The Bureau of Labor Statistics (BLS) releases two job reports that this month highlight the huge difference between job openings and jobs created.  On April 30, 2021, there were 9.3 million job openings in the US.  In May, 671,000 jobs were created.  A gulf in headcount that great does invite questions.  From a supply & demand standpoint, something is satisfying the labor supply to the point that those needing workers are using price (wages) to entice people to take their jobs.  A good part of that something is compensation competition.  Workers are compensated to their satisfaction for what they’re doing.  Even if that is being unemployed.

During the pandemic lockdown State and Federal government agencies enacted sweeping measures to assist Americans to get through the crisis.  Those measures included additional unemployment payouts, a moratorium on rental evictions, and a basketful of restrictions in everything everyone did.  Although possibly the right solution at the time, as we began the economic restart effort, they stayed in place.  This puts an effective floor on wage rates in the economy and forces employers to compete for workers using higher wages as the lure.

The Jobs Report for this year shows that the biggest need for workers is in the food and hospitality industries.  These jobs tend to be lower on the pay scale.  So, picture it:  Your favorite restaurant, after almost a year of trying to survive, can’t open as fully as government restrictions may allow because they can’t find the necessary workers.  And they can’t find workers because their target employees are doing better with the excess income the crisis has brought.  So, one of the hardest-hit industries, food & hospitality, must abide by government restrictions and compete with those same governments to get workers.  Talk about the longest of odds!

Fortunately, many States have recently announced the termination of many of their emergency unemployment programs.  This will put more supply (workers) on the market in those industries most needing it right now.  It will also subdue price (wages) pressures that exist today, allowing the true(r) supply & demand mechanism to work to set that price.  Unfortunately, the Federal government has yet to move on shutting their programs down as well.

From the bleachers, as these programs shut down over the next few months, the Jobs Report should show growth more in line with analysts’ expectations.  As more people get out and about and start working, a lot of pent-up demand will unleash on the market and that will reinforce job creation even more.  One concern, if there are artificial hurdles constructed to impede the pricing for labor to work based on supply & demand, the economy will react by building those cost increases into their pricing.  That’s where inflation finds a toehold to grow.