August 30, 2021
My wife Sara and I were stunned halfway through Monday of this past week when our daughter’s daycare notified us that they would be closing mid-day due to staffing shortages. Nowadays, a positive Covid test result is the cause of such notice and limited to a single classroom, but this closure was for the entire school – with only an hour and a half of notice!
The school explained that a staffing shortage was responsible for the surprise closure and summarized their plans for additional substitute teachers to prevent future disruptions. Curious, I took to Twitter. A quick search revealed that we are not alone. I soon found reports of childcare staff shortages in Connecticut, Michigan, Maine, and Tennessee.
Signs of hiring challenges are now common in daily life. Fast food restaurants advertise: “Work today, get paid tomorrow” on one side of their sign with hourly wage details on the other. Bloomberg has reported the Albuquerque police department is offering a $15,000 signing bonus to new officers.
A friend of ours has a job with responsibilities for employee retention. They recently relayed that this has become much more challenging in recent months. In one such discussion, our friend told us that an employee had received an offer from a prospective new employer that was 65% higher than their current salary.
Economic data backs up anecdotes like these. The Bureau of Economic Analysis reported wage growth of 10.1% in July compared to the same month of 2020. That increase was due, in part, to wage declines that occurred in July 2020, but the wage growth measurements from the past few months still show a rapid rise above pre-pandemic levels. Perhaps just as noteworthy are the current numbers on the ratio of open jobs to workers. That ratio recently fell to 0.9, which means that there are now more job openings than workers seeking employment.
While the unemployment rate has dropped to 5.4% as of the latest report, the U.S. labor force participation rate remains about 1.5% below its level before the pandemic. The disruptions to school and daycare that began in March 2020 disproportionately affected women, many of whom dropped out of the labor force and have not yet returned. According to the Bureau of Labor Statistics, female labor force participation is at the lowest seen since the late 1980s, consisting of only about 56% of women.
With workers remaining hard to find in many industries, employers will need to raise wages for certain jobs. On the positive side, stronger wages and an abundance of unfilled job openings might lure sidelined workers made idle by the pandemic back into the labor force. Less desirable is the potential for wage growth to boost inflation. How all these trends develop will be critical to the health of our economy. In the meantime, we are likely to witness more fast-food recruitment creativity.