Is the job market truly healthy?

Don’t let us forget that the causes of human actions are usually immeasurably more complex and varied than our subsequent explanations of them - Fyodor Dostoevsky, Russian Novelist

Health is difficult to measure in most fields, especially in economics. Economists frequently disagree on which measures to point to when they refer to a “healthy economy” or a “healthy market.”

“The beginning is the most important part of the work.”
Plato

 More recently there has been confusion amongst pundits and economists about the recession we are currently experiencing, despite the fact that there are “healthy employment numbers,” and that has led us at Emergent to ask the question: “but is it really healthy?”

The first, and of course, most vital data on a healthy employment situation is whether or not the unemployment rate is low: the unemployment rate being the percentage of the labor force that is without a job, the labor force being those who are looking for a job who are not disabled or discouraged. If you look to the right of this page, you’ll see that the unemployment rate has recovered from its highs during the pandemic and is in what has historically been the “healthy” range of below 5%. There are assumptions, however, that might need to be taken into question regarding this rate. For instance, this economic model assumes that work is something desirable and that the civilian population is looking for work. Furthermore, the employment situation is only one half of the equation.

“Nothing will work unless you do.”
Maya Angelou

 Historically, looking for work has been more difficult than finding workers. As we are starting to realize, however, that may not be the current situation. The civilian labor force, as can be seen in the chart to the left, has not recovered from pandemic lows, despite the 2018-2019 reverse in the downward trend.

Now, one may argue that if less people want to work, and the ones that do want to work are employed, then that should also be an indication of a healthy working environment and that the civilian labor force participation rate drop can be due to other factors, such as an aging society, all of which are valid points.

There is, however, one last question to ask. Are the businesses finding all the employment that they need to fulfill their business services?

For the most part, historically, as mentioned above, this has not been a problem. It’s clear that that dynamic has changed. There was a huge spike in job openings in 2021 that has not yet been satiated.

So, the question remains: is this job market healthy if businesses cannot find the workers necessary to fulfill their business needs? For many, that’s a question that is scoffed at. Certainly, the businesses owners simply need to pay more. Small businesses, however, cannot afford to respect that dictum as much as they may want to, and many businesses have doubled their offered starting pay and are still unable to find enough staff. Hotels are cutting their offered rooms while raising rates, and restaurants are raising prices because they cannot afford to stay open for multiple days of the week. Our local Charlottesville restaurant scene has had to reduce their operating hours drastically while increasing prices to compensate for their lack of help.

Why do we work? 

“The end of labor is to gain leisure.”
Aristotle

 Is the labor market healthy? Why do we work in the first place? As Aristotle says below, it’s for leisure. It’s for us to be able to afford to enjoy our lives. Maybe that is part of the issue, however, as between working at home, pandemics, nursing quitting, and stimulus, US households have more money than ever before, especially for the middle and upper classes. The need to work while maintaining leisure is not there right now. And many economists point to the strong growing numbers in the service sector as well as signs that inflation is slowing down as evidence that the recession may not be too severe and the labor market is still strong. Perhaps.

Maybe, with enough job openings, decreasing inflation, and the strategic reserves holding down gas prices we will begin to limp out of this recession. Or we can remain vigilant, prepare ourselves for the worst, that perhaps a healthy job market is a balance between workers finding work and businesses finding workers, and that simple fact still remains to be satiated.

I’m Nickolas Urpí

From Emergent Financial Services

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