Recent US labor market developments: what is going on?
Labor markets and labor economics are often viewed as being under the privy of "microeconomics." Yet, changes in labor markets can (and often do) have significant macroeconomic impacts. And there are some economists who develop macroeconomic models with labor market disruptions. So with that in mind, let's take a look at two recent developments in labor markets in the United States that have many economists (both macro and micro) stumped.
One is the high quit rate and the other is rising tide of unionization.
First, the quit rate. The nice folks over at the US Bureau of Labor Statistics track and report quits during a given month as a percent of total employment. This is called the quit rate. You can find it here: https://www.bls.gov/news.release/jolts.t04.htm
The BLS has only been tracking this data since December 2000 so we don't have a ton of historical data to go on (you can find it nicely presented here thanks to St. Louis Fed: https://fred.stlouisfed.org/series/JTSQUR) but even a quick eyeball of the data and one gets the sense something has changed. So what is it?
Some suggest that is a backlash against the corporate "return to the office" policies as the threat of COVID has declined. In early May 2022 it was reported that Apple's director of machine learning, Ian Goodfellow, was resigning his position due to Apple's return to office policy. Such a high profile quit has goateed many others in the tech industry, it is argued, to also up and quit as opposed to returning to the office.
While we don't have any data on WHY people are quitting their jobs there have been a number of stories in the business press reporting that large numbers of highly skilled workers, web developers, data analysts, financial analysts, engineers, etc. are walking away from jobs that do not offer them sufficient "flexibility." Some argue this has even made its way down to entry level college graduates. The argument goes, with so many job openings for these highly skilled and highly mobile workers, corporations need to rethink their "back to the office" policies. The macroeconomic ripple affects of this, if it is significant, maybe very interesting.
But, when we look at the data, we see the highest quit rates are NOT just among highly skilled tech workers. Look at that BLS data. We see that some of the highest quit rates are in Retail Trade and Leisure & Hospitality sectors. Again it is important to note we don't have sound data on WHY people are quitting, but there is growing anecdotal evidence that one of main causes is: bad management. This ranges from poor working conditions to stagnant wages, from micromanagement to sexual harassment.
Which brings us to the second labor market development: rising tide of unionization.
In the first half of fiscal 2022, the National Labor Relations Board reports that union representation petition filings are up 57% year on year. (See the NLRB press release: https://www.nlrb.gov/news-outreach/news-story/union-election-petitions-increase-57-in-first-half-of-fiscal-year-2022). From Apple store employees, to Starbuck baristas, from Amazon warehouse workers to Google Fiber contract workers, the rate of unionization is, according to the NLRB, at the highest rate in the last 10 years.
Even when the push to form a union does not succeed on the first attempt, as was the case with Amazon warehouse workers in Alabama, it spurs workers elsewhere to take notice and to try. The current tight labor market conditions with two openings for every unemployed worker has strengthened workers' bargaining power.
Some experts including Harry Katz, at Cornell's School of Industrial & Labor Relations, question if this is really that big of a deal. In an interview with CNBC, Katz argues that recent development "doesn't amount to a lot'. Thomas Kochan of MIT argues, in the same article, that "There is still some ambiguity in the minds of workers about turning to unions as the institution that will provide the answers." (see: https://www.cnbc.com/2022/06/02/majority-of-american-workers-want-more-unionization-at-their-own-jobs.html).
But maybe what the 71 year old Katz and the 74 year old Kochan are overlooking is the major shift in the attitudes toward unions among younger workers. For example, a Gallop Poll in 2021 found those age 18-34, approval of unions to be an eye popping 77% (see: https://news.gallup.com/poll/354455/approval-labor-unions-highest-point-1965.aspx). Perhaps these two elderly economists are right (more about the lack of diversity in the economics profession in another post) and this will be nothing more than a historical blimp.
Or maybe what is happening is there is a fundamental shift underway in how our labor markets, from highly educated tech workers to warehouse workers and baristas, are functioning. If that is the case, the impact maybe be fully felt for several years. Or, given how rapidly our markets can change, maybe the impacts will be felt much sooner. The impact this might have on household incomes and thus consumption could have very significant macroeconomic impacts.
So what do you think? Post your thoughts below.
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