Where did all the workers go? What happened to them?
This is THE question of the moment and we must find out because no one seems to know.
We do know that there are almost double the number of people who are looking for work and can be considered unemployed versus the months before the pandemic began - 5 million versus 10 million - yet the mismatch of workers is palpable and is causing havoc with just about every company in the U.S. The numbers are the ultimate conundrum.
How did this happen? What gives? When you speak to as many CEOs as I do and hear how baffled they are it's certainly worth looking in to. It's pretty stunning how little people seem to know. The only thing I hear is "Amazon (AMZN) hired 500,000 people. They took the supply." Obviously that's not the best answer but it is the one I get when I press.
That's not good enough.
Here are some theories.
First, people have gotten so much stimulus money that they don't need to work at least yet. It hasn't run out.
Second, the unemployment benefits are very bountiful, much more than many businesses can pay. I know many of the economists I listen to simply refuse to believe that this matters. But as someone who has a couple of small businesses you must understand that we are offering $18 an hour but current unemployment benefits in New York, the ones that run out in October, yield a net of $22 an hour.
We have advertisements everywhere to try to get people and they show up but they have a habit of either not showing up for the interviews or turning us down. It's pretty stark. We have a couple of jobs where you can, with long hard nights, make $70 to $80,000. But we can't find people.
Third, people have moved. They soul searched, they had time to think through what they were doing in their lives, and they moved. I cannot believe the emptying out of the cities. I hear again and again that restaurants that were closed and then re-opened simply can't find the people who used to work for them. They have left. We don't know much more than that.
Fourth, we had about 500,000 excess deaths in this country because of COVID. We also have had many people simply not come back from being ill and the lack of vaccinations and the new strains will most likely produce another shrinkage in the workforce.
Fifth, the start-ups are incredible. We know from American Express (AXP) that there are more companies opening up small businesses that are looking for employees. Now we have heard that the number of restaurants closed ran as high as 150,000. I now question that number as the restaurant companies I speak to simply don't see it that way. Initially yes, but not since the country re-opened.
We have had 536 IPOs this year, 500% more than last year. SPACs, industrials, retailers, you name it. Money is so easy to get that companies can fight for more expensive employees. You raise the money you spend for employees.
Finally, the pent up demand for people going places and doing things that were put off is amazing. Yet the travel and leisure companies did everything they could to cut back because they didn't expect the vaccines. They simply can't find all of the people to take them back because they got integrated into other aspects of the workforce.
I think that the expiration of the benefits is key. That, or the Fed slams on the brakes and throws a lot of people out of work needlessly before the big benefits expire.
It's a race that Jay Powell knows must be won by seeing what happens in October. If those people do not come back to work, wage inflation will be unstoppable. That's the one inflation that the U.S. cannot handle.
Let's see what happens.