Hard Times Ahead: The May Jobs Report
by Frank Stricker
The Bureau of Labor Statistics’ job numbers for May show that the official unemployment rate stayed low, at 3.6%, for the third straight month. Other key numbers: the rate for whites was 3.2% and for Asian Americans 2.4%. The Hispanic unemployment rate climbed by .2 to 4.3%, the African-American rate rose by .3 to 6.2%, and the Black teen rate jumped 3.1 points to 18.3%. So, some groups that traditionally experience higher unemployment lost ground. But not all. Persons with disabilities did a little better in May, although their rate was still 7.5%.
The payroll report on total jobs at non-farm employers gets a C+. Job additions of 390,000 were the lowest in 13 months, but that number was better than some predictions.
As to job sectors, employment in nursing homes and child-care centers is still 10% below the pre-pandemic period. The retail sector fell by 60,700 jobs. The leisure and hospitality sector added 84,000 jobs, but it is still down 1,340,000 employees from the pre-pandemic period. One economist claims that restaurant sales are above pre-Covid numbers, so the sector must be making more money with fewer workers. Are restaurant workers getting more productive? Apparently so. Menus have been streamlined, servers may be waiting on more customers, and chefs occasionally have to wash dishes.
Reported job vacancies fell by 455,000 in April, but they were still high at 11.4 million. Walmart and Amazon claimed they were overstaffed, but that was unusual. Quite a few companies can’t get the workers they need. Yet there are millions of potential workers who are actively looking for work, and millions more who are on the alert for good opportunities but not actively searching for jobs. According to the National Jobs for All Network (NJFAN) Full Count, there were 11.7 million people who weren’t employed and wanted a job, as well as 4.3 million part-timers who wanted full-time work. The NJFAN Full Count of real unemployment was 9.4%.
The level of quits is still 4.4 million a month. That’s 1 to 2 million above normal. Although that number is not a huge difference in absolute terms, it indicates larger trends. There are many reasons for quitting work or for staying on the sidelines: lousy pay, impatient customers, confidence about finding another job, fear of Covid, harsh bosses, poor-to-no benefits, and weak family-support programs, including an inadequate childcare system. The latter is a long-term problem and one that affects parents’--especially women’s--ability to work outside the home. Between 1990 and 2020, female labor force participation in the United States fell from 6th to 21st among countries surveyed by the Organization for Economic Cooperation and Development. Other prosperous countries invest relatively more in childcare and early childhood education.
Most job-quitters are not opting for early retirement in order to devote themselves to gardening or online gaming. Quitting is one step to finding a better job. There’s more of it because jobs seem plentiful and because pandemic forces lifted the lid on long-simmering worker resentments. The pot boiled over. And while many people are quitting to find better work, others are organizing on the job. At the anti-union Starbucks company, workers in about 120 stores have voted to unionize. That is up from zero.
But bad news ahead. To fight inflation, Federal Reserve policy is pushing the economy toward a recession. As unemployment rises, worker insecurity will rise.
Inflation remains a huge problem. The Consumer Price Index for Urban Wage Earners and Clerical Workers increased 8.9% between April of 2021 and April of 2022. It rose another 1.1% in May. Wages increased, too. Labor shortages mean that even in our wage-stingy country, employers must pay more to get workers. But they are not paying enough. Consumer prices for workers rose faster than wages by 2.5%.
The inflation surge is a political problem for Democrats, and it really hurts workers. What are its the causes? Are there better solutions than tight money policies that cut economic growth and demand for workers? Here are the chief causes.
- The war in Ukraine brought cuts in energy and grain exports from the region and pushed prices up.
- Massive federal pandemic spending in 2020 and 2021 kept the worst of the job recession short. Most of that spending is over, but above the poorest fifth or third of the households, people still have ample spending power, and heavy consumer demand continues to push prices up.
- This effect was intensified by supply chain issues. If stuff can’t get delivered, the price of what’s there rises. Many supply chain issues have been fixed but others remain. A pound of Oscar Mayer Bacon is no longer selling for $12.99 at my local stores, but a can of store-brand canned milk jumped 40 cents--31%-- in a day.
- Businesses complain about wage and other cost pressures. But billionaires keep getting richer. Most banks are doing well. There is a lot of price-gouging. Is gasoline in such short supply that the price of an average gallon of gas had to rise 89% since January of 2020? California Congressional Representative Adam Schiff pointed out in a Los Angeles Times opinion piece (June 4, 2022) that oil companies are doing extremely well. Comparing the first quarter of last year with the first quarter of this year, the money grab looks like this:
Quarter 1, 2021 to Quarter 1, 2022
Shell: profits of $3.2 billion to profits of $9.1 billion
Exxon Mobil: profits of $2.7 billion to profits of $8.8 billion
Chevron: profits of $1.4 billion to profits of $6.5 billion
Is This All They’ve Got?
You’d think that Washington might be readying price and profit controls, but you’d be wrong. There are other proposals. Representative Schiff introduced a bill to create a windfall profits tax on oil companies. Good. The tax would also pay for his other suggestion--to suspend the federal gas tax through 2023. That’s a nice gesture that doesn’t offer much relief. A $5 gallon of gas would be cut to $4.82--a 4% cut.
Selective price controls would be better than Federal Reserve Policy, which uses higher interest rates and tighter money to cut business activity. It means at least a mild recession, more unemployment, and less income for the working class. The Fed crunch is the traditional solution. And it is supported by White House experts and most economists, including Paul Krugman. But is this the best anti-inflation medicine that capitalists and mainstream economists can offer after 150 years of learning experiences and billions of dollars spent to train economists? Yes, that’s pretty much the solution they want to offer.
A specific goal of the Federal Reserve money crunch is to restrain wage increases. After all the ups and downs of wages in the last 50 years, real hourly pay is barely higher today than in 1972. One third of U.S. workers, Oxfam America estimates, get less than $15 an hour. If you work a full year, that’s about $30,000. In Mississippi, almost half the workers earn under $15. We need new minimum-wage goals for the states and the nation. How about $22? The $15 minimum was very useful in its time, but it was too modest then, and its value today is 26% less than it was in 2012.
As the economy gets tougher, caring politicians should push for income-grants to cushion the effects of rising unemployment and high prices. Here are two suggestions. Strive to renew the expanded Child Tax Credit that kept millions of people out of poverty during the pandemic. Recently, it was part of the failed Build Back Better legislation. It can be offered as a separate piece of legislation. It should be a focus in current political campaigns.
Another part of Build Back Better was investment in childcare and early childhood education. Such spending might create more good jobs and widen access to quality childcare--a good thing in itself and something that would help parents--especially mothers--who want to jump back into the work force.
The political views in this essay are those of the author, and not necessarily those of his organizations, which include the National Jobs for All Network and Democratic Socialists of America. Frank Stricker is the author of American Unemployment: Past, Present, and Future (2020)