Lately, there have been a lot of reports about employment rates in the US are rising steadily. They seemed right on track for economic recovery and unemployment claims were reducing. The jobless claims also showed that the application for unemployment benefits fell below 500,000 for the first time since the initial lockdown in 2020. On the other hand, restaurants are facing a shortage of employees causing them to stay shut or close earlier than usual. Signs can be spotted saying “No one wants to work anymore.” But these are two very contradictory statements.
Well, their unemployment rates had been reducing. It went down to 6% in March. There was a lot of anticipation for the release of the US job reports for April. Economists expected a further drop in April; instead, they were surprised with a rise in unemployment rates to 6.1%. Employers only added 266,000 workers in April, compared to 770,000 in March. This happened despite many states easing Covid related restrictions.
There are a few reasons why this could have happened…
Unemployment benefits are incentivizing people to stay at home! Last year, a lot of people lost their jobs due to the pandemic. In order to help them, the Trump Administration provided them with financial support. This was followed by Biden’s $1.9 trillion stimulus plan, which included $300 weekly. Some of the workers prefer relying on these benefits instead of actually working. The wages they earn by working are either less than or close to these benefits. Which is why, it isn’t motivating enough for them to go to work. The government needs to keep the benefits so that they aren’t too generous because workers might not go back! But they shouldn’t be too miserly, in order to actually help those who need the benefits.
The second reason is somewhat connected to the first one, low wages paid by employers. Apart from the wages, the benefits aren’t much. Especially because of Covid, health benefits hold more importance while people are looking for benefits included in jobs. Many workers started demanded higher wages. Soon, companies realised that they were facing a shortage of employees and have no other way but to increase their minimum wages.
McD raised the hourly wages for more than 36,500 of its employees. They said that their aim is to increase wages by an average of 10%, as well as hire 10,000 new employees. Under pressure from labour activists, Costco, Walmart, Amazon and others are also in talks to increase their minimum wages. In April, America’s average hourly pay rose 0.7%. That’s a weighty gain for just one month!
Companies spend a very low percentage of their total operating profit on wages and employee benefits. In some cases, it’s even going down. They are hesitant to pay their employees a decent wage and provide them with benefits.
The pandemic isn’t over! While things are much better and government is easing restrictions, everything isn’t back to normal. People are still getting infected. Some workers are apprehensive of going back to work, especially in hospitality sectors because these are service based sectors which involve interacting with customers. This puts the workers at risk. Further, children still have online school in most states. Which means, they need a guardian to stay home with them, restricting their freedom to go to work.
According to financial times– while men continued to pour back into the labour force last month, women retreated from it, meaning fewer females were employed or were searching for work compared to March.
As outlets and malls are opening up, revenge spending is on the rise. Revenge spending is basically overindulgence in retail therapy by those who have missed shopping because of the lockdown. This has been coupled with inflation to give the economy a boost. This could provide a much needed boost to the labour market in the US.
It’s going to take some time for everyone to get back to work. A combination of incentives from employers and fewer Covid cases should do the trick. Wishing the economy a speedy recovery!
Here’s what people think about this:
The Echo-nomist 
Leave a comment