Employers added 199,000 jobs in December. Certain outlets will try to put a positive spin on that number. It was a huge miss based on estimates. The market was expecting a non-farm payroll increase of 422,000. So, it was a miss of slightly more than 50%.
U-6 dropped slightly from 7.7% to 7.3%. This number represents the total unemployed, plus all persons marginally attached to the labor force, plus total employed part-time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. To define it further using Bureau of Labor terms, persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part-time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.
It’s super hard to put your finger on why our unemployment numbers in America have been so consistently anemic since Biden took over. I don’t think it is any single factor. Many people point to the Covid government transfer payments that propped up families during the forced economic shutdown. Those payments and the corresponding rent forgiveness went on far too long.
However, the Democrats need a fear angle to try and win the 2022 midterms, so they kept policies in place that kept people fearful. They also utilized their media mouthpiece to keep spreading the fear message.
I know people that will simply not go out of their homes they are so scared.
Reading Glenn Greenwald’s piece from yesterday helps put it all into perspective. He is correct that the Bush 2 administration used fear as a weapon against American citizens as well. Remember all the Homeland Security warnings about upcoming or potential terror attacks in the US? Because we in fact were attacked on 9/11, the Bush administration used them to their advantage.
Biden is doing the same with Covid and the farce of January 6th.
One thing that has happened with Covid policy is this; many in government were pushing for a $20 minimum wage. The “fight for $20” is something you might recall. I cannot find the source, but I recall reading that with transfer payments, the average hourly wage for people was $22. There is no end to the government money faucet.
Businesses are having trouble incentivizing workers to leave their homes and come to work.
A segment of radical Americans has been advocating for Universal Basic Income for the past few years and with the way the government has been doling out money to individuals via Covid bills, we now have it and see the results of it. UBI is a terrible policy and is terrible for the fabric of a country.
A lot of the unemployment problem is Covid policy. Many people don’t want to be vaccinated and why should they? Mayo Clinic just laid off 700 people. Expect shortages of workers there and longer wait times. If you were part of the 99.98% of people that miraculously survived Covid, you are many times more immune than a vaccinated person who didn’t have Covid. Mask mandates also keep people away. Who wants to wear a mask all day, especially when it has been scientifically proven they don’t do anything? The marginal benefit of wearing a mask is close to zero.
These policies aren’t driven by science. They are driven by litigation attorneys who are looking at the downside risks. They are advising their clients on policy based on potential lawsuits and potential harm, not based on objective statistical data or even data with a modicum of science.
It is also worth noting that doctors have a zero-tolerance policy when it comes to getting sick. Zero tolerance doesn’t work for public policy. I can’t help but think that the age and health of the people setting policy also has a high input on the policymaker’s decision-making. JB Pritzker is grossly obese. Grossly obese people have a much more difficult time with Covid and die in greater numbers. So do older people. The average age of Covid death is 78 years of age. Our octogenarians in government are more sensitive than someone in their 20s might be.
States that have lockdown Covid policies also are discouraging work. Places like California, New York, and Illinois make it hard for people to open businesses and serve customers. Who wants to go to a gym, work out, and wear a mask? If you are a trainer, you want to wear one of those things all day?
People that can are moving away from shitty Covid policy states to “free states”. The data on this is crystal clear despite the protestations and deliberate deceptions of media and politicos in the states losing population. It also turns out that in the Venn diagram of states that have shitty Covid policy, they intersect and are the same states that have high taxes, high regulation, and lower degrees of personal liberty.
People have finally had enough.
I went to dinner at a place last October. It was refreshing. None of the servers or staff had masks. None of the diners had masks. It was just like things used to be. Normal. No one got Covid and we had a great meal.
I am wondering what it will take for people in areas that a totally a mess to quit paying taxes. If I am a business or individual in Chicago or San Francisco, why am I paying a cent in tax to the city? I don’t get public schooling. I don’t get policing. I don’t have good infrastructure that works. Basically my tax dollars go to fund a corrupt political machine.
A big part of our labor problem is the pool of workers is smaller based on demographics. Remember, the youngest part of the huge baby boom generation is turning 60. The generation behind that is small. Then comes the millennial generation which is huge. They are roughly ages 25-39 now. The nature of work that you can do at age 25 is really different than when you are twenty years older at 45.
That millennial generation is ideologically very different than the generations that preceded them. Family formation is happening later. Different things are important to them. This is neither a “good or bad” thing it just is. Millennials are motivated by different things than prior generations.
The social safety net our government has set up has decreased the desire to work. Entitlement spending consumes 70% of the federal budget. All kinds of people figure out ways to get government checks. I remember my friend Bill Sheperd telling me that he was glad when he was 18 he couldn’t get any government money. He said he might have just gotten a trailer, a case of beer every few days, and just sat around. It’s not that bad today but the anecdote has manifested itself into the workforce.
There are a lot of jobs out there, it is just that the workforce thinks those sorts of jobs are beneath them. Or, they want more pay than the employer is willing to pay. So, there is a mismatch.
My generation was mostly motivated by earning a living. Any sort of living. We were the children of the Depression Era people. People survived the Depression, and World War 2. We grew up in the tumultuous 1960s and high inflation 1970s. All we wanted to do was make money. My baby boom generation has had it super easy compared to other generations that passed through America and we didn’t pass along the same values to the next generations. The millennial generation doesn’t have that very strong work ethic in large numbers. They are motivated by experiences. They want to be at the top of the food chain today and don’t understand why they have to work through the hierarchy to be there.
A piece of advice. If you are a millennial and you work hard, are honest, treat people well, and take calculated risks, you will make a lot of money. Take your time early in your career to learn the finer points of what you are doing. If you can, develop a network of mentors. Have great attention to detail. The incentive for work in your generation is just not as strong as it was in prior generations.
I have told this story before but when I was 24, the most I ever made on the trading floor was $400/week. I worked 12 hour days minimum learning. I did bullshit tasks, but someone had to do them. I also did what seemed to be bullshit tasks which actually became very meaningful later. When you are young, you don’t have the full picture of the entire tableau you are participating in.
Given the smaller demographics and the absolute hunger for talent on behalf of businesses, labor today has the most pricing power I have ever seen.
That means there are only two answers. The first is that businesses are going to have to cough up a lot more to get quality labor. This means costs for everything are going up since labor costs are the single biggest input to production. Combined with the damaged supply chains and government policy that disincentivizes competition, prices will go up. Additionally, government policy is misguided when it comes to energy policy. Energy is a large input into the costs of production. Because the cost of energy is going to continue to go up, that will cause prices to rise as well. The Democratic Party is endorsing a war on indigenous energy production. The next thing you will see is businesses are going to embrace robots and software like never before to cut costs.