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U.S. employers face worker shortage: Morning Brief

Julie Hyman, Brian Sozzi, and Myles Udland break down the labor market recovery as the market anticipates tomorrow’s April jobs report.

Video transcript

JULIE HYMAN: We are looking ahead, of course, to the jobs report tomorrow, monthly jobs report. And economists on average looking for a gain of a million jobs last month. Now, of course, this is off a very low base. We've been talking a lot about it. The economists we've talked to on the show have been looking ahead to this point here.

And the estimates are still going up. I mean, Myles, you wrote in the Morning Brief that the estimate was 995,000. It's already gone up to million over the past 24 hours here. And there is this strong anticipation of what we're going to see. We should also mention we got productivity numbers this morning for last month. 5.4% was productivity there, which sort of illustrates, ironically, the tightness of the job market right now. So it's the dynamics underneath the surface, I think, right now, are as interesting as those huge overall numbers that we're seeing.

MYLES UDLAND: Yeah, I mean, there's really-- there's-- I would say, there's two main stories in the labor market right now. And I think this is kind of a way to read what we wrote about in the Morning Brief this morning. The first story is the one that gets the most press. There is no-- you want to talk about supply and demand imbalance. There's no shortage of supply of stories about businesses that are not able to hire the amount of staff they would like to.

Now the real simple breakdown on that is they are not able to hire the amount of staff they would like to at the wage they would like to pay. An example that we cite-- and this is one of dozens-- you can find dozens of these every day in papers and websites all across the country. An example we found was an ice cream shop in Pittsburgh. It was offering $7.25 an hour. It got no applicants. It raised the wage to $15 an hour. It got more applicants than it needed. Funny how that works. And we're seeing that play out all across the country.

Now, a lot of these businesses were paying minimum wage or paying some type of low wage that is less than what the enhanced unemployment benefits added up to for, oftentimes, a job that isn't that great or a job that-- I mean, we've all worked our service sector jobs through high school and through college-- jobs that are hard. I would say all the jobs I had before taking this job were harder than the job I have now, frankly. And they paid a lot less. And so that competitive dynamic is one that has been covered at length and I expect will be covered at length as we go through the summer.

The other side of this-- and Nick Bunker over at Indeed talked about it in a brief note-- and I think it's going to be a very kind of interesting, wonky economics story to follow, but just how many workers that are classified as out of work now are truly out of work. And by truly out of work, I mean, not anticipating that they will get called back to work and choosing to-- basically trying to find work and unable to find work. Because if you are out of work and you expect that your company will recall you as part of a furlough or you expect that you could go get a job tomorrow, but right now, you're just-- you're not looking for one because the unemployment benefits, other kinds of reasons, you're considered out of work.

So we talked about that eight million worker shortfall. I think the question is, genuinely, how many of them are out of work because they cannot find a job? And I think the suspicion from a lot of economists is that that number is dramatically smaller than eight million, thus indicating the labor market is significantly tighter than the headline data would make it seem. And I think that has all kinds of fascinating implications as we go through the next year or so.

BRIAN SOZZI: Wow, this is a tough gig, how many earnings reports we've read this week. We're just digesting everything. We're in the eye of the storm. But actually, to your point here, so if the jobs report does come in, in a million or more, I mean, do you think that is inflationary? And then if so, does that send the 10-year higher?

MYLES UDLAND: Look, I don't know what the 10-year's going to do tomorrow, the next day. No one knows the 10-year is going to do, right? But I think the reality is that economists expect there are at least, let's say, half the number of jobs, half that employment dropped from February. I think economists think that's coming back by the end of the summer. So we're looking at four million job gains in the aggregate over the next four months. We know the math there on what that means for monthly average job gains.

I think the question is then, Sozzi, kind of come up at the end of the year. You say, how many people were tired? How many people are out of work for other reasons? And where do we take the labor market from that point forward? So is it inflationary? I don't know. On the margins, yes, someone who is going from making 9 bucks an hour to 15 bucks an hour because there was no supply of labor in their local market. They have more spending power, thus they can feed more back into the economy.

Is the Fed going to deem that a permanent level of inflation? It's unclear if that becomes a durable setting and sort of how that all plays out. I don't think Jay Powell is going to look at the next five months of labor market data and start making a decision on whether he thinks inflation is here to stay, if we want to answer the question that way.

JULIE HYMAN: Yeah, I mean, and as for market reaction, right, a million's priced in. I mean, that's the expectation. So we'll see what happens if there's wavering from that. My big question is, Myles, what was your hardest job?

MYLES UDLAND: Oh, well, I think the hardest job was probably doing the checkout at the-- being a cashier at the grocery store for a number of reasons, not the least of which is, I was 17 at the time. And so to stand for eight hours, checking out and then bagging groceries when you're 17 is like-- it just seems like it lasts forever. Because while an eight-hour shift is only eight hours, and, yes, in our current jobs, the hours certainly go-- they bleed outside of that, I mean, just, when you're that young, it just seems like the shift goes all day long. So that was one that I still remember. I like bagging my groceries when I--

BRIAN SOZZI: [INAUDIBLE]

MYLES UDLAND: I like when I go to the grocery store now. Like, you still have all the tricks, how do you build a good bag. You know, all that stuff is a nice thing that kind of gets exciting.

BRIAN SOZZI: How do you--

MYLES UDLAND: What, you've got to have the--

JULIE HYMAN: There's a skill. There's definitely a skill for that.

MYLES UDLAND: Like, the cold with the colds, and you can make sure your breads and your softs are on top. And where you do the produce, you could have the, let's say, pasta or cans or whatever. You build the base. You have to have it double bagged, all that stuff.

JULIE HYMAN: Very important.