Data as of April 2021. Sources: Macrobond, Bureau of Labor Statistics, WTIA.
The government has a Herculean task of counting every single job added across the largest economy in the world. They do quite a good job of it, surveying firms that employ one-third of all relevant workers, which in statistics is a very large sample, but this statistical noise will continue.
One of the main retardants for stronger job growth is the sheer unavailability of workers. There is a growing chorus of employers reporting inability to find qualified workers, or even to entice any workers to apply. Stories abound of fast-food restaurants paying people just to fill out applications and some are even offering hiring bonuses. The National Federal of Independent Business, a collection of very small establishments usually employing around 10 people, are reporting the most challenging hiring environment in their history, as shown in Figure 2.
The reason for the lack of workers is at least twofold: fear of Covid and generous unemployment benefits. A set of closely watched special questions in the jobs report showed 2.8 million people not in the labor force, not even looking for work in the past month, because of the pandemic. That could be for myriad reasons including fear of the virus, challenges with childcare, or a shift to virtual learning requiring a parent to stay at home. Encouragingly, the number of people citing COVID as a reason is down from nearly four million a month ago but is still a drag on the ability to hire.
We also know that unemployment benefits are generous, with recipients collecting the regular benefit, usually about 50% of previous pay, plus an extra $300 per week as part of the most recent stimulus package. For many workers that extra $300 translates to bringing home more on unemployment than what they were making at work. Estimates vary but it’s likely as high as 40% of recipients at the current level of benefit. We are not passing judgement on any workers nor making a political statement about the policy, but it’s easy to see that such generous benefits are an incentive to not return to work. If this program is preventing labor force participation, it will remain so until the program runs out on September 6, with some states such as South Carolina and Montana looking to end federal benefits even sooner.
Figure 2: Percent of small businesses unable to fill open job positions