Where the labor shortage is most acute: manufacturing, retail and transportation
Companies are posting more vacancies than ever, but hires are not keeping pace, raising concerns among many employers about their ability to find workers. So far, this has not yet appeared in the wage and price data, but there are some hints of potential mismatches between supply and demand developing in specific industries that produce and distribute goods. physical.
First, focus on the sharp increase in demand for labor: there were 9.3 million positions available in business, state and local governments, and the federal government at the end of April, according to Survey of job openings and workforce turnover, up from around 7.1 million openings in January. The speed and scale of the increase is unprecedented, and the number of posted openings has now broken the previous record set in November 2018 when there were 7.6 million open positions.
Most of the additional job vacancies are concentrated in a few sectors. Leisure and hospitality businesses – hotels, bars, restaurants, casinos, museums and live entertainment venues – are posting many more job vacancies than in the past as they have to replace workers who were laid off earlier in the pandemic and ended up moving to other positions. State and local governments that have cut spending on public schools and other programs are also trying to replace workers they cut back.
But the really interesting development is in the manufacturing sector, like Barron noted last month. On average, there were twice as many vacancies in the manufacturing sector as in the year before the pandemic. In fact, there are more jobs open in US manufacturing companies than at any time since at least the 1990s, by far.
There is also a record number of openings in the “transportation, warehousing and utilities” category, up about 30% from the pre-pandemic average. Together, these two categories explain about a quarter of the total increase in the number of open positions compared to the pre-pandemic peak of November 2018.
What about the labor supply? Unlike last week’s non-farm wages report, Jolts data tracks the actual number of hires, departures and retirements instead of the net change in paid employment. This makes it easier to see what is really going on. In most industries, hires have also increased sharply based on the number of job postings posted, while the number of people leaving their jobs is either the same or slightly lower than before the pandemic. But there are some interesting exceptions to this pattern, especially in the manufacturing sector.
Companies rarely hire enough workers each month to fill all of their openings, so the thing to watch out for is the changing ratio of monthly hires to posted openings. So far this year, around 0.73 workers have been hired each month per posted vacancy, compared to around 0.81 workers each month from January 2018 to February 2020, although each industry is different.
In restaurants and hotels, hiring has exceeded historical standards in part because the Bureau of Labor Statistics includes rehires and layoff recalls in their hiring data but only counts openings where “the employer actively recruits workers from outside the establishment to fill the position”.
On the other hand, the manufacturing sector, where hiring has not kept pace at all with the increase in openings. Government, professional service firms, transportation and warehousing companies, and the healthcare industry have also experienced notable declines in hiring relative to labor demand.
We do not know what motivates this mismatch. Manufacturing and healthcare companies need workers with specialized skills who cannot do their jobs remotely, which could slow down hiring compared to the local sandwich shop. All levels of government have cumbersome hiring processes that may not be flexible enough to add workers quickly. Well-paid professional services firms may be cautious about adding expensive workers if they are unsure of the quality of the fit. Either way, these are the industries where the pressure begins to put on employers to raise wages, not lower paying jobs in leisure and hospitality.
This is also what can be seen in the data on dropouts. Despite the apparent difficulties restaurateurs face when it comes to finding staff, there are fewer workers in the industry leaving their jobs compared to the previous peak in July 2019. Instead, the boom in resignations is due to records in retail, health care, transportation. and warehousing and manufacturing.
The high dropout rate in retail seems to reflect the churn rate within the industry more than anything else, as the total number of published openings is still below the prepandemic peak. But employers in other sectors, especially manufacturing, may need to adjust their salary expectations if they are to hire and retain the workers they need.
Write to Matthew C. Klein at [email protected]