Opinion

Let the post-pandemic boom ride

Shocking employment numbers are cause for optimism, not panic

America's economic recovery from the pandemic has been halting, but there are signs that it may be starting to really take off. The latest figures from the Bureau of Labor Statistics show that the number of job openings is skyrocketing, as well as the number of people quitting.

Conservatives and rich people are starting to panic over the situation. The idea of workers having the ability to be choosy about job opportunities — or even worse, successfully demanding higher wages — is horrifying to them. So they are already building a pressure campaign to bully the Federal Reserve into strangling the economy before the damage from the pandemic has been fixed. Deutsche Bank recently warned inflation is a global "time bomb." CNBC reports: "As many as 65% of millionaires are concerned about inflation caused by recent government spending." America is "on the verge of an inflation crisis," wrote Senator Ted Cruz (R-Tex.) in a recent op-ed.

This fearmongering is wildly exaggerated, and must be resisted.

Let's dig into the data from the Job Openings and Labor Turnover Survey (or JOLTS) for last month, which is genuinely surprising. Since the pandemic started to ease off in the U.S. around March, there have not been that many jobs created — America is still about 7.6 million jobs down from where it was in February 2020. However, monthly job openings have skyrocketed from about 7.5 million in March (about how many there were in late 2018) up to 9.2 million in May — the highest level measured since this survey began in 2000. The share of workers quitting their job each month has also surged to 2.7 percent, also the highest figure since 2000. The rate of quits in the accommodation and restaurant industry is 5.6 percent, again a record.

As is always worth mentioning, all these various reports are noisy and preliminary, and it will take many months before we can be sure what exactly is happening. However, it's possible to make some educated guesses. On the one hand, the pandemic created a lot of disruptions in business and the labor market. The global system of production was in ragged shape even in 2019 thanks to a decade of weak demand, and the pandemic inflicted a lot more damage. Meanwhile, it seems a large number of people are rethinking their careers. Many already-precarious categories of workers have had an absolutely brutal year — a recent study found that line cooks had the highest COVID-19 mortality risk out of any profession, including health-care workers. Warehouse work, agriculture, baking, and construction rounded out the top five highest virus risk professions.

These and many other jobs typically had low wages and meager benefits even before they became so deadly. It seems many folks in those professions are looking to find something better — perhaps having seen how nice it is to have some economic security thanks to the various benefits in the pandemic rescue packages. Others seem to be quitting the labor force entirely to spend more time with their families.

On the other hand, the American consumer is unusually flush with cash. The lockdowns and pandemic relief bills meant the bulk of the population saved tons of money over the last year — something like $2.4 trillion. We are seeing enormous demand for housing, cars, computer chips, and hundreds of other products.

Strong demand runs into constrained supply, and that's how we have supply bottlenecks and price increases in all sorts of places — lumber, semiconductors, container shipping, and so on.

It's not hard to imagine how this might work out reasonably well. Businesses will get more and more desperate for labor so they can build out supply capacity to deal with the bottlenecks. They will be forced to hike their wage offers and improve workplace conditions to get workers — because just about any job can be made "good" with enough pay, benefits, and labor control over the workplace. Workers will flow into high-productivity businesses that can afford to pay well — the abusive, non-innovative businesses that only got by over the last decade by exploiting labor (like practically all the "gig" companies) will either improve or go out of business. In a year or two, we'll be back to a very low unemployment economy, but this time with substantially higher wages and productivity, and a much more robust supply side.

But all that can only happen if demand remains strong. Despite the fact that in some markets (like lumber and housing), recent price spikes have already turned around — suggesting these supply bottlenecks will be temporary — we are still seeing a big panic about inflation. The push is aimed at the Federal Reserve, to convince chair Jerome Powell to hike interest rates and crush the boom before this stronger economy can emerge.

There are two reasons: first, conservatives want to strangle the economy so that President Biden will be blamed for lack of jobs. Second, rich people want to keep the economy weak to maintain their vast power and wealth. A recent ProPublica report examined the taxes of some of the richest people in the world, and found them paying almost nothing on their staggering hoards — between 2014 and 2018, Michael Bloomberg gained $22.5 billion in wealth, but paid just 1.3 percent of that in taxes; Jeff Bezos paid just 0.98 percent of his $99 billion wealth gain in tax; and Warren Buffett paid just 0.1 percent on his wealth gain of $24.3 billion in tax.

A big reason these men are worth so much is the desperate condition of the American working class. If workers were scarce, business would have to pay higher wages to attract them — leaving less of the corporate surplus for shareholders and top executives, and hence causing less appreciation in financial assets. If labor markets get tight enough, we might see unions start to spread. So to keep the ultra-rich in ultra-large yachts, American workers must remain desperate.

But unless you have enough money to buy your own smallish continent, don't listen to this nonsense about inflation. You'd be much better off letting this boom ride and seeing where it takes us.

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