Labor market is tight, but it's not entirely strong

Daily Data: Rising wages and low unemployment are definitely good though

In today’s dispatch:

• tight is not necessarily strong, but it’s a common misconception

• something about the excess retirees

• supply of workers is closing in on demand (and a surprising thing about demand)

• unemployment is lower, but not everywhere

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Labor market is tight (but not entirely strong)

A very common misconception is that rising wages and low unemployment mean that everything is awesome.

Wait, wut? Of course rising wages and low unemployment mean everything is awesome.

Nope. Not necessarily. I mean, I’d almost certainly rather have those things, than not have them, but they don’t mean everything is awesome.

Go on.

If the labor force shrinks, because, I don’t know, everyone is getting older and neglected to make babies, then you can also have low unemployment and rising wages, but the bigger picture is decidedly not awesome.

Hmm.

Oh yah. It’s a labor “shortage.” It’s inflationary in the bad way. Services are just worse now—less bang-for-the-buck. I mean, if you had a famine, you’d have less “unemployed” food, and your food would have much higher “wages,” but that wouldn’t be good.

I see. So if it’s not low unemployment and higher wages, then what do you want?

I mean, you do want those things, but you want them to reflect more people being productive, more work to be done, and/or more productivity from the ones you got—those are signs of strength.¹But if unemployment goes down just because people left the workforce, no, that’s probably not good.

Sounds doable.

Of course, but y’know, the first step is admitting you have a problem.

Seniors OUT

Anyways, Random Walk has been beating iterations of this drum for ~2 years now because it’s by far the most important drum to beat.²

It explains why inflation has been so persistent in precisely the areas where it persists, why growth has been and will be increasingly hard to come by, why borrowing as though growth is right around the corner is so reckless, and why generally, things are not as they seem.³

We’ve had one of the greatest demographic tailwinds civilization has ever known for a half-century+, and now it’s rolling over. It’s a new normal. Time to wake up.

Well, the good thing is that people are starting to wake up (maybe).

Now everyone has realized that actually the open border is a pretty big deal (which is OK to say now, because it helped bring wages down when that’s a good thing, because ordinarily you would never want to admit that the increased supply of labor could have a deflationary effect on wages . . .).

OK, cool.

The SF Fed just noticed something neat too (and I’m very jealous that I didn’t think of earlier). I was so close, too.

Remember the “excess retirees?”

Well, if you had “all the excess retirees were ‘blue collar’ workers” on your bingo card, then you win:

“Without college degree” retirees exited the workforce with unexpectedly high propensity, while everyone else was more or less on schedule.

By golly, if an aging population didn’t run headlong into a “pull-forward” of retirement, leading to a shortage of service workers (and higher prices for those services), then . . . well, I’m just saying, it’s more evidence that that’s exactly what happened.

Remember how there were too few truck drivers, skilled tradesmen and that sort of thing? Look no further than no-college retirees.

Why did they retire? Could be all the HVAC, car wash, lawn care, and pool-service roll-ups made offers that couldn’t be refused, lol.

Fewer people, same jobs

Another thing that people are starting to realize is that “hey, ‘labor tightness’ isn’t necessarily ‘labor strength’ because, as it turns out, we’re not actually demanding “more work.”

We’ve just had fewer workers.

The “more work” part is very much a work-in-progress, as, at least, the following data would suggest.