It seems that everybody is hiring now… and yet, somehow, relatively few people are getting hired.
This “Great Resignation,” where a ton of people have seemingly left the workforce despite an abundance of jobs, is yet another post-pandemic mystery that has commentators everywhere wringing their hands and looking for someone to blame.
I can tell you that it’s not just clickbait – the data does indeed indicate something weird.
As the below chart shows, businesses have steadily opened more and more jobs over the course of the year, presumably in an effort to regain the staff they’d furloughed in 2020. They’ve been so gung-ho about it, in fact, that they’ve hiked up the compensation on offer almost 10% on average.
And yet would-be workers have apparently replied with a resounding “meh,” with only half as many Americans applying for jobs as there are jobs available. What’s the deal?
For a while, the easiest scapegoat was federal stimulus money from the CARES Act. Since Uncle Sam was being so generous with unemployment insurance and the like, people apparently weren’t in a big hurry to get back to earning a paycheck – especially on the lower end of the income scale.
But now that the aggressive stimulus spending is behind us, that explanation no longer seems to fit. And with increasing vaccination rates, the theory that retail and service workers are staying home for fear of Covid seems less likely too.
Another possibility is that people actually are going back to work, but the more traditional metrics aren’t catching it. Remember, “employed” and “unemployed” aren’t the only options, at least not as far as the Bureau of Labor Statistics is concerned. Turns out “self-employed” is its own category.
And when we look at self-employment specifically, guess what?
Yup – it’s at a ten-year high, well above pre-pandemic levels.
Finance pundit Josh Brown suggests this is because the massive job losses in 2020 allowed more people to get in touch with their entrepreneurial side, starting up small businesses and sole proprietorships rather than holding out for their 9-to-5 to come back.
So in theory, fewer people are applying for jobs because more people are now their own boss. An encouraging thought, and probably true to an extent… but sadly, the increase in self-employment isn’t nearly dramatic enough for that to be the whole explanation.
To show what I mean, here’s one more chart – this one comparing how much the amounts of job openings, job-seekers and self-employed have changed over the course of the pandemic, rather than just their raw numbers:
In the bigger scheme of things, the number of self-employed Americans has stayed pretty stable. And despite a year-long explosion, the number of job-seeking Americans has also started to normalize. The true outlier right now, it turns out, is the total number of available jobs – a full 50% higher than it was before the pandemic!
In other words, while the US labor market is indeed in a strange place right now, it seems that our label for the phenomenon is almost precisely backward. Far from a “great resignation,” we may actually be in the midst of a great recruitment – one hungrier than the American labor supply can satisfy.
As for how to explain that, well… I can only guess, and this email is already pretty long. But our discovery here is a great example of how some extra digging into the data – surprisingly little, in fact – can be enough to turn the popular narrative on its head.
– Graham