This past week’s report that the jobless rates in Leflore County and all of Mississippi were the lowest they have been in decades must have led to some head scratching.
What about all those labor-strained employers grousing that people are getting so accustomed to the pandemic-driven surge in federal handouts that they have lost their desire to work?
If that’s so, why are the jobless numbers not increasing, rather than hitting lows that haven’t been seen at least since the 1980s?
It may be that what employers thought was the root of the problem was only part of it. Mississippi cut off the extra $300 a week in unemployment benefits in June, and while maybe that has caused some people to go back to work earlier than they had planned to, it hasn’t fixed the labor crunch.
Just as big of a problem may be the number of people who, because of the pandemic, decided to retire earlier than anticipated, or have decided to take a break from work either because they have young children whose school situation is still in flux or because they themselves are anxious about being exposed to the virus, whose variants unfortunately just seem to keep on coming.
The jobless rate can go down either because more people are finding work or because more people are dropping out of the labor force. Both appear to be what’s behind the dramatic drop in the jobless rate.
If anyone needs a refresher, in April 2020, the month following the first reported case of the coronavirus in Leflore County, the unemployment rate soared to 16.7%. This past month, it had dropped to one-third of that, hitting a low of 5.6%.
In Mississippi as a whole, the same thing happened. In April 2020, the statewide rate was 15.4%; this October it was 3.9%.
The Mississippi Department of Employment Security, which releases the monthly jobless numbers, keeps on its website a record of the figures for the state and every county going back to January 1990. This is the first time in the past 382 months that Leflore County has broken the 6% mark and Mississippi the 4% mark.
That’s pretty close to full employment, since it’s generally estimated that around 4% of the technically available labor force is unemployable, either because those individuals lack adequate job skills, have substance abuse problems or can’t be depended on to show up for work.
The labor shortage is putting pressure on employers to raise wages in an effort to meet customer demand, whose spending has soared both because of the loosening grip of the pandemic and because the federal government put so many trillions of dollars into the economy to keep it from tanking.
Some of this rise in wages, though, is not sustainable.
Hospitals, for instance, can’t afford for long to pay nurses more than $100 an hour, which is what some traveling nurses command, before they start feeling pushback from patients and insurance companies that are hit with higher bills.
When a business is faced with much higher labor costs, it has only one of two choices. Raise prices or reduce profits. Higher prices produce lower demand, and reduced profits push companies out of business. Either is ultimately bad for workers, as both produce fewer jobs.
Companies all over the U.S. are desperate for workers. There were a near-record 10.4 million job openings in September. Employers are competing among themselves for labor and bringing on employees who in the past might not have met their standards. They are also having to accommodate the demands of some workers who want more flexibility on when and where they work.
The result has been a lot of churn, either because qualified workers are changing jobs more frequently or because the less qualified are constantly dropping in and out of the work force.
Eventually, this will settle down.
There is no fooling the forces of the free market for long. The market will correct itself and find the equilibrium between supply and demand that it inexorably seeks.
Currently the demand for labor is greater than the supply. Good for workers, bad for employers.
That will only go on so long before the pendulum swings the other way. Some employers, already inclined to automate, will speed up that process. Others will increase their efforts to hire immigrants, whether legally or illegally. Others will raise their prices to the point where they are uncompetitive and lose market share.
When those forces meet, labor supply will once again exceed demand, and those historically low unemployment rates will head in the other direction.
- Contact Tim Kalich at 662-581-7243 or tkalich@gwcommonwealth.com.
