Page 17 - THE SOUTH CHINA BUSINESS JOURNAL
P. 17
t Friday’s job report in May was a big miss. jobs in the U.S. economy have not reached pre-
Most analysts expected the economy to create pandemic norms. This is a sign workers are finding
one million jobs in April. Instead, businesses better opportunities—or more money—elsewhere
added a paltry 266,000 new jobs—that’s a gap and therefore willingly leaving their jobs. It is also
of almost 750,000 jobs. Did I say it was a big another indicator of a very tight labor market.
miss? However, the unemployment rate remained An overly tight labor market with the wrong
essentially unchanged at 6.1 percent. At the same incentives matters because it has the potential to
time, wages rose 0.7 percent from March and the stall the recovery. Think about it. All things being
labor force increased 430,000 overall. As first equal, we anticipate the economy growing around
glance, it seems the economy is sending us lots of 10 percent this quarter and strongly the rest of
mixed signals. the year. But that forecast assumes businesses
But is it? Taking a bit closer look at the numbers provides can find and hire willing workers who won’t quit
us some answers and the key is the labor market. quickly. Today, with Washington still providing
At the Chamber we’ve been hearing for months now the wrong incentives, that picture is murky. Unless
from businesses of all sizes that hiring the right more workers reenter the workforce, business will
workers has become increasingly difficult. It’s not a find it hard to meet customer demand and get
question of the wrong incentives—across industries, their businesses up and running like they were
the right workers simply cannot be found. Some of before the pandemic. And that has the potential of
the reason workers aren’t reentering the workforce derailing the whole recovery. Just ask your local
are due to medium- to long-term impacts of the small business owner.
pandemic: Some workers are still reluctant to take The good news is that something can be done
jobs because of COVID-19 concerns, while others immediately to stop the artificial, policy-driven
are at home caring for children. constraints on the labor market. The most
But there is another fundamental reason the pool immediate step is for Congress to end the extra
of available workers has shrunk. Increasingly, $300 per week unemployment benefit. According
businesses are struggling to compete with overly- to a Chamber analysis, this extra $300 benefit
generous government benefits, including the results in approximately one in four recipients
$1,400 checks that went out in March and the taking home more in unemployment insurance
extra $300 per week in unemployment benefits than they would have earned by working. And
paid by the federal government under COVID relief don’t forget: this is an extra $300 above and
bills passed by Congress. Now, what were once beyond the regular unemployment insurance
anecdotal reports of employers having a tough time which workers would continue to receive.
finding workers, are showing up in the data. Together, this means the average unemployment
The tightness in the labor market is highlighted by recipient earns more than the equivalent of
wage growth and the quit rate (hat tip to Michael working full-time at $15 an hour.
Strain of the American Enterprise Institute). In other words, about 25% of available workers
According to the Atlanta Fed, median average are staying on the sidelines because of misguided
hourly wage growth in March 2021 of 3.7 percent incentives. Ultimately, these incentives hurt
is about equal to the February 2020 level of America’s businesses and workers themselves who
3.9 percent (before the pandemic). If you can could stand to benefit from a more broad-based
remember back to early 2020 before the pandemic recovery. It’s time for Congress to suspend this
struck: the labor market was tight and this was extra payment, help alleviate the labor shortage,
forcing wages up sharply, especially for the least- and get America ready for a full-throttle reopening
skilled workers. Today, as the reopening gathers and recovery. In the end, that’s what will get this
momentum, businesses are forced to compete, recovery back on track.
raising wages to attract and retain workers.
At the same time, the quit rate has increased. The
quit rate refers to employees who leave companies
of their own accord as opposed to being fired or
laid off. In times of economic uncertainty, quit
rates drop. When the economy improves, quit
rates increase. Today, the quit rate is above where
it was pre-pandemic despite the fact that overall
SOUTH CHINA BUSINESS JOURNAL 14
Most analysts expected the economy to create pandemic norms. This is a sign workers are finding
one million jobs in April. Instead, businesses better opportunities—or more money—elsewhere
added a paltry 266,000 new jobs—that’s a gap and therefore willingly leaving their jobs. It is also
of almost 750,000 jobs. Did I say it was a big another indicator of a very tight labor market.
miss? However, the unemployment rate remained An overly tight labor market with the wrong
essentially unchanged at 6.1 percent. At the same incentives matters because it has the potential to
time, wages rose 0.7 percent from March and the stall the recovery. Think about it. All things being
labor force increased 430,000 overall. As first equal, we anticipate the economy growing around
glance, it seems the economy is sending us lots of 10 percent this quarter and strongly the rest of
mixed signals. the year. But that forecast assumes businesses
But is it? Taking a bit closer look at the numbers provides can find and hire willing workers who won’t quit
us some answers and the key is the labor market. quickly. Today, with Washington still providing
At the Chamber we’ve been hearing for months now the wrong incentives, that picture is murky. Unless
from businesses of all sizes that hiring the right more workers reenter the workforce, business will
workers has become increasingly difficult. It’s not a find it hard to meet customer demand and get
question of the wrong incentives—across industries, their businesses up and running like they were
the right workers simply cannot be found. Some of before the pandemic. And that has the potential of
the reason workers aren’t reentering the workforce derailing the whole recovery. Just ask your local
are due to medium- to long-term impacts of the small business owner.
pandemic: Some workers are still reluctant to take The good news is that something can be done
jobs because of COVID-19 concerns, while others immediately to stop the artificial, policy-driven
are at home caring for children. constraints on the labor market. The most
But there is another fundamental reason the pool immediate step is for Congress to end the extra
of available workers has shrunk. Increasingly, $300 per week unemployment benefit. According
businesses are struggling to compete with overly- to a Chamber analysis, this extra $300 benefit
generous government benefits, including the results in approximately one in four recipients
$1,400 checks that went out in March and the taking home more in unemployment insurance
extra $300 per week in unemployment benefits than they would have earned by working. And
paid by the federal government under COVID relief don’t forget: this is an extra $300 above and
bills passed by Congress. Now, what were once beyond the regular unemployment insurance
anecdotal reports of employers having a tough time which workers would continue to receive.
finding workers, are showing up in the data. Together, this means the average unemployment
The tightness in the labor market is highlighted by recipient earns more than the equivalent of
wage growth and the quit rate (hat tip to Michael working full-time at $15 an hour.
Strain of the American Enterprise Institute). In other words, about 25% of available workers
According to the Atlanta Fed, median average are staying on the sidelines because of misguided
hourly wage growth in March 2021 of 3.7 percent incentives. Ultimately, these incentives hurt
is about equal to the February 2020 level of America’s businesses and workers themselves who
3.9 percent (before the pandemic). If you can could stand to benefit from a more broad-based
remember back to early 2020 before the pandemic recovery. It’s time for Congress to suspend this
struck: the labor market was tight and this was extra payment, help alleviate the labor shortage,
forcing wages up sharply, especially for the least- and get America ready for a full-throttle reopening
skilled workers. Today, as the reopening gathers and recovery. In the end, that’s what will get this
momentum, businesses are forced to compete, recovery back on track.
raising wages to attract and retain workers.
At the same time, the quit rate has increased. The
quit rate refers to employees who leave companies
of their own accord as opposed to being fired or
laid off. In times of economic uncertainty, quit
rates drop. When the economy improves, quit
rates increase. Today, the quit rate is above where
it was pre-pandemic despite the fact that overall
SOUTH CHINA BUSINESS JOURNAL 14
