Do you know that there is a labor shortage?
The one that left employers desperate for employees?
The one that caused some companies to cut their hours because they don’t have enough staff?
The one that led companies to raise wages and benefits to attract employees?
It’s not just going to fade away.
“We have to get used to this reality that labor markets are just going to be tight and labor shortages are going to be our new reality,” said Sam Wolkenhauer, regional labor economist, US Department of Labor. Idaho.
He told about 150 people at the Coeur d’Alene Regional Chamber’s optimistic breakfast on Tuesday that businesses cannot take for granted that they will find workers.
He said nearly 50% of small businesses surveyed in a recent Census Bureau survey said labor shortages and labor costs were their biggest concern.
“Some people will not be able to fill their vacancies. They are going to have to find other solutions, ”he told the Coeur d’Alene Resort, citing examples of price increases or salary increases.
He said that “human capital” problems will also not be solved by market dynamics. Some companies will go bankrupt for lack of manpower.
“There are going to be losers. And that’s what’s happening in the markets,” Wolkenhauer said.
In a sometimes humorous 40-minute presentation filled with tales of caution and red flags about the economy and the labor market, but laced with optimism about the United States’ ability to print and give away money , Wolkenhauer reviewed the latest information on inflation, housing, transportation and monetary issues in the country.
He said past economic crises, such as the Great Depression and the housing crash of 2007, were generally driven by financial problems and had little to do with the physical capacity of the economy.
This is not the case today.
“Right now, the major constraints on the US economy are all physical. They’re all about getting physical products, physical raw materials, physical labor,” he said. “And so that’s kind of a new position for us.”
Housing follows the same dynamic: demand is up, supply is down.
“The main reason houses are so expensive is that there aren’t enough houses,” he said.
He said the United States does not face a “hyperinflationary” scenario.
“And here’s why. It’s because the US dollar is kind of omnipotent,” he said with a smile.
The dollar is the world currency. Nearly 90% of all foreign exchange transactions in the world involve the US dollar.
“So everyone loves our money – they can’t get enough of it,” Wolkenhauer said. “And basically it allows us to print as much as we want. And nothing bad ever happens to us. And no one else can.”
He said the dollar was gaining value against gold, silver and foreign currencies.
He compared the government sending out stimulus checks during the coronavirus pandemic to dropping cash from a helicopter.
“It should be noted that only America was saying, ‘Just print some money and pass it out,'” he said, as the crowd laughed. “And that’s because we have this superpower because everyone loves our currency.”
Wolkenhauer answered the obvious question: where have all the workers gone?
“Right now in the state of Idaho we have about three times as many jobs open as unemployed. So at some point you play musical chairs with the employees,” he said. “And the dynamic of this game is that somebody ends up without a chair.”
He said even if all of Idaho’s unemployed were hired today, two out of three jobs would remain unfilled.
“So that raises an obvious question: what is wrong with our labor supply? Where have all the workers gone?
Some factors he cited were lack of skill levels, low population growth, high retirements, difficult job seekers and savings accumulated during the pandemic when people cut spending.
Another is what he called the decline in labor force participation, that is, the percentage of adults who are working. It was just above 7 out of 10 in 2000 but has fallen to nearly 6 out of 10.
“Now it is decreasing for two reasons. First, because the population is aging and more and more adults are entering the retirement age group,” he said.
The other is that the labor market participation of working-age men is also declining. Wolkenhauer said it was linked to alcohol and drug abuse and video game addiction, which he called “desperation disabilities.” Depression can also prevent people from working.
“It’s a real problem. This keeps tens of thousands of people, mostly men, out of the job market,” he said.
He added that national population growth was also declining. For the first time in American history, more than half of 30-somethings are childless. This means fewer workers on the road.
“Now Idaho was able to cheat to some extent by basically poaching people from other states,” he said. “Individually, states and regions can grow. But that’s by reallocating where people live in the country. You’re reallocating a stagnant global labor pool.”
He said COVID had accelerated early retirements. It has been estimated that the country would have around 47 million retirees today, but it is approaching 50 million.
“These people were going to retire anyway, but the accelerated schedule is very inconvenient,” Wolkenhauer said. “Especially because baby boomers have a lot of institutional knowledge. They’re very experienced, they’re usually pretty productive workers. So that’s a lot of human capital that kind of ran away during COVID.”
There’s a perception that once the pandemic is over everything will go back to normal, Wolkenhauer said, but that won’t be the case.
“The normal has changed. Normal excludes a lot of people who have retired. They will not return to the labor market,” he said.
He said that in December alone, five million people quit their jobs.
“What it reflects is that workers know they have leverage,” he said. “They know there are so many open professions that they have the flexibility to shop around, be selective, and look for what they want.”
The main problem in the US economy right now is not monetary, he said. It’s not tax. It is not national debt or consumer debt.
“It’s that there aren’t enough physical things that we want, and what are the physical things that we want? Human products and workers. There aren’t enough of one or the other. “other of those things. And that’s why we have inflation and why we have labor shortages.”
He said labor shortages “are just a chronic reality that we have to deal with” due to “a demographic problem that is very difficult to solve”.
Wolkenhauer said inflation is likely to remain high due to a complex global economy and supply chain issues before things start to pick up.
“But it takes time because we’re dealing with physical issues. You can’t just physically eliminate a late port instantly or produce more tank tops,” he said. “So it might moderate, but it’s probably going to stay higher than normal for a few years.”