Despite ‘Worker Shortage,’ Businesses Keep Finding Workers

Businesses hired 850,000 workers in June, beating economists’ expectations and seemingly defying employer complaints that workers were shunning jobs in favor of unemployment benefits. 

The economy is still down nearly 7 million jobs compared to before the coronavirus pandemic, but employers are hiring at a pace of more than half a million 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 set of people, interview them, and then hire them?” William Spriggs, chief economist at the AFL-CIO, told HuffPost. “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, more than many low-wage workers received from their jobs. Republicans and businesses have said the additional money is holding the recovery back, and Republican governors have halted the benefits in their states.

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

Restaurants have seen some of the fastest-rising wages, with hourly pay up 11.2% compared to last year, according to the Center for Economic and Policy Research.

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

Faster wage growth in the leisure and hospitality industry suggests better pay is a good way to get people back to work, Wilson said. But she noted that restaurant wages dropped during the pandemic recession and are still lower than in most industries.

“If [wages] are a little higher now, it’s just putting them back on pace with where they would have been,” Wilson said.

The Bureau of Labor Statistics, which produces the monthly jobs report, cautioned that its data for wages is a little messed up because of how 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 the rising demand for labor associated with the recovery from the pandemic 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.”

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

The household survey sample is smaller and is generally more volatile from month to month, but Spriggs said it holds a clue that the labor market is not as “tight” as some suspect. He noted that the report shows more Black workers entered the labor force in the past two months, but Black unemployment also increased from 9.1% to 9.2%. 

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

Republicans pointed to the higher overall unemployment rate as an indication that they are right about the dangers of higher unemployment benefits. In a statement Friday, the Republican National Committee said, “Biden’s agenda is squandering the economy he inherited.”

Unemployment was at 6% when Biden took office in January, and the economy was 3.5% smaller than it was at the start of the pandemic.

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

The Biden administration and Democrats have said they don’t see the need to extend federal unemployment benefits after they expire in September — a change in position from earlier this year.

That could be cause for concern, as the economy still lacks millions of jobs it once had prior to the pandemic. And in past recessions, Wilson noted, cutting unemployment benefits off early didn’t actually push more people into the job market. However, it will definitely keep billions of dollars in potential consumer spending out of the economy. 

“I expect that we won’t see that cutting those benefits will have any significant impact on employment growth,” she said. “But it may have some negative effects.”