After a discouraging anemic April jobs report—with only 266,000 jobs added—versus an anticipated increase of one million, the United States Department of Labor reported Friday another relatively disappointing report. Employment rose by 559,000 in May and the unemployment rate declined by 0.3% to 5.8%. According to the U.S. Bureau of Labor Statistics, “Notable job gains occurred in leisure and hospitality, in public and private education, and in healthcare and social assistance.”
On a positive note, “April’s payrolls were upwardly revised by 12,000 to 278,000, while March’s non-farm payrolls increase was raised to 785,000 from 770,000.” The U.S. has 7 million less jobs compared to pre-pandemic levels.
The increase in new jobs is indicative of the country’s positive mood change. Millions of Americans were vaccinated, states reopened, people left their homes and spent money going to restaurants, bars and sporting events. Travel has dramatically increased. These factors, coupled with trillions of dollars flooded into the economy through federal government stimulus plans, created a consumer-spending boom. This led to businesses doing better and requiring more help.
Scott Clemons, partner and chief investment strategist at Brown Brothers Harriman, has some concerns. He questions if the economy has become “addicted” to trillion dollar stimulus bills and low interest rates and worries about “what happens when those supportive policies begin to fade away?”
Clemons pointed out, “Employment recovered quickly from the economic distress of last year, [but] we have seen throughout this recovery, economic data is exaggerated and volatile.” The underlying dynamics of the labor market remain fragile, he maintains.
We are still at an uncomfortably high unemployment rate. By comparison, pre-pandemic, the U.S. had record-high employment. The unemployment rate was at around 3.5%. Around 9.3 million Americans still remain unemployed.
According to Clemons, “The labor supply chain has been severely disrupted.” Business owners contend that they can’t find workers. They blame the enhanced unemployment benefits, claiming it disincentivizes people from seeking out new jobs. Many cities closed their public schools. This pushed working mothers to choose staying at home and taking care of their children and providing supplemental education help to the much-criticized online video classes. There are also people who are concerned about contracting the virus and are staying on the sidelines until they feel more comfortable.
In response, businesses—particularly in the food services and hospitality sectors—have been offering increases in wages and bonuses to entice people to interview. A large number of states have said they’ll stop the extra unemployment benefits to see if this helps nudge people back into the job market. Some states have offered $1,000 bonuses to folks who got off unemployment and found a new job.
Clemons said, “We expect that this will resolve over time as more people get vaccinated, various government support programs expire, and K-12 schools return to normal operations in the fall.”
UBS economist Pablo Villanueva said in a note last week, “Schools are reopening, [Covid-19] risks are diminishing, and in many states, unemployment benefits are coming down.” Villanueva added, “We expect that in the coming months there will be a significant rise in the labor force participation rate because several factors point in that direction.”
Carl Tannenbaum, chief economist at Northern Trust, said, “I think the end is in sight, but it’s going to be a long and winding road back to full employment.”
There is some good news that’s come out of the Covid-19 outbreak. Companies get that they need to take care of their employees. Pay is important, but so is a supportive, empathetic atmosphere. Workers are demanding their employers to help with childcare and mental health matters. Remote work has been considered a great success and a large percentage of people want to keep this going. Studies show that a large percentage of the workforce would rather quit their jobs than return to an office every day.
Smart forward-thinking companies, such as Google, have been offering hybrid and remote options to their employees. In addition, the tech giant has created wonderful in-office experiences. This includes an array of amenities, attractive campuses and rooms with large video screens to ensure that remote workers don’t feel left out. Some companies, such as Twitter and Spotify, are allowing their staff to work from home indefinitely. Reddit, the online community platform, said it’ll pay people who move from San Francisco to lower cost places the same level of compensation.
While the last few months came in with less-than-hoped-for numbers, it feels like corporations are changing the way they do business to attract, retain and keep workers happy and motivated.
Source: Forbes
