits to those they already receive, which include free college tuition in many places.

Add a group of workers at Google. Backed by the powerful Communications Workers of America, they have formed a union to cope with “massive power at the executive level”, force Google-owned YouTube to remove a video address by Trump, and reshape the company’s culture.

Labor Markets If Pandemic Becomes Endemic

Those events are visible, their effects on the labor market susceptible to informed conjecture. Not so what would happen in a post-pandemic, endemic world, in which the availability of workers is not limited by periodic virus emergencies, businesses do open and close, schools remain open.

In 1920 Americans elected Republican Warren G. Harding because he promised a return to “normalcy” after the Great War and the deadly 1918-1919 influenza epidemic that took the lives of an estimated 675,000, an infection rate that given America’s current, larger population would have killed over two million people, well over twice as many as the 830,000 counted as victims of the Covid virus.

Fortunately, Joe Biden is no Warren Harding – the latter’s regime was characterized by massive corruption. But a gaggle of his own advisors, organized by Dr. Ezekiel Emanuel, have taken to the pages of the Journal of the American Medical Association to propose a modern new normal. They are urging the President to end “a perpetual state of emergency” and instead move to a “new normal” of living with the virus indefinitely, as we now do with the flu. “It feels like we are always fighting yesterday’s crisis and not necessarily thinking about what needs to be done today to prepare us for what comes next,” said Dr. Luciana Borio, former acting chief scientist at the Food and Drug Administration, one of those who want Biden to concentrate on programs to foster ongoing, routine development of new vaccines and create sufficient hospital capacity to handle an occasional flu-plus-virus case load.

In short, adapt. That just might produce what the ill-fated Harding promised if his new normal were adopted. “Poise has been disturbed, and nerves have been wracked, and fever has rendered men irrational.” Normalcy, as he called it, would result in  “healing … adjustment … serenity … equipoise …”.

Advantages Of A New Normal

These advisors’ plan to replace policies designed to meet an ongoing emergency with policies that include routine vaccinations would have two virtues if adopted. That would send Dr. Anthony Fauci back to his bureaucrats’ cubicle from the television studios that are his current haunt, and create a new normal. With the exception of some teachers’ unions, whose desire for vacations-at-full-pay has not been sated, there is a widespread desire to incorporate prudent reactions to Covid in daily life, and, as Churchill advised during the dark days of WWII, KBO – keep buggering on.

Whether that period of increased domestic tranquility would produce a more normal growth in the supply of labor we cannot know. For now, the range of issues workers seem comfortable confronting is a clue to the strength of their bargaining position, as is the willingness of employers to concede to their wage and other demands. If the four million workers who have dropped out of the work force since pre-pandemic days return, some of that bargaining power would shift to employers, but that does not seem likely. Some have aged; some, enriched by rising share prices and housing values, prefer retirement to what was once called dying in the traces (a reference by Jack London to sled dogs that expire because of being cut out of the traces); some are content living off federal entitlements.

Consider how the language of the workplace has changed. Workers speak of interviewing employers, a change from the older notion that it is employers who do the interviewing. That tells us more about where bargaining power lies than confusing survey data.