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Despite A "Worker Shortage," Businesses Continue To Find Employees
Unemployment

Despite A "Worker Shortage," Businesses Continue To Find Employees


Businesses hired 850,000 workers in June, exceeding economists' expectations and appearing to defy employer complaints that workers were avoiding jobs in favor of unemployment benefits.

The economy is still down nearly 7 million jobs from before the coronavirus pandemic, but employers are hiring at a rate of more than 500,000 per month, and it's not just people returning from temporary layoffs like last year.

“How long does it take to put out an ad, recruit a group of people, interview them, and then hire them?” William Spriggs, AFL-CIO chief economist, told Stardia. “Eight hundred thousand is a lot of people to onboard in one month. We just don’t do that.”

The federal government has been adding $300 per week on top of state unemployment insurance, which is more than many low-wage workers receive from their jobs; Republicans and businesses have said the extra money is slowing the recovery, and Republican governors have suspended benefits in their states.

However, employment growth in the leisure and hospitality sector, which includes restaurants and generally pays low wages, has accounted for more job gains this year than any other single sector, including 40% of the June total, indicating that restaurant workers have benefited particularly from the extra unemployment benefits.

According to the Center for Economic and Policy Research, restaurant wages are among the fastest rising, with hourly pay increasing 11.2% over the previous year.

“I think today’s report blows a hole in the idea that there is a significant widespread labor shortage in the economy,” said Valerie Wilson, an economist at the left-leaning Economic Policy Institute.

Faster wage growth in the leisure and hospitality industry suggests that better pay is a good way to get people back to work, according to Wilson, who also pointed out that restaurant wages fell during the pandemic recession and remain lower than in most industries.

“If [wages] are a little higher now, it just puts them back on track with where they would have been,” Wilson explained.

The Bureau of Labor Statistics, which publishes the monthly jobs report, has warned that its wage data is a little skewed because last year's shutdowns threw millions of people out of work all at once, skewing year-to-year comparisons.

“The data for recent months suggest that rising labor demand associated with the pandemic recovery may have put upward pressure on wages,” the bureau said in its June employment situation report. “However, because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earnings,” the bureau said.

Despite the addition of nearly a million jobs, the June report found that the unemployment rate rose slightly from 5.8% to 5.9%, based on data from a separate survey of households from the survey of businesses used to estimate the number of jobs added.

"To me, the fact that employers are still picky about Black workers indicates that there isn't a shortage."

Chief economist for the AFL-CIO, William Spriggs

The household survey sample is smaller and more volatile from month to month, but Spriggs believes it provides evidence that the labor market is not as “tight” as some believe. He pointed out that while more Black workers entered the labor force in the last two months, Black unemployment increased from 9.1% to 9.2%.

“The fact that employers are still picky about Black workers, to me, is an indication that you don’t have a shortage,” he said, adding, “You mean you can’t find the people you want, not that you can’t find people.”

Republicans cited the higher overall unemployment rate as proof that they are correct about the dangers of increased unemployment benefits. In a statement issued Friday, the Republican National Committee stated, "Biden's agenda is squandering the economy he inherited."

When Biden took office in January, unemployment was at 6%, and the economy was 3.5% smaller than when the pandemic began.

Republican governors in 25 states announced in the spring that they would cut off federal unemployment benefits — including the additional $300 per week — by June or July, claiming that the assistance was preventing Americans from finding work. The June jobs report mostly covered the period before the cuts went into effect.

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The Biden administration and Democrats have stated that they do not believe there is a need to extend federal unemployment benefits after they expire in September, reversing their earlier position.

That could be cause for concern, given that the economy still lacks millions of jobs it had prior to the pandemic, and in previous recessions, Wilson noted, cutting unemployment benefits off early didn't actually push more people into the job market, but it will definitely keep billions of dollars in potential consumer spending out of the economy.

“I expect that cutting those benefits will not have a significant impact on employment growth,” she said, adding that “it may have some negative effects.”

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