MainStreet Macro: Missing Workers: Hiring in a Tight Job Market

Summer usually signals the start of theme park season, when adventure-seekers line up for the adrenaline rush of their favorite roller coaster and its ups and downs. 

Labor market watchers can relate to those ups and downs – maybe too much, lately. It’s clear that employers, workers and jobseekers are more than ready for some stability. 

The labor market’s high-speed airtime cost more than 19 million workers their jobs at the beginning of the pandemic. Since then, we’ve recovered, but that ride has been bumpy and uneven.

Today, total employment is still about 800,000 workers fewer than it was prior to the pandemic, according to the Bureau of Labor Statistics. Not only has the labor market not fully recovered, it hasn’t even kept up with population and economic growth. 

That shrinking workforce has meant growing problems for employers. As the country re-opened after the worst of the pandemic, companies brought back people they had laid off or furloughed. But by early 2021, that fill rate started to decline and is now lower than it was before the pandemic began. 

In 2019, employers found new hires for about 84 percent of job openings. In 2021, that number had fallen to 71 percent. Applicants just aren’t showing up even as overall job postings have surged.

As employer competition for workers intensifies, companies are putting more effort into their job postings, using want ads to tout the benefits of their workplaces. Help-wanted ads are 29 percent wordier than they used to be, and minimum requirements are falling.

As we make our way along this rocky recovery path, we now have a new obstacle – the rate of inflation, which reached a 40-year high of 8.6 percent in May from a year earlier.

For workers, that means average wages are now down 3 percent from a year ago when adjusted for inflation. Companies are not only competing to grow head count in a tight labor market, they’re also being challenged to keep wages above the rising tide of inflation.

So, where are those 800,000-plus missing workers? This is the question that my colleagues at the ADP Research Institute sought to ask in our latest research note, “Missing Workers”.

Many might still be waiting for the right opportunity combined with the right compensation – that much-needed stability we’re all looking for after a two-year roller coaster ride.