Work in progress
Sam Wolkenhauer, regional labor economist, Idaho Department of Labor, speaks at The Coeur d'Alene Regional Chamber's Upbeat Breakfast at The Coeur d'Alene Resort on Tuesday.
Hagadone News Network | February 15, 2022 1:00 AM
You know that labor shortage going on?
The one that has left employers desperately seeking employees?
The one that's caused some businesses to reduce hours because they don’t have enough staffers?
The one that has led companies to boost pay and benefits to attract employees?
It's not going to just fade away.
“We need to get used to this reality that labor markets are just going to be tight, and that labor shortages are going to be our new reality,” said Sam Wolkenhauer, regional labor economist, Idaho Department of Labor.
He told about 150 people at the Coeur d’Alene Regional Chamber's Upbeat Breakfast on Tuesday that businesses can’t take it for granted they will find workers.
He said almost 50% of small business respondents to a recent Census Bureau survey said labor shortages and labor costs are their biggest concern.
“Some people are not going to be able to fill their open positions. They're going to have to come up with other solutions,” he said at The Coeur d’Alene Resort, citing examples of raising prices or raising wages.
He said "human capital" problems won't be solved by momentum of the market, either. Some businesses will go under for lack of workers.
“There are going to be losers. And that's what happens in markets," Wolkenhauer said.
In a sometimes humorous 40-minute presentation packed with tales of caution and red flags about the economy and labor market, but mixed in with optimism about the U.S. ability to print and give out money, Wolkenhauer reviewed the latest regarding inflation, housing, transportation and the country’s monetary matters.
He said past economic crises, such as The Great Depression and the housing crash of 2007, generally were driven by financial issues and had little to do with the physical capacity of the economy.
Not the case today.
“Right now, the main constraints on the U.S. economy are all in the physical realm. They all concern getting physical product, physical raw materials, physical labor," he said. "And so this is kind of a new position for us to be in."
Housing is following the same dynamics: Demand is up, supply is down.
“The main reason homes are so expensive is because there's not enough homes,” he said.
He said the U.S. isn't facing a “hyperinflationary" scenario.
“And here's why. It's because the U.S. dollar is kind of omnipotent,” he said, smiling.
The dollar is the global currency. Almost 90% of all foreign exchange trades globally involve the U.S. dollar.
“So everybody loves our money — they can't get enough of it," Wolkenhauer said. "And basically, that just lets us print as much as we want. And nothing bad ever happens to us. And nobody else can do this."
He said the dollar is gaining value relative to gold, silver and foreign currencies.
He compared the government sending out stimulus checks during the coronavirus pandemic to dropping money out of a helicopter.
“It's worth noting that only America was like, 'Just print money and hand it out,'" he said, as the crowd laughed. "And it's because we have this superpower because everybody loves our currency."
Wolkenhauer addressed the obvious question: Where did all the workers go?
“Right now in the state of Idaho, we have roughly three times as many open jobs as we have unemployed people. So at a certain point, you're playing musical chairs with employees,” he said. “And the dynamic of that game is that somebody gets left without a chair.”
He said even if everybody who was unemployed in Idaho got hired today, two out of three jobs would still go unfilled.
“So this raises an obvious question: What's wrong with our labor supply? Where did all the workers go?"
Some factors he cited were lack of skill levels, low population growth, lots of retirements, choosy job seekers and accumulated savings during the pandemic when people slashed spending.
Another is what he called falling labor force participation, which is the percentage of adults who are working. It was just above 7 out of 10 in 2000 but has fallen to nearly 6 out of 10.
“Now this is shrinking for two reasons. One, because the population is getting older so more and more adults fall into the retirement group,” he said.
The other is that labor force participation for working age males is declining, too. Wolkenhauer said that's tied to alcohol and drug abuse and video game addiction, which he called “disabilities of despair.” Depression, too, can keep people from working.
“This is a real issue. This keeps tens of thousands of people, mainly men, out of the workforce,” he said.
He said national population growth is down, too. For the first time in American history, more than half of 30-year-olds don't have any children. That means fewer workers down the road.
"Now Idaho has been able to cheat this to a certain extent by essentially poaching people from other states," he said. "Individually, states and regions can grow. But it's by reallocating where people live within the country. You're reallocating a stagnant overall pool of labor."
He said COVID ramped up early retirements. It was estimated the country would have about 47 million retirees today, but it’s approaching 50 million.
"These people were going to retire anyway, but the accelerated timetable is very inconvenient,” Wolkenhauer said. “Especially because baby boomers have a lot of institutional knowledge. They're very experienced, they're generally quite productive workers. So that's a lot of human capital that just kind of fled during COVID."
There’s a perception that once the pandemic is done, everything will go back to normal, Wolkenhauer said, but it won’t.
“Normal has changed. Normal excludes a lot of people that have retired. They're not going to come back to the labor force," he said.
He said that in December alone, five million people quit their jobs.
“What this reflects is that workers know that they have the leverage,” he said. “They know that there are so many open occupations that they have the ability to shop and be choosy and look for what they want.”
The main problem with the U.S. economy right now is not monetary, he said. It's not fiscal. It's not the national debt or consumer debt.
"It’s that there's not enough of the physical things that we want, and what are the physical things we want? Products and human workers. There's not enough of either of these things. And that's why we have inflation and why we have a labor shortage.”
He said labor shortages "are just a chronic reality that we have to deal with" due to "a demographic issue that's very difficult to solve."
Wolkenhauer said inflation will likely remain elevated because of a complex globalized economy and supply chain problems before things start to iron themselves out.
"But it takes time because we're dealing with physical issues. You can't just physically clear a backlog port instantaneously or churn out more longshoremen," he said. "So it could moderate, but it's probably going to remain higher than normal for a couple of years.”