Confusion as US economy surges
Print Edition
The United States economy is sparking confusion and whiplash almost as fast as it’s adding jobs.
Barely more than a year after the coronavirus caused the steepest economic fall and job losses on record, the speed of the rebound has been so unexpectedly swift that many firms can’t fill jobs or acquire enough supplies to meet a pent-up burst of customer demand.
“Things exploded — it was like a light switch,” said Kirby Mallon, chief of Elmer Schultz Services, a family-owned Philadelphia firm that repairs and maintains kitchen equipment for restaurants and other clients. “The labor market is just out of control. We literally cannot hire technicians ... We ramped up so quickly, the supply chain wasn’t ready for it.”
Economic forecasters, with little historical precedent to guide them through the aftermath of a global pandemic, are pondering questions they can’t answer with any confidence:
Does robust consumer spending reflect economic strength and resiliency? Or has it been temporarily propped up by federal stimulus checks?
Was an April run-up in consumer prices a temporary blip? Or an ominous sign of accelerating inflation?
Are two months of middling job growth the result of too much of a good thing — employers want to hire more than they can? Or a hint that the labor market isn’t as strong as economists think?
In many ways, the news has been cause to cheer: The economy grew from January through March at a red-hot 6.4 percent annual pace.
Yet the full portrait of the US economy is a rather more nuanced one.
Take jobs, for example.
Employers last month added 559,000 jobs on top of 278,000 in April. Those would ordinarily be seen as quite healthy numbers. Yet amid record-high job openings and free-spending consumers, forecasters had expected much more hiring. Some had envisioned the recovery from the pandemic recession driving monthly job growth of 800,000, 900,000, even 1 million or more.
Considerable tumult
What explains the shortfall?
Economists point mainly to what they call a short-term mismatch: Companies are posting job openings faster than applicants can respond. After all, many Americans are contending with considerable tumult at home — health issues related to COVID-19, child-care problems with schools slow to reopen, career uncertainty after many jobs permanently vanished over the past 15 months. And some people, earning more from federal and state jobless aid than they did when they worked, are taking their time before pursuing another job.
Some say the labor shortage is nothing that can’t be solved the old-fashioned way: By raising pay and offering more generous benefits and working conditions. In fact, that process appears to have begun: Average hourly wages rose solidly in April and May.
Consider Gina Schaefer, who owns 13 Ace hardware stores in Maryland, Virginia and Washington, DC, and who has been rapidly staffing up for the spring and summer, when her sales typically hit highs.
Schaefer has hired nearly 120 people since March, both seasonal workers and long-delayed replacements for people who left last year when COVID ravaged the economy. Her company pays a minimum of US$15.50 an hour, to compete with larger chains that now pay US$15, and provides health insurance, paid vacation, sick leave and a 401(k) plan after employees have been on the job for about six months.
“We firmly believe that better workplaces do not have a problem finding employees,” she said.
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