What’s Up with the Labor Market?

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The April Employment Situation released on Friday left a lot of people scratching their heads. From businesses who are struggling to hire despite millions on unemployment to economists who expected 4x as many jobs to be added by employers, how can all be true at the same time? Many business leaders were quick to call for an end to expanded federal unemployment benefits, but is that the only impediment to the labor market recovery? Let’s dive into what’s up with the labor market – from variations among state policies, industry differences, the impact of childcare (or lack there of), vaccination rates, and what role does federal unemployment benefits and stimulus play. It’s all connected! Prefer to listen? Catch the deep dive of the Labor Market on this week’s Finance Explained podcast here.

Why is hiring so hard if so many are without jobs?

Why is Hiring So Hard When So Many Need Jobs?

On Friday, the Bureau of Labor Statistic released its April Employment Situation report. The economists’ consensus ahead of the release was 1 million jobs had been added to payrolls. But the actual results missed… and missed big. Total nonfarm payrolls increased by just 266,000 in April vs. the 1 million expected. And not only that, the previous numbers released for March, were revised down from 916,000 to 770,00, a decrease of 146,000. And because 430,000 people returned to the labor force in April – meaning people employed and activing looking for work, which is a good thing – the headline unemployment rate, actually increased, from 6.0% in March, to 6.1% in April.

Following Friday’s less than stellar employment numbers, I reached out to ask my followers what questions they had about the current labor market:

Are unemployment benefits really more than minimum wage?

My friend, a bar/restaurant owner, says she can’t hire because people get more on unemployment in California. Is this true elsewhere?

How can we get back to work? Is it getting more people vaccinated?

What does unemployment look like in states that are locked down vs. not?

Why is it still so hard to hire? Need 15+ people ($4 above minimum wage) and can find NO ONE!

I see help wanted signs and hear places aren’t getting applicants. Why the disconnect?

Is there anyway to know the number of people looking for work that don’t qualify for unemployment?

I shared all these questions too. My local town’s Moms Facebook group is FULL of women sharing that their families’ businesses are hiring. Every local business owner I’ve talked to, from restaurant owners to landscapers, the golf course to salons, has said they have positions available they can’t fill, or when they spend money to advertise, get few to no qualified applicants. I even had one of you send me this last week from a Menard’s (a regional chain similar to Lowe’s or Home Depot in the Midwest).

Businesses are actively trying to hire. They are offering higher wages than ever before to try to fill their positions – and even offering signing bonuses for hourly positions. So why aren’t more jobs being filled?

After the BLS’s April Employment Situation came out, the US Chamber of Commerce (as well as several Restaurant and Lodging industry associations, Republican leaders both in Congress and state Governors) called for an immediate end to the $300-a-week federal jobless supplement.

The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market

Neil Bradley, Chief Policy Officer, US Chamber of Commerce

The White House and Treasury Department pointed the finger elsewhere. President Biden said…

I know some employers are having trouble filling jobs. But what this report shows is that there’s a much bigger problem. Today’s report just underscores, in my view, how vital the actions we’re taking are: checks to people who are hurting, support for small businesses, for child care and school reopening, support to help families put food on the table. Our efforts are starting to work, but the climb is steep and we still have a long way to go.

President Joe Biden, Friday, May 7, 2021

… while Treasury Secretary Janet Yellen pointed to supply-chain problems impacting many sectors as part of the problem, and denied unemployment benefits were part of the problem.

I don’t think the addition to unemployment compensation is really the factor that’s making a difference.

Janet Yellen, Treasury Secretary, Friday, May 7, 2021

So with everyone pointing fingers in different directions and blaming anything but an area they control, I decided to dig into the data to see what it tells us about these various potential factors impacting the labor market.

I looked at weekly unemployment claims data – people actually filing for unemployment insurance and the average benefits from the Department of Labor, which is available at a state by state level. I looked at Bureau of Labor Statistics monthly unemployment data, also available not only at a national and state level, but even at a MSA level, and broken out by industries as well. I looked at various data on job postings and openings to see what is currently true and where the disconnect is in the current economic environment. And I also looked at Census and academic surveys that have been ongoing during the recession about what people are actually saying about why they aren’t working, how they are using their money, what funds they need to make ends meet every month.

Here’s what I learned…

What’s Up with the Labor Market?

Is it as simple as the fact that expanded unemployment benefits are paying people to stay home, as industry leaders allege? As you might have guessed, the answer is more complicated than that.

Are Current Unemployment Benefits More than Minimum Wage?

Unemployment benefits are a federal mandate but administered by state programs – so exactly how much you get and for how long varies from state to state. According to the US Department of Labor, the average weekly benefits paid out across all states was $318. Add the current additional $300 per week in expanded federal benefits, and that makes the national average benefit $618. That’s just over the $600 you would earn in weekly wages for a full-time job under the proposed $15 minimum wage increase. It’s also less than the combined state and federal benefit currently being paid in Texas ($705), and more than is being paid out in Florida ($533).

Unemployment benefits vs average wages

But big picture? They are all significantly less that the average weekly earnings currently being paid to production and nonsupervisory employees, who earned $875/week in April. Now that’s an average, so it can be skewed by higher earning outliers, and it doesn’t really tell us enough at the aggregate level. Are they more than current minimum wage? In most states, most likely yes, since most states aren’t at $15/hour. But we need to know more about the make-up of the labor market to best answer this question.

What does the Labor Market Actually Look Like?

To understand the current labor market, we need to better understand what the labor market actually looks like. What sectors employ the most people? What sectors have been most impacted by the pandemic? And what do those sectors pay?

By far, the most impacted segment of the labor market during the pandemic was Leisure & Hospitality. This includes things like Arts, Entertainment and Recreation – so think museums, concerts, and gyms. It includes Hotels, Restaurants and Bars. Basically, the epicenter of everything that was completely shutdown during lockdowns and couldn’t easily or immediately be substituted with online services. And it also is the 3rd largest employment sector of the economy, representing 11% of all employees pre-pandemic, behind only Healthcare and Business Services.

How Much Do Employees Earn by Sector?

Now, let’s take a look at the average earnings by each sector. While the average weekly earnings in April were $875/week, the average earnings in the Leisure & Hospitality sector were less than half of that, just $397/week, the lowest earning sector of the labor market. Allowing for 34.9 average weekly hours per the April employment data, that amounts to $11.34/hour.

The next lowest earning sector? Retail at $572/week, or $16.39/hour. Combined, the Leisure & Hospitality and Retail sectors represented 21% of pre-pandemic employees, or 1 in 5 workers. And they both on average earn less than the current average national unemployment benefit.

So is this impacting hiring in these sectors? We can definitively say employment is disproportionately impacted in these sectors. Total private employment – actual people on payrolls – is down -5.0% vs. pre-pandemic levels. Restaurants are down 13%, Arts, Entertainment & Recreation are down nearly 5x that, at -24%, and Hotels are down even further – 27%.

As an aside… the only sector with positive employment growth over the last 18 months? The Federal government, which got a boost over the summer from Census workers, but still remains 2% ahead of pre-pandemic levels.

Who’s Actually Collecting Unemployment Benefits?

Before we address the hiring question, let’s take a deeper look into who is actually collecting unemployment benefits. I’m going to give breakdowns on demographic factors. Later, I’ll look at state breakdowns as well.

The US Census Bureau has been conducting a weekly household pulse survey throughout the last year designed to quickly and efficiently deploy data collected on how people’s lives have been impacted by the pandemic. Included in this data are questions and demographics about those receiving unemployment insurance benefits, which we don’t readily get in the weekly jobless claims data released every Thursday.

According to the latest Household Pulse Survey, for April 14-26th, you are more likely to be collecting unemployment if you are:

  • Age 25-54 (which makes sense, given that’s prime working age)
  • Male (4.4% of men vs. 3.9% of women, which also makes sense given men make up more of the labor force)
  • A person of color (Hispanic 6.1%, Black 5.6% vs. White 3.2%)
  • Have only a high school degree (5.2% vs. 2.8% for college graduates)
  • Are divorced, separated or never married
  • Have children (5.2% vs. 3.5%)
  • Are below the median household income

And as I share weekly in the Monday Market Update, as of mid-April, 16.2 million people were collecting unemployment insurance benefits, across all programs, with 3/4s collecting benefits under expanded federal programs. What do I mean by that? Everyone currently collecting benefits is receiving the additional $300 in weekly federal benefits, on top of any state benefits. But, there’s two other ways the Federal government has expanded unemployment benefits.

First, there’s Pandemic Unemployment Assistance. This made unemployment insurance benefits available to people who would not have normally been eligible under regular state programs, supporting 1099 workers, members of the gig economy, and the self-employed, as well as anyone who may have lost a job directly due to Covid, either due to having to care for a family member or because their place of business was quarantined. You can collect PUA benefits, if eligible, for up to 74 weeks through the beginning of September 2021.

Second, there’s Pandemic Emergency Unemployment Compensation (PEUC). Many state benefits only run for 12-26 weeks. We are now well over a 52 weeks into this recession, and 43% of those unemployed have been out of work for over 27 weeks, so many people have exhuasted their state benefit eligibility. That’s where PEUC kicks in. As part of the American Resue Plan Act passed in March, the federal government extended PEUC benefits to up to 49 weeks, until the program is scheduled to end in September 2021. This means, in many states, you can collect up to 75 weeks of unemployment insurance benefits.

If we look at weeks of benefits by state, 12 weeks is the lowest number for most state benefit programs, like Florida’s… add the 49 weeks of PEUC benefits, and you may have people start to use up their benefits starting in just the next few weeks. Most of the rest? They’re covered until September.

One other question I wanted to address here – how many people looking for work who don’t actually qualify for unemployment? Now this is an informed guess. But as of April 2021, the Bureau of Labor Statistics monthly household survey data reports 161 million people in the civilian labor force, with 9.8 million unemployed, 6.1% unemployment rate. However, if we expand that to account for the U-6 rate of 10.4%, which includes those working part-time who want to work full-time, as well as those who might be discouraged given extended unemployment, that looks not too dissimilar from the 16.2 million collecting unemployment according to the Labor Department as of April 17th. So my educated guess? There’s aren’t many not getting benefits who need them.

Stimulus Adds to Employers’ Hurdle to Hire

But it’s not just unemployment benefits that are helping households in the current economic environment. The Household Pulse Survey also asks households what sources of funding they are using to meet their spending needs over the last 7 days. For this time period, 26% of all households surveyed said the stimulus benefits from March where helping them meet their spending needs, while 42% of households receiving unemployment insurance benefits relied on stimulus for spending needs.

Stimulus checks went out in March to more than 127 million Americans. They amounted to $1,400 for every income eligible person, including dependents. For a family of 4, you got a check for $4,800. If you are a one income household earning the average weekly earnings of $875/week, that’s 5.5 weeks of wages. So unemployment benefits are a hurdle in some sectors, but so are stimulus benefits.

And there’s more to the story though than just money… and I’ll get to that momentarily. But first, let’s look at how all this varies across the nation.

Is Unemployment and Hiring Difficult Nationwide?

One of the questions I’ve been asked by all of you a lot: does this look different in states without lockdowns? For geographic breakdowns, because I’m just a one woman show and can’t dive into all 50 and all the MSAs, I’ve focused on 4 states: Texas, Florida, New York and California. I chose these based on both your questions, as well as what is widely viewed as their differences in not just political leadership, but also very different pandemic responses.

In addition to those differences, the industry concentration between states can vary a lot too. Some states are far more economically driven by tourism, like California and Florida, while others, like Texas, are also highly dependent on Oil & Gas, which can also drive local labor markets.

Each week in the Monday Market Update, I share the weekly jobless claims data from the Department of Labor. It’s based on numbers reported by each state’s labor department based on people who file for unemployment benefits.

Comparing the 4 states I mentioned, California’s labor market by far is the most severely impacted. California is still reporting 2.3x as many initial weekly jobless claims as Texas, despite being just 30% larger in terms of population.

In terms of continuing claims, again, California has 2.5x as many people as Texas, and New York is similar to California’s claim levels, despite having HALF the population.

Now, if we normalize for population and look at montly BLS data, what does that look like….

Since the start of the pandemic, New York saw the most severe contraction in employment – down more than 20% from pre-pandemic levels in April 2020. California saw declines not dissimilar from the nation as a whole, down 15% at the peak. California has just been far slower to regain employment, as has New York, after inital employment recoveries last summer.

Why might that be?

The Impact of Childcare

First, childcare. Parents can’t work, or look for work, if they don’t have reliable childcare or schools that are open. I’ve shared previously data with you all from USC’s Understanding Coronavirus in America Survey. According to their last survey in February, California students were far more likely to NOT be in school in person than the rest of the US, with 85% of California students remote only and just 8% fully in person vs. less than half remote for the nation as a whole and 35% fully in person.

More recent data, from April, from the Census Bureau’s Household Pulse Survey gives similar childcare concerns. Two months later, just 1/3 of California students are in school in person even part-time, vs. 59% for the US. Both California and New York households reported a far higher percentage with children unable to attend childcare due to Covid over the last month, 8.3% and 15.6%, respectively, vs. 6.9% for the US as a whole. In New York, more than 4% of households reported leaving their job in the last month due to childcare.

Concerns About Covid

Second, people are still concerned about Covid.

However, new cases per 100k, so normalizing for population are highest in Florida (though now at far lower levels than this winter), where the fewest unemployment claims are being filed and the unemployment rate is lowest. While California has the lowest cases per 100k, of these 4 states, and has the worst labor market situation currently.

Also, if lack of vaccinations are the issue – at this point, over 40% of Americans are fully vaccinated. The rate is even higher in California, and higher still in New York, which is the 11th most vaccinated state in the nation… while Florida and Texas fall well-below the national average, and as mentioned before, their labor market is in far better shape.

Reasons People Actually Give for Not Working

What other reasons do people actually give for not working? Nationwide, actually only 7% of those not working say it’s because they are concerned about Covid. One in 5 are out of work due to Covid, however, due to their place of work being temporarily or permanently closed due to the pandemic. Another 11% nationwide do attribute not working to caring for children. While another 10% say they simply don’t want to.

Now, What Does Employment Demand Look Like?

So far, I’ve talked a lot about the supply side of the labor market – the people looking for work. Now let’s talk about employers and job openings – the demand side of the labor market equation.

The National Federation of Independent Business, a leading advocacy group for small and independent business owners, reports that 60% of their members are experiencing some level of staffing shortage. In their monthly small business survey, for April, 44% of small businesses reported unfilled job openings, the highest level ever recorded in 50 years of surveys.

Their small business members also increasingly report that finding qualified applicants for jobs is a problem. In April, 54% of business owners (and 92% of those looking to hire), reported few or no qualified applicants for jobs.

The Bureau of Labor Statistics also puts out a monthly JOLTs report – it stands for Job Openings and Labor Turnover, and breaks down data by sector, with the latest data currently through the end of February. Private sector job openings are currently up 8% vs. pre-pandemic levels, with retail job openings up 11%, while Leisure and Hospitality job openings still down 5% vs. early 2020 levels. We will actually get data for March tomorrow morning.

Indeed.com also publishes a Job Postings index, available both nationally, by state, and even for some major metro areas. It gives near real-time data. Nationwide, job postings vs. February 2020, are now up 24%, with more open states like Florida and Texas up even higher, while states like California and New York lag, but still have higher postings now than pre-pandemic.

However, like real estate, especially in the service sectors most impacted, the jobs market is still super local… and you can see how it even varies between major metros in a given state. In California, San Francisco’s job postings are just now even with pre-pandemic levels, while San Diegos are up more than 30%. In Texas, Houston, impacted by the Oil & Gas sector, sees slowerly job posting recover than the state as a whole.

Want to check out your local jobs market? You can look up your metro or state’s Indeed Job Posting’s index on FRED at fred.stlouisfed.org. Just type in Indeed and your state or major city in the search bar.

So what’s the answer?

The answer is… it’s all connected. Labor markets, especially for those sectors most impacted by the pandemic are still local, and local policies matter – from executive orders on things like restaurant occupancy to whether certain businesses can even be open at all. Schools being open, in person, as well as childcare more broadly, definitely impacts parents ability to work.

And yes, for the sectors of the economy most impacted – like leisure, hospitality, restaurants, and retail – unemployment benefits are absolutely a financial hurdle for businesses trying to hire. It’s forcing hourly wages to compete with benefits that surpass average wages in those sectors. But more than that, for now, people are also making ends meet with stimulus checks from March. But that headwind will disappate sooner than unemployment benefits which are in place in most cases until September.

Some states are starting to take matters into their own hands. North Carolina has reinstated its work-search requirements to remain eligible for unemployment benefits. Florida says it plans to reinstate requirements that recipients provide regular updates on job seearch efforts. Virgina is reinstating job interview requirements. Governors of Montana and South Carolina want to stop the $300 a week federal benefit before it ends in September, and Montana’s governor instead wants to use the funds to pay residents a $1,200 return to work bonus if they return to work and complete 4 weeks of paid work.

There is no doubt that there is now demand for labor – and a labor shortage – across most sectors and in most of the US. And that is only likely to get worse as many states continue to lift restrictions, vaccination rates increase, and the summer travel and tourism season gets underway.

For more about the history of the labor market and other major economic indicators…

Want to Learn More about Economic Cycles?

Recessions are a NORMAL part of the economic cycle... and as a cycle, they happen again and again. Learn exactly what happens, what to expect, and how to prepare your family finance's to weather the storm.

Thank you for sharing!

About Meghan

Meghan spent nearly a decade as a Financial Analyst, before spending the last 7+ as a SAHM to three little ones. She shares simple money tips for moms to help your family reach your financial goals by building a financial plan you can LIVE with! You can learn more about her background in finance, catch her daily on Instagram and Facebook, and her weekly live discussions in her community for Family Finance Moms.


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