Is it a sluggish labor market — or workers positioning themselves for better opportunities? - NBC News

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It’s an evolution that everyone saw coming — and yet it still caught corporate America off guard.

Labor economists had for years been warning of a looming demographic shift as America’s baby boomers aged out of the workforce, and as a manufacturing-based economy became supplanted by one that held out the promise of more autonomy and greater productivity in knowledge-based sectors. Yet, at the same time, it offered little for workers on the middle and lower rungs of the educational and socioeconomic spectrum other than demoralizing, low-wage and often piecemeal employment.

But no one anticipated a pandemic — or its potential silver lining for the lowest-earning tranche of the country’s workforce. Covid-19 accelerated the trajectory of secular trends such as older workers leaving the workforce permanently, and created profound changes in consumer behavior that could change the future shape of American economic activity.

It also triggered a moment of reckoning for America’s workforce. Many re-evaluated their jobs: How steady — and how demanding — were the hours? How long was the commute? How physically strenuous was the work? How much did they earn?

There is a shakeout occurring as many displaced workers find themselves either considering or actively seeking different types of work.

“A lot of what’s happened is people are taking this pause as a time to see if the field they were in was really the right field,” said Rosalie Drago, commissioner of labor for Suffolk County, New York. “Businesses and job seekers are in a bit of flux right now.”

With high unemployment rates as well as a labor shortage, it is a paradox, said Nicole Smith, chief economist at the McCourt School of Public Policy at Georgetown University’s Center on Education and the Workforce.

“Many companies have talked about the fact that they can't find workers,” Smith said, with retail and construction trades, restaurants and manufacturing experiencing particularly acute supply and demand imbalances.

Many businesses — especially in these sectors — are raising pay to attract and keep workers, said Patricia Malone, associate vice president at Stony Brook University's School of Professional Development. “The world has come alive again, but there are different parts of the economy that are struggling to maintain enough employees."

At Marlin Steel Wire Products, a manufacturing company in Maryland, company president Drew Greenblatt characterized the situation as "crazy town."

"I’ve never seen anything like this,” Greenblatt told NBC News. “We have a lot of open positions and it’s very difficult for us to get people to send in résumés, send in applications and show up for interviews. The market is hot,” he said.

Although he has increased wages by some 20 percent, he estimated that his company is running short by about 20 percent of the number of workers he needs. “What’s driving the conversation is pay,” Greenblatt said.

It is taking longer to fill open positions, said Marc Jones, CEO of Homeland Stores, a chain of 80 grocery stores.

"I’d say today, it’s probably taking us maybe a month, whereas it might have been a week or two a couple years ago,” Jones said.

Homeland recently raised pay for workers by an average of $1 or $2 an hour for most positions. “It’s probably the biggest single-year pay change we’ve given as a company,” Jones said. He added that the increase wasn’t just intended as a recruiting tool but to show appreciation for the company’s existing workforce that soldiered on through the pandemic — and he acknowledged that Covid-19 might have prompted workers to consider other work they viewed as easier or safer.

"Potential employees have more options than just showing up at a retail store," said one grocery chain CEO. “It’s hard work — it’s lifting stuff and carrying stuff and standing.”

“Our employees showed up every day, but I think between the advent of online opportunities along with the working-from-home option that’s become more prevalent, I think potential employees have more options than just showing up at a retail store,” he said. “We’re a physical place to work. … It’s hard work — it’s lifting stuff and carrying stuff and standing on your feet.”

Labor market experts note that more people, especially in lower-wage service sectors, are becoming choosier about the kind of job they take. “There's this urgency mismatch in filling positions and that’s particularly acute right now,” said Nick Bunker, economist and head of research at Indeed.com.

Bunker said that, while employers are trying to hire as fast as they can to make up for lost time, “a large chunk of job seekers seem to be taking more of a patient, or a wait-and-see, approach.”

For some workers, the disruption of Covid-19 has driven them to prioritize stability, such as a job with steadier hours that would guarantee a certain amount of income, or year-round rather than seasonal work, or a profession with better job security or more chance for advancement.

“People are thinking, now that we've been through a pandemic and a lot of instability, they're thinking about careers that are going to create stability. They’re trying to figure out where to head next and everyone’s still looking to see what’s going to happen,” Drago said. “There's been a lot of talk about ‘people don’t want to work,’ and that’s not the case. People are trying to figure out what’s stable.”

Evan Dannells, owner of Cadre, a French restaurant in Madison, Wisconsin, dismissed the idea that expanded unemployment benefits are motivating workers to stay at home. “I didn’t have a single employee who looked at me and said, ‘I want to stay on unemployment and ride this gravy train to the end.’ The idea that people want to stay and live free on the government dime — I’m sure there are still people doing that, but it has to be the exception to the rule.”

Dannells inferred that child care access is a more likely culprit, along with the erratic earnings that still plague his hard-hit industry. “Everybody wants to come back to work and they want a guaranteed income level at or above where they were before, but very few restaurants are back to pre-Covid numbers. We’re still hearing a lot of apprehension from older, higher-income couples and families about eating out,” he said.

Fear of contracting Covid-19 still looms large, as well, especially in service sectors with a high degree of person-to-person contact. “In a lot of those roles, there’s concern about the vaccination status of co-workers and customers,” Bunker said. “That could be a factor, and it’s hopefully temporary,” he said — assuming vaccination rates continue to grow and the vaccines remain successful deterrents to virus variants.

“I think we may be underrating how difficult it is to reboot the labor market after the enormous shock of the pandemic,” said Daniel Zhao, senior economist at Glassdoor.com. “Food service workers who found jobs in e-commerce or warehousing may choose not to come back, whether because of higher pay, better working conditions or other factors,” he said. “That's a new normal that many industries will have to adjust to post-pandemic.”

Corporate capital investment in equipment and technology for automation and contactless transactions as well as changes in consumer behavior such as more widespread adoption of online shopping mean that certain types of jobs will probably never return at the same rate. But economists note that new ones are emerging to take their place: While employment in transportation and warehousing remains 100,000 below its February 2020 benchmark as of May, this sector has been more or less steadily adding jobs. Amazon alone has been adding workers by the tens of thousands throughout the pandemic, most recently announcing that it plans to hire 75,000 fulfillment and logistics workers, with an average starting wage of $17 an hour.

By comparison, jobs in wholesale and retail trade are still down by 622,000. Leisure and hospitality employment remains 15 percent — 2.5 million jobs — short of pre-pandemic levels.

“Employers and job seekers alike will need to relearn how the labor market functions, because their assumptions from before the pandemic of where workers or jobs are may no longer hold true,” Zhao said.

There are some indications that policy could play a role in shaping this new job growth. President Joe Biden has called for an ambitious push into green energy generation, electric vehicle production, constructing and retrofitting buildings with an eye toward sustainability and energy-efficiency.

According to Malone, one burgeoning industry on Long Island is the development of offshore wind energy facilities. “There's so much development just commencing. It creates a lot of opportunities for the region to create a workforce ecosystem,” she said, including construction and skilled trades, maintenance, safety and a whole host of downstream and support jobs.

After losing her job in commercial aerospace procurement last summer, Jacqueline McCarthy is one displaced worker who is optimistic that clean energy could open the door to a new and better career.

“I thought this would be a great opportunity for me to transition, and my trajectory was towards renewable energy,” she said. “As a consumer and a homeowner, I'm concerned about energy and the climate.”

As a member of Generation X, McCarthy worried that her age could put her at a disadvantage. “With the market so saturated and having so many people unemployed, you have to set yourself apart,” she said.

McCarthy credits the enhanced unemployment benefits she receives for being able to enroll in Stony Brook University’s professional development training programs. “The additional funding unemployment afforded me definitely gave me a little breathing room so I could explore some other avenues and try to discover my niche,” she said.

“Is the best policy goal to get people immediately into jobs, or do we want to give them the ability to take the time and figure out the right job for them?”

According to Bunker, experiences like McCarthy’s are one important element that tends to get overlooked in the conversation around unemployment benefits. Getting it right now in terms of policy, he said, could accelerate the recovery going forward. “Is the best policy goal to get people immediately into jobs, or do we want to give them the ability to take the time and figure out what the right job for them is?”

Paring back unemployment benefits, Bunker said, might satisfy the needs of labor-intensive, low-wage industries in the short term, but there is a significant cost, as well: Forcing people to take the first job they come across, regardless of how well it dovetails with their skill set or career trajectory, is a wildly inefficient use of the nation’s vast pool of human capital, and virtually guarantees a less-robust return on the investments employers and individuals have made in training and professional development.

“For the longer run, it does seem like you want the best possible match. That might slow things down a little more, but in the longer term, that might be better for the economy overall,” he said. What appears to be a sluggish labor recovery, he suggested, might actually be workers laying the groundwork for greater future stability and positioning themselves for higher-earning opportunities.

“There's a current of opinion that says people don't want to work or are sometimes choosing not to work,” Jones said, a notion he was quick to rebut.

“We had a job fair yesterday with people out the door. We hired four people on the spot during the day,” he said. “It was a happy thing to see. It reinforced to me that there are workers out there looking for a job. It’s just our job to make sure we find them.”

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Is it a sluggish labor market — or workers positioning themselves for better opportunities? - NBC News
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