Where Have All The Workers Gone?

In our last issue we suggested that the "Inflation Genie" was out of the bottle. Since then inflation has been rising at almost double the pace forecast by the FED (as well as Wall St. and the and the Biden Administration). At the same time, job creation has slowed to about half the pace they were forecasting. Could it be that the American economy has already achieved full employment? If so, why is the Biden Administration still pushing for more stimulus and the Fed still expanding the money supply at a 15% annual pace? The Fed remains focused on the pre-pandemic employment high water mark as the key indicator of economic slack. Today 7.5 million less people have jobs than they did in January 2020. Since then 1.7 million baby boomers have opted for EARLY retirement. That alone reduces the shortfall to 5.8 million while an additional 3.5 million Americans turned 65 last year. Hundreds of thousands died or are suffering long term Covid effects while millions remain paranoid about infection risk. Just look at all the people that you see driving alone or walking outdoors still wearing masks. Immigration has failed to offset the shortfall. The number of LEGAL immigrants declined by almost one million last year. This before we even consider the extra $300 in weekly unemployment benefits. Some continue to collect more than they made working. That relatively unproductive group will eventually need to work, but others are simply collecting before they drop out of the work force. Companies are reporting large numbers of remote employees who are quitting rather than returning to the office. The combination of remote work and low mortgage rates created a mass migration to the suburbs. The majority of those migrants were millenials with young families. Faced with the high cost of childcare and commuting, those low mortgage rates enabled many former two income families to get by on one income. A huge percentage of the 3.6 million collecting benefits are either older baby boomers or young parents. Some will take jobs when schools reopen and the benefits run out, but many have no plans to return. Job openings are at record levels but workers simply aren't available. Those who do want the jobs simply aren't qualified. If you have tried to buy, rent, or order anything, you know this to be true. If you are lucky, you have a long wait for a competent, overworked employee. Alternatively you get an untrained rookie with the IQ of a rock. Even the wages of those incompetents are soaring. Wages are rising at over a 7% annual pace, even though most of new hires are a the bottom of the wage tier. Increased low income hiring reduces the "average" wage even as wages rise across the board. Those wage hikes are rapidly adding to the inflationary effect of supply shortages. Inflation is rapidly emerging as the biggest economic threat, but the Fed and the Administration continue to fight an unemployment war that has already been won. America is at full employment.