View of the New York Stock Exchange (NYSE) at Wall Street (Photo by Angela Weiss / AFP) (Photo by … [+]
Investors reacted positively to the job’s numbers this morning.
At 4:00 pm the S&P closed up and peppy at a 2% increase while the 8:30 am employment situation showed more inequality, soft labor markets, and bargaining power continuing to shift to employers because fewer men and women are working. Because so many workers are waiting in the wings, it will be harder to ask for a raise or for better working conditions. Even in the very profitable sector of on-line shipping labor conditions are eroding. In September 2020 investigations revealed Amazon worker injury rates are increasing. Bad news for workers means good news for profits.
Employers have the whip hand in this market environment, profits should stay robust as workers accept few raises and better working conditions to keep their jobs.
The share of the population working is quite low. Before the pandemic, in February 2020; 69.3% of men over 20 and 57.4% of women were employed for pay. In February 2021, that ratio plummeted so that only 65.5% of men and only 53.7% of women were employed. The unemployment rate, at 6.2 percent, and the number of unemployed persons, at 10 million, changed little in February.
The fastest growing portion of the labor market – people over age 55 – have less bargaining power than in the past because unlike other recessions older people are hit harder in this recession compared to prime-aged workers Many of these laid-off older workers will be permanently unemployed. (See Table A-9)
Another sign that profits should do well at the expense of wages is my “labor power index” – the “take-this-job-and-shove-it” number I can compute from Table A-11. The index is the share of people who are unemployed because they left their job voluntarily. In good times, in February 2020, the job leaver ratio was quite high — 13% of people looking for work were those who left their employer – a gutsy thing to do before lining up another job. You can be gutsy in tight labor markets.
But the pandemic took a toll on labor power. In August 2020, job leavers were a tiny share of the unemployed only 4%. Today, that job leaver number is 7%. Those unemployed because they are job losers or completed temporary jobs are a high 66% of the official unemployed, compared to February, back before the pandemic, job losers were less than half of those looking for work, only 47%.
The winning and losing sectors show that, though shuffled around, the for-profit private sector is doing fine. Consumer demand for private goods has shifted. My mother took her stimulus check and bought me lobelia for my garden – thanks Mom — while I stopped traveling and caring about my airline frequent flier miles. Since I am just like everyone else my life shows up in the statistics. Building material and garden supply store jobs are up over 10% from last year, but airline, scenic and sightseeing jobs have lost about 28%. The profits in the private sector might be shifting around, but the profit picture still looks rosy. (See Table B-1 for the sector changes).
Profits may by helped by little pressure on taxes and little pressure for essential public sector jobs. The essential sectors, where we need more employment are doing poorly. Since February 2020 child care services are down 17% and emergency and other relief services down 3%. Employment in local schools have dropped nearly 9% just when we need more school aides, social workers, and IT experts to keep the students connected to their teachers, peers, and their education. The unequal effects of school closures are having a large and persistent effect on students from poor neighborhoods whereas children from rich neighborhoods remain unscathed. Since schools could not be open for school as usual we could have provided extra resources children of children whose parents needed to work and to provide much more aid poor schools to keep their students on track. Some have called for the jobless bartenders and airline stewards to be redeployed as school aides and contact tracers and for a federal job guarantee.
Demand will go up for private goods as for-profit companies may lobby successfully to keep their tax rates low.
Profits should do well because the Senate may pass most of the $1.9 trillion stimulus, most of it going into the pockets of private households to buy private goods from for-profit business. More Disneyland trips and fewer home grown gardens.
We have a long way to go to reach pre-pandemic levels of employment. As President Biden’s spokeperson said today “At this month’s pace, it will take us more than two years to get to pre-pandemic employment levels, and will take even longer at the average pace over the last three months. That sentiment bodes well for the Senate to pass the stimulus and the President to sign the bill.
I joined The New School in 2008 after 25 years as a professor of economics at the University of Notre Dame. My recent book, co-authored with Blackstone’s Tony James and