U.S. economic system seen including 450,000 jobs in October regardless of labor scarcity
If you post it will you come? Companies have an almost record-breaking number of job vacancies, but cannot fill them quickly enough due to a large labor shortage.
Economists predict more people were looking for work and were hired in October after September’s weakest round of job creation in nine months.
Here’s what to look for in the latest U.S. employment report due Friday.
Recovery in recruitment
The USA. Probably 450,000 new jobs created in October, according to economists polled by the Wall Street Journal. That would be a big improvement over September’s preliminary profit of 194,000, which was the weakest of 2021.
Read: The US economy appears to be picking up again as the delta dwindles
The rise in recruitment is likely to be widespread, with recreational and hospitality companies benefiting most from the decline in “delta” coronavirus cases. Business has picked up again in restaurants, hotels and the like.
But even an increase of half a million is not fast enough to alleviate the biggest labor shortage in decades. About 5 million people who had a job before the pandemic have still not returned to work.
Unless more people return to work soon, labor shortages could dampen economic recovery. Some companies have already had to cut production due to insufficient number of employees.
Read: “My company has a severe shortage of workers,” the owner told Congress
Corporations are also being forced to pay significantly higher wages, adding to the biggest spike in US inflation in 30 years.
The share of employed or job-seekers of employable people aged 16 and over is at its lowest level since the early 1970s: only 61.6% in September. Worse still, there has been no improvement over the past year.
This means that millions of people are still missing from the workforce. The US economic recovery cannot accelerate much faster unless more Americans return to work and alleviate labor shortages.
Before the pandemic, the proportion of people in employment was 63.4%, and the trend is rising.
Most Wall Street DJIA, -0.29% economists say it’s only a matter of time before more people go back to work. The additional unemployment benefit introduced during the pandemic has ended. Schools are open again. Companies offer higher wages. And the coronavirus cases are crashing again.
The big question is how quickly they will return and whether the so-called labor force participation rate will return to pre-crisis levels. Some economists are not so sure about this and point to a massive wave of retirements at the beginning of the crisis.
The official unemployment rate in the US fell from 6.7% at the end of 2020 to 4.8% in September, marking the lowest level since the start of the pandemic. And economists predict it fell another tick last month.
At first glance, this seems like great news, and it is. The unemployment rate is not far from the pre-crisis low of 3.5%, the lowest level in 50 years.
But the number doesn’t tell the whole story. The pandemic has distorted the government’s ability to measure unemployment. Economists estimate that the real rate is about 2 percentage points higher.
The unemployment rate also does not capture the millions of people who are able to work but are not counted because they are not looking for work.
Rapidly rising wages
The labor shortage is tough for companies, but good for workers. They get a higher salary and are unlikely to be fired. Average hourly wages increased by 4.6% annually for the 12 months ending in September.
Read: Labor costs rise in the 3rd quarter due to higher wages and production losses
Aside from a brief pandemic-related spike last year, this is the biggest spike since the government started keeping track in 2006. And it’s the fastest increase since the early 1980s based on other government measures.
The disadvantage? Higher wages contribute to the surge in inflation. Most of the wage increases are in danger of being consumed by inflation, so workers are not doing much better.