The Unemployment Mismatch
As of July 2021, there are over 9.3 million unemployed Americans actively looking for work. Historically, when unemployment is high there are not enough job openings that people can apply for. However presently, this is not the case. In the US, we are seeing record highs of job openings, 9.2 million to be exact. So why aren’t these positions being filled? Why aren’t people going back to work? The reason isn’t as clear as one may think, but here are a few of the main contributors: suburbanization, government policies, and changing work preferences.
A WSJ analysis of the U.S Postal Service change of address data reveals an accelerated trend of people moving from dense urban regions to the suburbs. Conversely, movement from the suburbs into cities have slowed. This migration was already occurring before the pandemic with people’s desire for more affordable housing, but was increased dramatically as people realized that working from home was a viable possibility. People have found that living within a 150 radius from their in-person workplace suffices, so long as they don’t have to commute there very often. Because of this change, suburbs are seeing demand for goods and services at unprecedented levels. For example, Starbucks foot traffic across several locations in the suburbs of New York City were above 2019 levels in May, according to Earnest Research. By contrast, visits to Starbucks locations near downtown and midtown office buildings in New York City were down about 65% in May compared with two years prior. The shifts create demand for local services in small towns and suburbs that aren’t always equipped with the labor force to meet that demand. It also leaves workers from big city retailers and service providers with fewer opportunities.
Government policies have also played a major role in job markets. According to US Labor department data, States that eased Covid-19 restrictions earlier such as Texas, Florida, and Nebraska and have seen much lower unemployment rates in comparison to states like California and New York.
Additionally, federal and state government unemployment benefits and stimulus have allowed workers the freedom to not have to not rush back into employment. In 24 states that have announced an ending for supplemental benefits in June or July, the average unemployment rate was 4.4% in May. The other 26 plus the District of Columbia with September ending date have an average jobless rate of 6.0%.
Lastly, changes in work preferences such as flexible work hours and working from home with zoom meetings have caused unemployed workers to seek jobs that will continue those trends. Many people don’t want to go back to doing menial labor like working in fast food, clothing stores, or serving while only earning minimum wage for it. Workers are striving to be developers, social media managers, or coders. Jobs where they can create and feel like they’ve made significant contributions. This unfortunately for employers means that, even with offers of $300 hiring bonuses for new servers or free pizza for delivery workers, they cannot get anyone to work for them.
Some of these changes will be here to stay and some will phase out as government policies end and reopening continues. These changes may be hard to anticipate, but looking forward there are a few trends to keep in mind that will indicate the future direction of employment. First is the productivity of workers from home. It is still a new trend, so as the years go on and flexible workers continue to produce as well as in-person workers, then that trend may just become a standard. After vowing never to return to the office, tech companies such as Google and Apple are now requesting their employees back to the office. Some aren’t happy about it. Additionally, Fed rates can be a concern for the larger economy. If the Fed decides to increase rates, the economy may slow down, and pressure workers to find less desirable jobs to support themselves in a potential downturn. Lastly, as states begin to roll back their additional unemployment stimulus, this may lead to more incentives to get people back into the workforce. As these ease off, workers will no longer have the monetary cushion to take their time as they search for jobs that meet their needs and will be forced to get jobs they need to pay the bills. By this time, we hope there are still jobs remaining to go back to.
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