When the Covid-19 pandemic struck, millions of American workers found themselves out of work. In the months that followed, millions more left the workforce for a variety of reasons: hesitancy to return to frontline jobs that exposed them to the disease; at-home schooling or lack of reliable childcare that made outside work difficult; health concerns or employer opportunities that led to early retirement; or, simply, the desire for a better work/life balance.
Nearly 18 months later, the work world looks very different than it did pre-pandemic. As the economic recovery continues and many businesses begin returning to on-site work, one very visible sign of the changed work world is the labor shortage that cuts across industries and is top of mind for almost every business.
The “Great Resignation” is the new normal
Much has been discussed recently about the “Great Resignation,” a phrase coined by a Texas A&M business professor to describe the large number of people who would rather leave their jobs than resume previous work routines.
Recent stats give weight to the theory that American workers are not returning to work: A record 4 million people quit their jobs in April, including 649,000 retail workers; Microsoft research finds that 41% of the global workforce is considering leaving their jobs this year; and Monster.com suggests the number of U.S. workers considering a job change could be a staggering 95%.
Perhaps most importantly, the U.S. Bureau of Labor Statistics announced that as of the end of June 2021, the United States had a record high of 10.1 million open jobs, with openings in professional and business services, retail, and food services/hospitality leading the way.
Workers are returning
Along with these trends, however, come July employment figures that indicate workers are making their way back into the workforce. In July, employers hired the most workers in nearly a year, as the unemployment rate dropped to a 16-month low of 5.4%. Non-farm payrolls increased by 943,000 jobs, the largest gain since August 2020.
But businesses feel the pinch of a labor shortage
Half of small-business owners say they are having a hard time finding qualified people to hire this year versus a year ago. Almost a third have positions that they haven’t been able to fill for at least three months.
Retailers, including Target and Walmart, are scrambling to find perks that will help them attract workers. Both retailers announced 100% coverage for college tuition and textbooks as new employee benefits.
Nearly 3 in 4 independent restaurants report difficulty finding workers to fill open jobs, causing some to reduce hours of operation and many to institute higher wages. According to the Bureau of Labor Statistics, average wages for non-supervisory restaurant staff hit $15 per hour in May and went higher in June.
What to look for in the months to come
Among the biggest questions to be answered amidst the labor shortage is whether the exodus of workers is a function of the pandemic or a sign of bigger changes in the economy.
Other important topics to consider: Will a recovering economy encourage people to act on their desire for new jobs and become part of the Great Resignation? And are the jobs that are going unfilled well matched to the available workers?
Answers to those questions may take some time. In the meantime, there are few other factors to consider about the job market as we head into fall:
- Many schools are returning to in-person learning and childcare centers are reopening. This may free parents, especially women, to return to the workforce.
- Extended unemployment and other pandemic benefits may be coming to an end, which will likely force a number of people to start looking for work.
- Covid-19 rates are high and on the rise in many parts of the country.
All these factors could continue to complicate plans for a return to in-person work and affect the labor market.
As with many developments during the pandemic, the best approach is likely: Stay tuned.
As you evaluate the impact of these societal and economic shifts on the market, FundVisualizer can help you analyze, explore, and model changes to your clients’ investment strategies. Find out more at www.fundvisualizer.com.
Putnam Retail Management.