Bob Garfield: Last Friday, the Department of Labor released its monthly jobs report, and oh, the disappointment.
Speaker 1: The president today faced the biggest challenge yet to his strategy to revive the economy. The labor department reported 266,000 jobs were added in April. That's far short of the 1 million that some economists had expected.
Speaker 2: If you need proof that we live in strange times, today's job report just smacked us all over the head with reality. Remember, the vaccine and states reopening were supposed to be jet fuel. Instead, the big headline is people aren't going back to work anywhere near as fast as we thought.
Speaker 1: In a rare moment of genuine surprise in Washington, some economists said they didn't know what precisely suppressed employment growth. In Washington, "I don't know" is an unacceptable vacuum that must instantly be filled with hot-take speculation, and so the narrative that jobs are there, but no one wants them. The great labor shortage of 2021. As the anecdotes of fast-food chains begging for workers and local restaurants limiting hours poured in, so did theories of an alleged culprit, COVID era unemployment benefits that were supposedly depressing America's work ethic.
Speaker 3: On the road to recovery, another blow to the tourism and hospitality industry, businesses now struggling to find enough employees in order to fully reopen.
Speaker 4: As Georgia businesses recover from the pandemic, business owners have gone from seeing a shortage of customers to a shortage of employees.
Speaker 5: Even on these conference calls for earnings this week, we've been hearing a lot of CEOs talk about they're worried about labor shortages down the line.
Bob Garfield: Government largesse has turned workers into freeloaders? Yes. No. Heidi Schierholtz is the director of policy at the Economic Policy Institute. She served as chief economist at the Department of Labor during the Obama administration. Heidi, welcome to the show.
Heidi Schierholz: Thanks so much for having me.
Bob Garfield: Let's start with the jobs report. Unemployment sits at 6.1% and that isn't low, but 266,000 jobs were added in April. Still, this led to immediate declaration of disappointing job growth. It wasn't only the prevailing news narrative, it was the only news narrative. Can you put these results in context?
Heidi Schierholz: Yes, that's a good point. 266,000 jobs added in normal times is actually really solid job growth. That's decent growth outside of the current context when other economic data was pointing to signs that we might see, say, a million jobs added. When those numbers came out, even though in normal times, 266,000 is solid compared to what people thought might happen, it was a big blow. It surprised me. I also thought that job gains would be higher than what we ended up seeing.
Bob Garfield: Now, even before the report came out, as we heard in the introduction, there was this wave of anecdotal stories about restaurants and bars not being able to find help. Some businesses even reported shortening hours, which would suggest a very tight labor market, but you say, "Not so fast." First of all, again, the jobs report did document a whole bunch of new hires, right?
Heidi Schierholz: Interestingly enough, it documented a lot of job growth in leisure and hospitality, which is the sector where restaurants are located. It's hard to really say that job growth was being held back because of labor shortages in restaurants and bars when restaurants and bars were the sector that saw, by far, the biggest job growth. By leaps and bounds, restaurants and bars grew more quickly than all the other sectors. Job growth in leisure and hospitality was roughly what I would have expected. It was all the other sectors that saw really depressed job growth in April compared to what we were all hoping would happen.
Bob Garfield: Secondly, in terms of wages, what we saw was not necessarily typical of a tight labor market.
Heidi Schierholz: That's a really good point. I think it's worthwhile to back up for a second and remember how it is we identify labor shortages. The footprint of a labor shortage is very fast wage growth. If an employer can't attract the workers they need, they will raise wages to poach workers from other employers who will, in turn, raise wages to retain their workers and so on. You get this increasing wage growth. That's how you can really identify if you're seeing labor shortages.
In recent months, wages in leisure and hospitality have indeed accelerated at a rate that would suggest we're seeing some real tightness in that sector, but it's not widespread. We are not seeing wage growth accelerate across the board, we really are just seeing it in these isolated spots. The question then gets raised, like, "Does that mean wage levels in leisure and hospitality are now too high?" The answer to that is absolutely not. Those wages really plummeted in the recession and they have just now regained their pre-COVID trends. Just now, they are roughly where they'd be if COVID had never happened.
Just to give you an idea of what those levels are, the current average weekly wage for typical workers in leisure and hospitality translates into annual earnings of less than $21,000. Even though we've seen this really large acceleration of wage growth in the last couple of months, that does signal that employers, and particularly restaurants, as restaurants have been reopening more broadly, that employers have had to raise wages to attract workers. They are in no way raising them to unusually high levels right now.
Bob Garfield: What's the demarcation of poverty? What's the poverty line?
Heidi Schierholz: The projected poverty threshold for 2021 for a family of three is $21,960.
Bob Garfield: All right, well that juxtaposition speaks for itself. Now, again, some articles have quoted managers saying they have done things like raising wages and offering signing bonuses, limiting hours. Is it that the press gets these anecdotes and reports them in isolation or is it that no matter how much they're sweetening the pot, it isn't sweet enough, or both?
Heidi Schierholz: I think we really are seeing the phenomenon of employers and restaurants are raising wages to attract workers and they are attracting workers by doing that. The job growth in restaurants outpaced job growth in other sectors by a long shot.
Bob Garfield: Now, you are not alone in concluding that these data do not suggest an overall labor shortage. The Federal Reserve Chairman, Jerome Powell says the same thing. Of course, his main job is to keep inflation down, so I'm not sure exactly what he's rooting for. Do you?
Heidi Schierholz: I think if you had a widespread labor shortage that was causing acceleration of wage growth, if you were that Federal Reserve Board Chair, you might want to keep an eye on whether there is a chance that a wage acceleration in one sector, like the restaurant sector, whether that might spill over into other sectors and cause widespread overheating.
Bob Garfield: And the inflationary spiral that comes with it?
Heidi Schierholz: Yes. You'd want to keep an eye on that. When you look at what's going on right now, that is not something that we need to be worried about in this situation. The idea that what's going on in relation to hospitality would drive wage trajectory in the larger economy is it's just pretty ludicrous. We know that leisure and hospitality is very segmented off from other sectors. We know that just a very striking feature of the COVID recession and the K recovery that has followed it is just how insulated other sectors in the economy are from the just extreme labor market distress that was experienced in face-to-face service sectors. Then the other thing to note is that wages in leisure and hospitality are still far, far lower than in other sectors, even though they've accelerated in the last couple of months. Those increases are not going to create broader wage pressure.
Bob Garfield: As we've reported on this program again and again over the years, the press gets fixated on certain metrics and imbues them with omniscience. Whether it's the Dow Jones average or the GDP or jobs numbers, we tend to present them as all telling indicators. What obvious things do we, as an institution in the media, do wrong when trying to assess the economy, especially in a new administration when everybody's looking really closely?
Heidi Schierholz: Oh, that's a really good question.
One thing that we've seen all the time, you mentioned this, was that in many cases, people in the media will focus on just the top-line numbers. For example, right now, you see a lot of focus on the fact that the unemployment rate is 6.1% overall. That is still elevated, but it's come down a lot since its peak in the worst part of this recession. It's demonstrating a ton of improvement. The key thing on that unemployment rate is that it's just an overall number and masks a ton of variation for different groups. That overall unemployment rate of 6.1% masks an unemployment rate for Black workers of 9.7% and white workers of 5.3%. Due to things like occupational segregation and discrimination and other labor market disparities that are really rooted in structural racism, you have these huge differences. When you just look at overall numbers, you really do miss what's going on for many, many people on the ground.
Bob Garfield: As you look at the underlying numbers, the big picture, headlines aside, what, if anything, do these job numbers tell you? Who is getting back to work and who isn't?
Heidi Schierholz: One thing we saw in April, was that the labor force rose a bunch, that people are getting work, and we're pulling people in off the sidelines. On the face of it, that's really great, but when you dig down under what you saw in April was that the entire increase in labor force was among men. Women's labor force actually dropped in April. We know that women are still shouldering a lion's share of care responsibilities at home, and the fact that when you see a big increase in labor force, but it's just among men, that really signals that care needs are still holding people back from being able to work.
Bob Garfield: Because child care simply does not exist as part of whatever our social safety net affords.
Heidi Schierholz: Yes. That's right. It's not just child care. It's elder care, it's care for people with disabilities, it's school though all those different systems are really a little bit broken right now and even before this recession, were never strong enough to really support the workers of this country. That does really point to, "Okay, there. That's a huge problem that we need Congress to address."
Bob Garfield: No surprise, I suppose, that Republicans have seized on this employment data to further their hoary old stance on the welfare state that too lucrative unemployment benefits have created a class of literally entitled lazy bone suckers at the teat of big government. It's Reagan's welfare queens all over again. Has government assistance been too good for so long in this pandemic that people are no longer incentivized to work?
Heidi Schierholz: There is no compelling evidence that that's what's going on. When you look at what happened in April when the jobs numbers were disappointing, job growth was disappointing in April, if you look at the sector that has seen the most stories about employers not being able to find workers, the leisure and hospitality sector or the restaurant sector, that was the sector that saw the highest growth. It doesn't jibe with his idea that unemployment insurance is keeping people out of work.
Bob Garfield: Let me ask you a hypothetical. Let's just say there is some truth in the Republican's complaint that benefits are so high that people would just as soon stay home for $11 an hour instead of work for 12, let's just say. Does that tell us that benefits are too high or does it tell us that wages are disastrously low?
Heidi Schierholz: One of the things we know in COVID is that many leisure and hospitality jobs, many restaurant jobs, they have become far harder and far riskier since COVID. What a well-functioning labor market would do to account for this is actually offer higher wages. When a job is riskier and harder, you would actually expect that the workers in that job would get higher wages than they otherwise would. One of the things that is true is, if pandemic unemployment insurance benefits are playing some role in actually allowing this to happen, giving workers a little bit of space to wait to get higher wages rather than take that job that they used to have that's actually a ton worse now, a lot riskier, a lot harder, the unemployment insurance benefits giving them a little bit of space to be able to wait until the wages are better, that is something economists would call efficiency-enhancing. It actually makes the labor market run better. It helps the labor market respond by seeing stronger wage growth that we should be seeing when the jobs are substantially harder and riskier than they were before COVID.
Bob Garfield: Yet, earlier this week, even Joe Biden seemed to embrace the hooked-on-entitlements notion and the importance of pushing people back to work ASAP.
Joe Biden: We're going to make it clear that anyone collecting unemployment, who's offered a suitable job must take the job, or lose their unemployment benefits.
Bob Garfield: As someone who has worked for a presidential administration where economics must be viewed through a political prism as well, what do you suppose is going on there?
Heidi Schierholz: Millions of workers still have serious legitimate health concerns about returning to work, and putting pressure on people to take jobs when they are not safe by doing something like cutting unemployment insurance, all that's going to do is increase suffering. It's not actually going to get people back to work. One of the things that will, on that front, is all the efforts the administration is doing in getting people vaccinated. There's good data that shows that as vaccinations go up, employment goes up.
Bob Garfield: When you heard the President at least nodding towards that notion of pushing people back to work, did you say to yourself, "Joe just shut up."?
Heidi Schierholz: [chuckles] What he was doing was basically just saying the thing that was already true. It is absolutely the case that if a worker is on unemployment insurance benefit, but is offered, and that the term is suitable work, you have to take that job. If you don't take it, you can no longer receive your unemployment insurance benefits. He was more just clarifying what we all already know to be true.
Bob Garfield: When governors of four red states, say "Thanks, but no thanks," to federal aid to extend unemployment insurance, what do you think then?
Heidi Schierholz: I think that's really misguided economics because we know that even though the unemployment rate is generally coming down, it's still very elevated. We still don't have enough job openings to provide jobs for everyone who needs work. The idea of turning down federal benefits, when we're in a situation like that is so near-sighted. That money from the pandemic unemployment insurance benefit is coming from the federal government. It is an infusion of cash into that state that is helping support the economy because workers who otherwise have care responsibilities and can't work, who otherwise have health concerns and can't work, they're getting those benefits that they can then spend in their state economy.
The idea that a governor would say, "No, we don't want that, will suck that money out of our economy," is actually going to hurt their states overall. I don't understand the logic. It seems extremely short-sighted to me.
Bob Garfield: Heidi, thank you so much.
Heidi Schierholz: It's been a real pleasure. Thanks for having me.
Bob Garfield: Heidi Schierholz is the Director of Policy at the Economic Policy Institute. She served as chief economist at the Department of Labor during the Obama administration.
Bob Garfield: This has been an OTM podcast extra. Be sure to tune into the big show this weekend. Talk to you then. I'm Bob Garfield.
New York Public Radio transcripts are created on a rush deadline, often by contractors. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of New York Public Radio’s programming is the audio record.