Home    News & Publications    Podcast #21: The U.S. Employment Market

Podcast #21: The U.S. Employment Market

October 04, 2022

Listen to the podcast below to hear Jill talk about

  • Unemployment
  • Labor Participation
  • Labor Demographics
  • Jill’s Good News Segment

 

 

Script:

Hi Everyone,

 

I’m going to go on a bit of a rant here but I feel the topic is critical to our economic future. I’ve been researching, listening and reading. I hope you won’t be bored.

What triggered me was Jerome Powell’s statement on September 22, saying we should anticipate slower growth and higher unemployment with a potential recession as the Fed raises interest rates to fight inflation.

What’s been bothering me in all this talk is higher unemployment. I’m perplexed by how we can have high unemployment when there are almost 2 job openings for every worker looking for a job.

Part of the problem has been brewing for decades as you’ll see. But there are also working-age people that decided not to look for work. They are referred to as the Disengaged. This results in a lower participation rate that could help the situation. According to the Bureau of Labor Statistics or the BLS, the Participation Rate in February 2020 was 63.4% compared to August 2022 of 62.4%. We need 3.2 million workers to get back to the February 2020 work force levels.

At its most fundamental level, a work force is from your own citizens. If you don’t have enough citizens, you have to bring workers in from outside your borders. Immigration has been a key to our workforce for decades.

The United States as well as most developed countries has had a below worker replacement birth rate for 50 years. Add to that Baby Boomers retiring and a significant decline in immigration. By 2034, adults over 65 will outnumber children for the first time in history. We have more workers retiring than entering the workforce.

This has become a recipe for a crisis that should be raising alarm bells throughout the business and legislative community.

EMSI Burning Glass, which stands for Economic Modeling Specialists International published “The Demographic Drought” in early 2021. Since then, the pandemic actually accelerated some of these trends.

What are some of the reason potential workers aren’t looking for jobs?

  • A study by Stanford and MIT shows 500,000 workers not participating because of long COVID
  • According to the Kansas City Fed, there were 2.1 million more workers retiring than the expected trend.
  • Childcare challenges – a large proportion of employees in this sector are lower wage earners which frequently were filled with immigrants

According to EMSI, “childcare workers are at ground zero of the problem we face nationally regarding the shortage of workers for jobs that pay less than $20/hr. “

The example they use is taking the national minimum wage of $7.25/hour. It equates to $1,257 per month. The national average cost for full time daycare is $1,324. By their calculation, if a single parent with 2 children paying housing and food costs, the after-tax hourly pay rate needs to be north of $22/hr. If it is a couple, it is often cheaper for one parent to stay at home than pay for childcare.

  • With the fiscal stimulus offered to workers during the pandemic, many households banked the money. According to the Fed, personal savings peaked at 22% but is falling. It is possible some will return to the workforce when their savings is spent.
  • 43% of workers quit their job to become entrepreneurs. It is unknown if they will succeed in large numbers
  • Another large group leaving the workforce are men with high school education. It is estimated that 800,000 men are battling opioid addiction. 100,000 overdosed on fentanyl.

What about automation? The World Economic Forum estimates advancements in artificial intelligence and robotics will actually result in an increase of 12 million jobs globally by 2025.

You know the self-checkouts grocery and drug stores? One would think we need less cashiers. According to EMSI, job postings show cashiers are the seventh highest-demand job openings in the country.

Immigration largely comes in two segments. The highly educated, especially in the science, technology, engineering and mathematics referred to as STEM as well as lower wage earners.

Immigration is at an all-time low. There are more than 4 million people trying to get work visas. For the educated immigrant, we are competing with other developed countries who are trying to hire them or keep them to work in their own country as middle classes expand.

The Migration Policy Institute shows 17% of the workforce were immigrants in 2018 but comprised 38% of home health care workers. With the boomers needing help, this industry is expected to grow 33% from 2020-2030. But with the pandemic, this sector has the highest unemployment rate – 8.8%.

So, what’s to be done?

Obviously, immigration needs to get straightened out. Borders were closed with the pandemic plus work shutdowns. Even before COVID, immigration became politicized. Immigration is at its lowest level. Giovanni Peri, a labor economist at UC Davis said approximately 2 million fewer working age immigrants were in the U.S at the end of 2021. Of those, half are the those educated for STEM type jobs. H-1B green card visa caps were lowered. These are usually highly skilled technology workers. Push deeper and these are the types of positions that lead to innovation and increased productivity. The Congressional Research Service found in 2019 that immigrant students earn more than half the masters’ degrees and 44% of the doctorates in STEM fields in this country.

Peri said there was a study at UC Berkeley that found for every new job in high-skilled positions, 2.5 more jobs were created in the local economy.

There are growing calls and lobbying from business and economists calling for immigration reform, comprehensive child-care, federal investments in job training and reskilling among other issues. Neil Bradley, chief policy officer with the U.S. Chamber of Commerce said, “when we look at the trends for workforce participation, short falls in legal immigration – we think that all of that kind of points to this being a long-term challenge for the American economy.”  Isn’t that an understatement!

Some companies are taking it into their own hands. While Tyson Food earned their bad press during the pandemic, they seem to have gotten part of the message. Tyson has 120,000 employees representing 160 different countries speaking over 50 languages. Some are on visas and others permanent.

Tyson spent over $500 million dollars increasing salaries, bonuses and benefits – combined to represent $24/hour. They are offering childcare, housing and transportation. They now offer programs to pay for employee education, immigrant legal services and they have their own health centers to provide free medical care.

Hector Gonzalez, their head of labor says “we can’t do it alone.” Only Congress can help.

And now we have the new Inflation Reduction Act of 2022 which says it will create thousands of jobs over the next decade. Who’s going to fill them?

So, back to the Fed. I think David Kelly, Chief Global Strategist at JP Morgan said it best. “We have one foot in recession and the other on a banana peel.”

Even though the economy is already slowing and inflation is declining, it apparently isn’t fast enough for the Fed. I don’t think it will surprise anyone if they push us into recession.

Let’s look at some good news.

British physicians created a blood test that they believe will be a game changer in identifying cancer at an early state. It’s called the Galleri test and is in trials. It looks for cancer DNA in the blood to not only identify a cancer but where it is located in the body. Wouldn’t that be nice as part of our annual checkup!

We all know climate change is making everything hotter. Emissions from buildings of CO2 from air conditioners is a significant segment of pollution. Apparently, the Ancient Persians had a way to use physics to keep buildings cool while maintaining attractive architecture. Building managers and architects are trying to learn. The use of what looks like chimneys actually channel winds through curved walls to heat or cool buildings. There is an example at the Royal Chelsea Hospital in London.

Please contact us if you would like to talk about your investment, financial planning or the general state of affairs.

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