It’s an interesting phenomenon that a top-tier financial newspaper could, without adding a big smile, run a headline like yesterday: “US economy added 428,000 jobs in April despite shortage of workers.” Imagine how many new jobs would be created if there was no “shortage”!
At least in the economic sense of the word, there is no loss More labor than lack of oil, ammunition, or diamonds: these things are much more expensive and more expensive than they have been in the recent past. One can define ‘shortage’ as one would like it, but if it is defined as ‘high price’ or ‘increasing price’, we need another word for ‘not available at any price determined by the market’, which is the way economics defines it.
By fostering confusion between unavailability of the market and availability at a price that many consider to be too high to justify a purchase, one abandons the possibility of useful analysis.
That employment opportunities appear to be greater than incumbents at a wage rate lower than the market clearing rate is not, in and of itself, a useful piece of information. For example, I have a permanent vacancy for a Ph.D. Research assistant $5 an hour. Not having an incumbent does not mean that there is a shortage of labour; It just means that I don’t need a research assistant at the price these guys and girls make in the job market.
We may sympathize with Federal Reserve Chairman Jay Powell’s efforts to continue his extensive training course in economics since President Donald Trump nominated him, but that shouldn’t stop us from realizing that an announcement like the one he just made doesn’t make much economic sense (quoting the same) financial times Report):
The demand for labor is very strong, and while participation in the labor force has increased somewhat, the supply of labor remains low.
“Poor” labor supply is not a technical expression, so let’s try to see if it means. That these slaves do not work as much as the political authorities want? Mostly not. Mr. Powell is probably only trying to blind his listeners with the idea that the supply (curve) of labor is not elastic enough and that it would be too nice, and would make the employers very happy, if more people were willing to jump the labor force for wages which they considered would not make up for their lost leisure time. It will be very good If the workers were not such giants! Or maybe this is how some in the Fed’s army of economists have tried to swoon their boss?
If there is an imbalance in the market, it is likely to be surplus Labor resulting from minimum wages and forced union privileges, both of which prevent less productive workers from competing for lower wages in order to find jobs. But note that the growth in real market wages that accompanied the high demand for labor in the post-pandemic recovery (before inflation picked up its ugly head) meant that any labor surplus was reduced, which is underlined by the low unemployment rate.
Inflation, the product of new money created to partially finance the federal government’s recent deficit, is a real but different problem. As the Bureau of Labor Statistics notes, “Over the past 12 months, average hourly wages have increased by 5.5 percent.” Even if we add advantages, the increase in wages is probably less, and certainly not much higher, than the current estimated increase in the general level of prices (that is, the rate of inflation), depending on the indicator used. Which indicates another problem with the “shortage” narrative: if there is a supposed temporary gap between the quantity demanded and the quantity supplied of labor, there will be strong upward pressure on fact wages. Without these real wage increases, it is no wonder that employers are having trouble attracting toilers who are wage-riggers. Perhaps the lack of a strong (median) real wage increase appears only as a temporary lag, assuming a recession is not on the horizon.
One way or another, it seems quite clear that, at least in the labor market in general, there is no more shortage than in any other market that is relatively free, or not very free.