Federal Unemployment Benefits Ended... So Where Are All the Workers?

Yesterday I saw someone ask in a local Facebook (FB) group why two different Starbucks (SBUX) locations in my New York City neighborhood are temporarily shuttered... The closures had also struck me as odd, as these stores have been busy. My neighborhood always had a lot of people who work from home – and has […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Federal Unemployment Benefits Ended... So Where Are All the Workers? By Berna Barshay Yesterday I saw someone ask in a local Facebook (FB) group why two different Starbucks (SBUX) locations in my New York City neighborhood are temporarily shuttered... The closures had also struck me as odd, as these stores have been busy. My neighborhood always had a lot of people who work from home – and has even more now. During the day, the many retirees, stay-at-home moms, and high schoolers in the neighborhood kept these stores popping. Lack of demand couldn't be it... even the tourists are starting to trickle back here for the Natural History Museum and other local draws. One person explained that a barista at another local Starbucks said the temporary closings were due to staffing shortages. Another poster wrote that they had faced similar issues with closures near their office in Midtown and were told that labor shortages caused the company to consolidate the employees they did have into a few locations and close the others for now. It's ironic that after surviving the lockdowns and public health devastation of spring 2020 in the city and the long COVID-19 winter that followed, that retail locations in New York City are closing now. These stores made it through the worst, only to shutter now that schools are fully open and people are trickling back to the office, and most people who had fled to the Hamptons, Connecticut, or other spots are back. It is crowded here again... but apparently not with hourly workers. September 6 has come and gone... which was the date that federal emergency supplemental unemployment benefits officially expired. The extra $300 per week in unemployment benefits is gone, but the workers aren't back, as prognosticators who pinned the labor shortage on excessive stimulus had predicted. But this really shouldn't be a surprise as fully half of states had ended the supplemental unemployment benefits early in the summer, with little benefit to labor availability observed. Greg Daco, chief U.S. economist at Oxford Economics, told business magazine Barron's that "We find that enhanced unemployment benefits appear to only represent a marginal disincentive to work." As Barron's explains... Daco looked at the latest July state unemployment data and found that only seven states out of the 25 that ended unemployment benefits through July 3 saw a statistically significant decline in their unemployment rate. That's as nine states (plus Washington, D.C.) out of 35 that didn't terminate benefits also experienced a decline. His findings comport with recent research from the Federal Reserve Bank of San Francisco and the JP Morgan Chase Institute. The former says just one in seven workers offered a job would turn it down because of unemployment benefits; the latter finds that the impact from generous benefits on the job-finding of unemployed workers has been modest. A different report from JPMorgan Chase (JPM) looked at the states that cut unemployment benefits early and noted they didn't notch stronger July job growth than the states still paying the extra $300. The end of benefits should bring some workers back though on the margin... Goldman Sachs (GS) estimates the end of supplemental benefits could bring 1.5 million people back into the workforce by year-end. A Morning Consult survey in late June indicated that 1.8 million people – or about 13% of the people receiving extra benefits – had turned down job offers because of the extra government money, suggesting these folks should be back in the job market soon after that well runs dry. You can see that the return-to-work rate for the unemployed in August was marginally – about 4% – ahead in states that had cut off unemployment benefits early versus those that hadn't... Source: The New York Times So on the margin, there should be a little relief on the labor supply front, but it won't entirely fix the labor shortage by any stretch of the imagination. According to a comprehensive study done by academics at Harvard, Columbia, the University of Massachusetts, and the University of Toronto, when 1.1 million people came off the supplemental unemployment rolls, just 145,000 of them found jobs. At the same time – the five states that had the fastest job growth in July – Vermont, Hawaii, North Carolina, Rhode Island, and Alaska – all retained at least some of the federal benefits. So the end of federal benefits will be a small tailwind and not a gamechanger... Meanwhile, the end of the supplemental benefits on September 6 will pull about $4.2 billion out of aggregate household weekly income, which will likely be a headwind to consumer spending. As Daco explains, "It appears the expiry of benefits will weigh more on the personal income ledger of the economy than it does to support employment growth." So if it wasn't overwhelmingly supplemental benefits disincentivizing people to seek work that caused the labor shortage, what is it? This is the million-dollar question. [People have been quitting]( for a variety of reasons. Some workers that were furloughed or fired during the lockdowns found new work that pays better or is less stressful than the retail and hospitality jobs they left. A lot of that new work is entrepreneurial, as evidenced by a big jump in new business applications. Other people learned to live with less and chose to retire or stop working multiple jobs... 3.6 million people retired during the pandemic, about 2 million more than expected, according to the Washington Post. Some folks remain fearful about returning to work, particularly with the emergence of the delta variant of COVID-19. Some press reports cite parents that don't want to return to in-person work until their children can be vaccinated. Women with school-aged children left jobs in droves to take care of their kids as schools and afterschool programs were shuttered during the pandemic. Putting it all together, there are currently 4.9 million fewer people working or looking for work than there were pre-pandemic. The big unknown is how many of them will come back looking for work... and when. According to a recent Indeed Hiring Lab Survey, a number of unemployed people are looking to return to the labor force – they just aren't in any rush... Source: USA Today At last count in July, there were 10.9 million seasonally adjusted job openings but also 8.4 million people still unemployed. Even if every single one of those workers were matched with a job tomorrow, there would still be a modest shortfall of workers. But it's not so easy to assign 8 million people across 11 million jobs. There are skills mismatches... interest mismatches... and geographic mismatches. In some sectors – like hospitality and manufacturing – the number of unemployed matches up well against the number of job openings. But there are others where specific experience and training are required – like business services, education, and health care – and the job openings swamp the number of unemployed people. These jobs can't all get filled... Source: The Washington Post It's also long been a problem that in areas with a high cost of living, most hourly workers can't afford to live where they work. As housing prices have continued to rise, so has the length of commutes for many folks. With housing prices up 24% from February 2020 to June 2021 – and much more than that in some metropolitan areas – this problem is only getting worse. As housing gets less affordable in areas where the economy is presumably robust, more lower-income workers may be forced to move away... thus aggravating shortages. --------------------------------------------------------------- Recommended Links: [The Tiny $4 Stock Capitalizing On Tesla's Big Problem]( Elon Musk and Tesla still have one BIG PROBLEM that could derail the whole electric vehicle market. No, it's not lithium. It's another resource that's even more critical for electric vehicles. And right now there's one tiny $4 stock that is uniquely set up to benefit from this booming demand. [Click here for details](. --------------------------------------------------------------- [Silicon Valley insider reveals how to make 5x to 21x from Apple's new iPhone]( This is what most analysts are missing... and one expert says it could make you 5x to 21x your money if you act before September 30. [Click here to make sure you don't miss a thing](. --------------------------------------------------------------- One other factor that may be contributing to the labor shortage is reduced immigration... Visas for work, school, and tourism had already declined from 10.4 million in 2016, the last year of the Obama administration, to 8.7 million in 2019, before the pandemic took hold, according to data from the U.S. State Department. Numbers aren't out yet for 2020, but given pandemic travel restrictions, I would expect that immigration number to be down even more. Source: USA Facts People here for school are allowed to work part-time up to 20 hours per week while school is in session, and there are folks who come here under tourist visas and stay and take on work illegally. In fact, for around a decade, overstays of tourist visas have represented the majority of new undocumented workers, as opposed to illegal border crossings. So fewer people coming in on nonimmigrant visas means fewer available workers – including those with the right to work (students) and those with no work authorization (tourists). Another headwind to labor availability has been the slowdown in growth in H-1B visa issuance. After having roughly doubled in number from 2009 to 2016, these grew only 2% from 2016 to 2019... Source: USA Facts Had H-1B visas kept up that 10% compound annual growth rate from the prior seven years during the period since 2016, we would have about 150,000 more skilled workers right now – not a gamechanger, but some relief on the margin. Since many of these visas go to highly trained and educated workers in fields such as engineering and health care, it's likely that the drop in planned immigration of professionals – which was a pre-pandemic trend exacerbated by COVID-19 – is crippling the ability to find workers in those industries. Adding it all up, this labor shortage problem has many causes and no easy solution. And it's not just here... Similar issues with unfilled job vacancies are plaguing France, the U.K., and many other developed economies. This will sort itself out, and just like the problem is multi-faceted, the solution will probably come in many forms – the financial imperative of people running down their bank accounts, workers getting retrained or moving, rising wages tempting people off the bench, and possibly policy responses such as an increase in the regulated immigration of skilled workers and students. Until all this is resolved, workers may find themselves wearing multiple hats and consumers will have to learn to be patient... And possibly walk a little farther for that cup of joe. In the mailbag, kind words regarding the loss of my beloved dog, a reflection on Broadway reopening, and more on Brandy Melville... How much do you think factors like unaffordable housing, reduced immigration, or continued fear of contracting COVID-19 are contributing to worker shortages? What solutions do you see for bridging the gap between open jobs and unemployed people? Send an e-mail to feedback@empirefinancialresearch.com. "So sorry you lost your beloved pet Prince!" – Mari H. "Great post. Loved the personal note about Prince" – Bob D. Berna comment: Thank you to Mari and Bob for the kind words. "1) The Original BARK Co (BARK) fits in the pet space "2) Target marketing by Brandy Melville is not new. The retail chain 5-7-9 (size), FUBU (race). Were their policies scrutinized?" – Frank S. Berna comment: Frank, I hadn't heard of Original BARK... Thank you for highlighting it, and I will check it out. As for Brandy Melville and the sizing, girls who wear a 7 or 9 (roughly equivalent to an adult woman's 8 or 10) would not fit into anything at the store except perhaps an oversized sweatshirt, despite 7 or 9 being a size that does not indicate obesity. I can't think of any retailer that had as restrictive a size range as Brandy Melville. Even chains criticized for non-inclusivity in the past like Abercrombie & Fitch (ANF), Lululemon Athletica (LULU), and Victoria's Secret (VSCO) have provided a much wider size range than Brandy Melville, which is why it has received so much scrutiny. Brandy Melville's restriction to the smallest 25% of what would be considered a healthy weight range in combination with the fact it sells to teen girls – who are most prone to eating disorders and bullying – is what fuels its critics. Also, the 5-7-9 chain went bankrupt in 1999, which speaks to my point about Brandy Melville pursuing a strategy ill-fit for the contemporary times. Even if Brandy Melville started selling a wider size range tomorrow, the company would still be in jeopardy given what has come out about racially discriminative labor practices and sexual harassment of employees. Of course it makes sense that specialty retailers target and serve key demographics – and targeting narrow demographics determined by things like age, race, and body type can be a good strategy... but it needs to be done with respect for humanity while following the law. These elements are lacking here. "Berna, thank you for the links to the Broadway reopening videos! Also, great call on the tissues. I needed them halfway into The Lion King. Tears of joy." – Dave V. Berna comment: Dave, I'm glad you enjoyed the videos. I had the good fortune to catch a Broadway performance of Hamilton last week... The energy was incredible from both the audience and the performers, who are clearly so happy to be back. I encourage everyone to take a trip to New York to catch some shows this fall if able – it really is a special time to take in Broadway. "Hi Berna! I'm disgusted by the things I read in your article. My girls have loved Brandy Melville and I've spent thousands of dollars there, but recently some of their friends criticized their large supply of Brandy Melville as 'basic' and feel it's no longer 'cool.' I didn't realize it until I read your article, but I have a feeling that they were actually referencing some of the things that you wrote about here. "I think you are correct in predicting that the tides are turning for Brandy Melville. My girls are turned off from Brandy Melville anyway, but I will never spend another dime in that store after reading your article. We already have a similar ban in our house to SHEIN after they sold a swastika necklace last year. "Thanks for the information." – Wendy R. Berna comment: Wendy, I didn't know about fast fashion e-commerce site SHEIN selling a swastika necklace last year. It's truly mind-blowing that companies are still making mistakes like this one. For the curious, you can read more about this incident in a Buzzfeed article [here](. Regards, Berna Barshay September 21, 2021 If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2021 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 601 Lexington Ave., 20th Floor, New York, NY 10022 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. [Unsubscribe from all future e-mails](