I have no hard data to prove it, but I would argue the most widely followed economic data in the U.S. are the trends in employment levels and the job market. And like many other economists and analysts, I was quite surprised by the most recent jobs data.
The first surprise hit me when the Bureau of Labor Statistics released its monthly report on the Employment Situation for April. According to the preliminary data, total nonfarm employment rose by 266,000 jobs last month. That's a pretty good number under normal conditions. But with an economy that is now in full recovery from the COVID-induced recession and a consumer base eager to return to "normal" levels of activity, most economists were expecting more jobs than that—a lot more.
The second surprise hit a few days later when the BLS released its monthly report on Job Openings and Labor Turnover (JOLTS) for March. According to this report, the number of job openings in the U.S. hit a series high on the last day of March at 8.1 million. For the record, this data report started in 2000.
A rough summation of these two reports is that there were about 8 million job openings at the start of April and there were about 9 million fewer people working at that time than there were before the COVID crisis, yet the net increase in jobs filled last month was only 266,000. At that pace, it will take us about three more years to get back to pre-crisis levels. My projections call for full employment some time in 2022.
If the BLS data is accurate, there are almost as many jobs open right now in the U.S. as there are unemployed workers who are not working. It is not quite one to one, but it is close. That is why many analysts, including myself, expected a stronger number in April.
This begs a couple of questions: "Is there a labor shortage in the U.S.?" And if there is: "Does this shortage threaten American economic vitality in the future?"
Now, before we jump to conclusions about the long-term implications of the current labor situation, we need to take a closer look at the data and combine this information with what we know about the current state of the economy. The current recovery is unique, so I want to examine it thoughtfully.
In April, it is quite likely there were many potential workers who still had lingering concerns about the pandemic. Maybe they were not fully vaccinated, or perhaps they were trying to solve the issue of safe childcare. The process of correcting these problems started strong last month, but it is quite possible that many labor market analysts overestimated how this would affect the overall jobs data.
Another factor getting a lot of attention is the unprecedented increase in unemployment insurance benefits currently available to many potential workers. The availability of these benefits is likely delaying the job search for some workers. In some states, these benefits may be the equivalent of $19 per hour. This is more money than many of the open jobs are offering, even in manufacturing. These benefits are scheduled to expire in September, so it is likely we will see a boost in the jobs data this fall and at the same time there will be a decrease in the number of job openings.
The monthly JOLTS data will continue to provide us with clues about the direction of these trends. For a baseline, we can make note of the data from March and then monitor the numbers in subsequent months to determine how we are progressing. In my role as an advocate for the plastics industry, I will pay particular attention to the trend in the data from the manufacturing sector.
On the last day of March, the job openings rate for all U.S. industries in total was 5.3 percent. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings. The openings rate was substantially higher the nondurable goods manufacturing category, which is the category that includes the majority of the plastics industry. Here the openings rate was 6.8 percent.
The BLS also calculates a "hires rate." The hires rate is the number of hires during the entire month as a percent of total employment. The hires rate for total private industry last month was 4.6 percent, but for manufacturers of nondurable goods it was only 3.8 percent. Based on the trends in both the respective openings rates and the hires rates, if you manufacture a nondurable plastics product and you are having trouble filling your open jobs, you are not alone. There are a higher-than-average number of jobs open for nondurables manufacturers, and their rate of hiring is lower than the overall average.
I will not speculate at this time what these trends will mean for the future level of wages or margins or employment for plastics processors. However, I do expect many of the labor issues that were caused by the pandemic will ultimately be solved with a little more time and patience. But a few months will not be enough to solve the deeper problems in the labor market due to the skills mismatch. The skills mismatch in the manufacturing sector did not start with COVID-19, and it cannot be cured with a vaccine.
And for many manufacturers, including many in the plastics industry, the persistent friction in the labor market is just another chapter in a much bigger story about the global supply chain. In the past few months, many manufacturers were affected by near-term problems such as weather issues in Texas, the blockage of global shipping routes, pipeline issues in the eastern U.S. and a global shortage of semiconductors. In addition, there are the longer-term issues stemming from geopolitical problems abroad and divisive political trends domestically.
Supply chains are the lifeblood of manufacturers, and experience has taught us to be acutely aware of issues pertaining to materials supplies, logistics and infrastructure. The rapid closing and reopening of the economy in the past year has exposed many weaknesses in our supply chains. The pandemic did not create all of these problems. Some have been building for a long time, and the pandemic exposed them.
There are no easy answers to identifying and solving this nation's supply chain deficiencies, but finding a way to invest in the successful preparation of our workforce is where we should focus our attention.