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The US is beginning to return to normal after the pandemic recession, and all eyes are on the job market. During lockdowns, unemployment claims reached catastrophic heights as many businesses were forced to close.
Now that these establishments are opening back up, owners are struggling to find employees. The labor shortage is highest in the service, manufacturing, and hospitality sectors. Think restaurants, fast food chains, retail, warehouses, and more.
There are several factors to consider when determining the reasons for the labor shortage. Child care has been less convenient, causing more parents to leave the workforce. The virus has altered what people consider safe and worthwhile.
However, the main culprit is likely that businesses aren’t paying employees enough, and government handouts are disincentivizing people to work.
Businesses Are Desperate For Cheap Labor
Companies are looking to fill low-wage jobs but are having trouble finding people willing to work them. Nearly everywhere you go, you’ll see now hiring signs with some offering higher than average pay and hiring bonuses.
Most small businesses cannot feasibly afford to raise wages for low-skilled jobs. RIP small business. However, large corporations like Amazon, Walmart, and McDonald’s have already significantly increased wages yet still struggle to attract a workforce.
Several restaurants and fast-food establishments have been forced to closed due to a lack of workers. This could be a temporary problem as the economy recovers, or it could signal a deeper, more long-term issue.
Government Dependency and Willingness to Work
Millions of people have been paid to stay at home and have really appreciated the value of their free time. Going back to work and getting paid less than what unemployment benefits offer doesn’t make sense now, does it?
Enhanced unemployment benefits are coming to an end in several states across the US. This may encourage more people to return to the workforce. However, it’s a time will tell situation, and more progressive government policies could continue to amplify the problem.
Wage Growth Compared to Inflation
Wage growth isn’t keeping up with inflation and hasn’t really for decades. The real inflation rate is much higher than the manipulated numbers put out by central banks. It’s highly discouraging for people to return to work when the cost of living is worse than before the pandemic and wages aren’t keeping up.
The labor system has always been somewhat broken, but it is now very apparent. The decline in purchasing power and the rise in the cost of living is not sustainable for most lower to middle-class Americans.
May 2021 US Market Performance
May 2021 Market News Highlights
AMC stock is squeezing the shorts. AMC shares have gone up over 1,100% since January, and short-sellers have lost $1.2 billion. Retail investors are flocking to the meme stock, hoping to get rich and stick it to the suites. It’s a similar story to the GameStop short squeeze, and it will be interesting to see how it unfolds.
The Colonial Pipeline got hacked. The pipeline serves 45% of the east coast fuel supply and was forced to temporarily shut down by hackers. The company ended up paying a $4.4 million ransom in bitcoin to make the pipeline operational again.
Inflation is transitory. According to the Federal Reserve, the jump in inflation is only transitory and is nothing to worry about. While some people agree, others think the Fed is underestimating the potential for a disastrous inflationary spiral.
China’s population growth is in decline. The country reported population growth of 1.41 billion over the past decade. The number is the lowest rate of growth reported since the 1980s. To help growth rebound, Chinese leaders adjusted the birth limit to allow couples to have three children instead of two.
The chip shortage isn’t going away. The CEO of chip manufacturing company Intel stated it could take several years before the global semiconductor shortage is resolved. The pandemic has amplified semiconductor demand and weakened supply chains.
US Economic Indicators Recap
Personal income decreased 13.1 percent month-over-month in April, beating forecasts of a 14 percent drop.
Personal spending rose 0.5% month-over-month in April, matching expectations.
Corporate profits fell 0.8 percent in the first quarter of 2021, missing market forecasts of a 2% rise.
Inflation rate rose 4.2 percent year-over-year in April, coming in far above estimates of 3.6 percent.
Producer prices increased 6.2 percent year-over-year in April, slightly beating forecasts of 6.1 percent.
Consumer sentiment dropped in May to 82.9 compared to April’s reading of 88.3, marking the lowest consumer sentiment level in 3 months.