What Labor Shortages?

The Labor Report for May 2024

By Frank Stricker | June 2023 | Online-only

The Bureau of Labor Statistics (BLS) found that the official unemployment rate rose a tenth of a point to 4% in May. It had stayed under 4% for 27 months. When we at the National Jobs for All Network include hidden unemployment—job-wanters not searching, including many who are discouraged about finding a job or a half-way decent job, and part-timers who cannot find full-time work—the real unemployment rate is 9.6%. At this level, most employers should not be having much trouble finding employees. I don’t see much evidence of labor shortages—about which much has been said in the past three years—in the numbers, or when we are out and about in the Los Angeles area. (Admittedly, the last place we should find labor shortages is in the state with the highest unemployment rate. California’s official unemployment rate in April was 5.3% while the national rate was 3.9%.)

In the latest federal survey, unemployment increased for many groups, but in some cases, not by much. And it fell for a couple of groups. Black unemployment jumped a half percentage point to 6.1%, but the rate for black teens fell by 4.3 percentage points to 13.9%. Go figure. Fairly small changes for the relatively small group of black teens in the labor force—under a million—make for outsized and sometimes erratic monthly changes in their unemployment rate.

The unemployment rate for disabled workers increased by more than a full point to 7.5%. Their real unemployment rate could be as much as three or four times as high. There must be a great deal of hidden unemployment in this group. I suspect that many disabled people who would like to work don’t bother trying because they don’t want to deal with resistant employers. I suspect that some employers simply do not want to hire disabled people. Overall, while the total official unemployment rate is rather low, the real unemployment rate is high and even the government’s rates for some specific groups are pretty high and are moving in the wrong direction.

But wait. Along with the main unemployment rate, the other large indicator that observers pay close attention to is the total number of jobs in the economy based on employer reports. This ‘establishment’ number comes from information supplied by non-farm employers, so it excludes farm-sector employees and also those who are considered self-employed. The number of non-farm employees increased in May by 272,000. That was more than expected, and it was stunningly different from similar data in the smaller household sample from which we get our unemployment rates. The latter showed that the total number of people with jobs fell by 408,000! So the two big numbers were far apart. Such differences are not unusual, but the size of the differences this time was very large. The BLS has never provided a convincing explanation of such differences. I’ve tried to do so and may try again someday. Meanwhile, in the grand scheme of things, while one survey showed a decline in the number of employed people, there is little evidence elsewhere that the U.S. economy is on the verge of a recession. Recently the economy has been growing at a 2.5% rate. Not bad.

More on Labor Shortages

If the real unemployment rate is very high at 9.6% and if the number of ‘discouraged workers’ is high for a prosperous period, it would stand to reason that there should not be general labor shortages. I don’t see much chatter about labor shortages anymore and sometimes some of what we hear about shortages comes from employers who don’t want to pay to get the labor they need.

But perhaps there is something like a shortage of workers in a few sectors and regions. Service in two nice restaurants in the Los Angeles area we visited last month was pretty bad, and quite a few employees seemed new to the work and discombobulated. I wondered if many restaurant managers were having trouble hiring and keeping employees across the nation. I checked the BLS’s Job Openings and Labor Turnover reports for employee turnover rates in the restaurant and accommodations sector. They were generally higher than in other sectors, but they usually are. Job openings were a little higher than they had been in the sector in another prosperous period—late 2016 to early 2017—so perhaps there is a mini-shortage, but not much of one. As mentioned earlier, the unemployment rate in my state, California, is the highest in the nation and high unemployment suggests a good labor supply.

Generally, employers aren’t having to pay much more to attract workers. For the workforce as a whole, pay levels are inching up, but very slowly. Real (after-inflation) hourly earnings for non-supervisory and production workers increased by less than 1% over the last year. That is, they are barely keeping ahead of inflation. That doesn’t make one think that employers are desperate to find new employees. By the way, I may be wrong about this, but the menu prices in those two nice restaurants seemed very high—sticker-shock-inducing—and sufficient to allow owners to pay employees a little more than they are paying.

Frank Stricker Frank Stricker is on the board of the National Jobs for All Network and he is a contributor to Dollars & Sense.

Did you find this article useful? Please consider supporting our work by donating or subscribing.