Show an ad over header. AMP

I am the FIRST

The mismatched economy: Jobs growth could be curbed by demands for higher wages

As job growth finally starts to take off thanks to improving vaccine numbers and increasing optimism, the economy is confronting an unusual quandary: a mismatch of expectations between workers and employers that's becoming a standoff.

Why it matters: The jobs growth bonanza economists and asset managers are predicting for 2021 and beyond could be inhibited by a market where American workers — particularly those at lower income levels — demand higher wages and employers refuse to pay them.

What's happening: Even with nearly 10 million fewer Americans employed than before the pandemic hit, more business surveys are showing companies struggling to find workers.

Driving the news: Last week's Job Openings and Labor Turnover Survey showed a record 7.4 million job openings in February, the most since January 2019.

  • However, actual hiring rose to just 5.7 million jobs, which was the lowest total (excluding the pandemic) since May 2019.
  • Similarly, 40% of small businesses surveyed in February by the National Federation of Independent Business said they had jobs they couldn’t fill — the highest percentage in the history of the data, which dates back to 1974.
  • In March 91% of those owners trying to hire reported few or no "qualified" applicants for the positions they were trying to fill, even though a net 28% (seasonally adjusted) of owners reported raising compensation, the highest level in the past 12 months.

What we're hearing: Hiring is breaking down along the lines of the K-shaped recovery, says Joseph Brusuelas, chief economist at tax policy firm RSM.

  • "While [lower-wage] workers are plentiful, firms are going to find it difficult to recruit workers unless they are willing to pay higher wages," he tells Axios, something large companies especially have shown they are unwilling to do.
  • "Thus firms then must choose: Hold down wage costs or substitute technology for labor. Either way, it results in historically low labor force participation rates and employment to population ratio."

Take a look around: The mismatch is already clear in fast-food and restaurant hiring, as my former colleague Hilary Russ wrote for Reuters last week.

  • "Total nightmare" is the way FAT Brands CEO Andy Wiederhorn described the staffing situation to Russ for franchisees of his company’s restaurants like Johnny Rockets and Fatburger.
  • "The most recent stimulus check and unemployment benefits have been a catalyst for people to stay at home" instead of looking for work, he added.

The bottom line: Employers will face a dilemma — "Either pay higher wages to recruit workers or prepare to pull forward a decade's worth of productivity enhancing capital expenditures into the near term," Brusuelas says.

  • "Either way the pre-pandemic status quo ante is not returning."

regular 4 post ff

infinite scroll 4 pff

Why the startup world needs to ditch "unicorns" for "dragons"

When Aileen Lee originally coined the term "unicorn" in late 2013, she was describing the 39 "U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors."

Flashback: It got redefined in early 2015 by yours truly and Erin Griffith, in a cover story for Fortune, as any privately-held startup valued at $1 billion or more. At the time, we counted 80 of them.

Keep reading... Show less

Scoop: Facebook's new moves to lower News Feed's political volume

Facebook plans to announce that it will de-emphasize political posts and current events content in the News Feed based on negative user feedback, Axios has learned. It also plans to expand tests to limit the amount of political content that people see in their News Feeds to more countries outside of the U.S.

Why it matters: The changes could reduce traffic to some news publishers, particularly companies that post a lot of political content.

Keep reading... Show less



Get Goodhumans in your inbox

Most Read

More Stories