Data show a near 1-to-1 ratio between job openings and total unemployment, which is characteristic of a full-employment economy, not the 5.8 percent jobless rate recorded in May. Businesses speak of an actual labor “shortage”; the U.S. Chamber of Commerce has just labeled it a “national economic emergency.”
Whether the situation is really so urgent, or just paradoxical, depends on exactly what’s causing labor supply to lag. The main suspects include employee fears of getting the virus if they go back to work and emergency federal unemployment benefits of $300 per week, which make low-paying jobs in restaurants, hotels and theaters less attractive. Another oft-cited issue is a lack of child care because of school closings, but new research from economists Jason Furman and Melissa Kearney found that, burdensome as child-care problems were, “they do not appear to be a meaningful driver of the slow employment recovery.” Meanwhile, employers are being forced to raise wages and offer workers other inducements, which shows that there is an upside to the situation, often for those most in need of an economic boost.
One aspect of the hiring crunch that does appear both real and amenable to government policy is the mismatch between employer needs and employee skills. An April National Federation of Independent Business survey of small businesses found 44 percent have jobs open they can’t fill, and cite “quality of labor” most frequently as their company’s most important problem. Investment in training and education is a long-standing need to which President Biden’s American Jobs Plan would devote $100 billion over the next eight years; it also seeks to double the number of registered apprenticeships. More money will help — and it will help more if spent on programs redesigned to overcome the relatively poor record of past federal job training.
There’s no harm in using a short-term crunch to argue for long-term policy changes, as the Chamber is doing both on job training and the need for more immigration, better focused on labor-force needs. On the whole, however, a little patience is in order. Current labor market distortions are real, and worrying, but may well resolve themselves when increased vaccination and declining covid-19 case rates reassure hesitant employees — and when enhanced unemployment benefits expire in September. (At least 25 states have already announced plans to cancel them ahead of schedule.) After the pandemic has passed, we can better assess the long-term labor-market damage.