Hiding behind the curtain of inflation: American’s 3.4 million missing workers
What’s driving the lack of workers and how to fix it
Right now, the latest data shows that we have over 10 million job openings in the U.S.—but only around 6 million unemployed workers. We have a lot of jobs, but not enough workers to fill them. If every unemployed person in the country found a job, we would still have 5 million open jobs.—Stephanie Ferguson, U.S. Chamber of Commerce
Yesterday I reported on the country’s current inflation and recession, as well as the prospect of more inflation or even deflation, and pointed to two key causes—the Biden administration’s reckless spending, and the Federal Reserve’s just as reckless interest rate hikes.
But there is a third component that cannot be overlooked—the nation’s ongoing labor shortage. Across the economic landscape, the lack of workers has reached crisis proportions and that is especially so in Wisconsin, where two of the labor shortage’s most impacted industries—hospitality and health care—are key employers.
Restaurants and hotels, manufacturers and convenience stores—each and every sector is scrambling for workers, and many are cutting back on the hours or days they are open just to survive. And now, the labor shortage is damaging not only the infrastructure of the private sector but splashing and thrashing around in the labor pools of public safety.
To wit, in Polk County, Texas, the sheriff says the shortage of corrections officers is the worst he’s seen in 20 years, and that’s a familiar refrain in state after state. In Wisconsin, the Dane County sheriff’s department closed part of its jail, in part due to staffing shortages, while in Oneida County last week sheriff Grady Hartman reported that nine of 20 jailer positions were vacant. According to the sheriff, his department was “right on the edge of crisis.”
That word crisis tumbles out of the mouths of employers much too often these days. That’s because, except for the Biden administration, everybody knows it really is a crisis, and one without a foreseeable end to it. That threatens not only the economy but, as the shortages reach historically high levels in law enforcement and health care, public health and safety, too.
Right now, there are 126,497 open positions listed on the Job Center of Wisconsin’s website. That’s down from 132,000 open jobs last November but not by much, and it’s still far above the number of unemployed people, which charted in at 96,000 in August—a complete reversal of the historic pattern in which the number of unemployed is larger than the number of job openings.
The same reversal of the pattern is being seen nationally, and this past week, speaking on Fox Business, as I mentioned yesterday, FedEx founder and chairman Fred Smith warned of a looming worldwide recession, in part being caused by the low labor participation rate. Smith said his company had noticed a sea change in the economy since June, and he said he knew why: On five separate occasions starting with the American Recovery Act, Smith said, the federal government had pumped money into the economy:
The problem is, when that comes head to head with the lack of labor that we have in the United States to meet the demand, and that’s what caused, in the main, the supply-chain crisis—people misjudged that it was some sort of shipping issue. We’re sort of in a stagnation, stagflation period, because you have this tremendous demand, but we’re still one percentage point, in terms of lower labor participation rates today, than we were before the pandemic.
In August, the labor force participation rate was 62.1 percent, still below the 63.3 percent rate of February 2020. All those supply-chain and shipping issues all track back to the low participation rate, Smith said—no truckers to truck, no cargo unloaders to unload ships, no workers to keep the mills and factories running, no jailers to tend the jails.
And so demand-gone-wild slams head first into workers-just-gone and, well, Washington we have a problem. On the one end, the lack of workers causes businesses to teeter and many to fail, a starvation of the economy itself, while on the other end the feast of stimulus-driven demand rockets inflation into the stratosphere.
So, to focus on one side of the equation, a lack of workers underlies the lack of supply that has helped to drive prices sky high. At the other end, all that stimulus Smith mentioned helped drive demand higher than it normally would have been, way higher, exacerbating even more the imbalance between supply and demand. And, of course, the price mechanism is the way imbalance is balanced.
So just how bad is it? Well, when it comes to the labor shortage and how long it will persist, it’s pretty bad, according to several recent surveys. In an analysis for the U.S. Chamber of Commerce in August, Stephanie Ferguson, director of the chamber’s Global Employment Policy & Special Initiatives, found that, in 2021, businesses added an unprecedented 3.8 million jobs, but workforce participation remained severely depressed, with 3.4 million fewer Americans working today compared to February of 2020:
Right now, the latest data shows that we have over 10 million job openings in the U.S.—but only around 6 million unemployed workers. We have a lot of jobs, but not enough workers to fill them. If every unemployed person in the country found a job, we would still have 5 million open jobs.
Just broadly, the pandemic is to have increased early retirements by about 3 million, and 2 million women workers just never came back. The labor force participation rate is sitting at the lowest point it has been in almost 50 years, and 3.4 million workers are missing.
The good news, we know why workers are sitting out, and there are specific things than can be done to bring them back. Let’s take a look.