What’s the Model?

I wanted to pass along this interesting report from James Freeman in the Wall Street Journal:

Hiring surged again in April, but a record number of U.S. small firms were unable to find workers to fill their available positions. That’s according to the latest monthly employment report from the National Federation of Independent Business, due out later today.

“Strong job growth continued for small businesses in April. Firms increased employment by 0.31 workers per firm on average over the past few months,” says NFIB Chief Economist William Dunkelberg.

That’s the good news. The bad news for small companies is that between the competition from larger firms, supplemental unemployment benefits that discourage work, remote schooling that keeps parents at home and the lingering impact of the virus itself, it’s become nearly impossible for many employers to attract enough workers. Mr. Dunkelberg reports:

Forty-four percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, up 2 points from March. Unfilled job openings continue to mount as April is the third consecutive month setting a record high reading of unfilled job openings. April’s reading is 22 points higher than the 48-year historical average of 22 percent.
Overall, 59 percent reported hiring or trying to hire in April, up 3 points from March. Owners have plans to fill open positions, with a seasonally adjusted net 21 percent planning to create new jobs in the next three months, down 1 point from March. Many will be unsuccessful in this tight labor market, having to delay hiring or raising wage offers.

Speaking of rising wages, here’s the best news for workers in this NFIB reading on the tightest of labor markets:

Seasonally adjusted, a net 31 percent reported raising compensation (up 3 points), the highest level in the past 12 months. A net 20 percent plan to raise compensation in the next three months, up 3 points. More will be compelled by market forces to raise compensation… For some, this includes paying “show up” bonuses for workers who agree to take a job and actually show up for work.

I wanted to call out a number of interesting aspects of that report. Let’s just accept the report as factual. It actually says several distinct things:

• Employers are unable to fill positions.

  There are multiple possible reasons for that including that prospective workers are just unwilling to work, they’re unwilling to work at the pay offered, federal benefits play a role in that, skills mismatch, or just plain not enough workers.

• They’re offering higher wages.
• That in turn is evidence of inflation.
• The pace of new positions being offered is slowing.

  That suggests the recovery is cresting.

I would genuinely like to know what the Biden Administration’s model of the economy is, how they see the economy? I will refrain from speculating but will only offer the observation that which of those things you believe is happening should have some impact on the solutions you’re providing.

I know what my model of the economy is. I think we should be making much, much more of the things we’re buying than we do at present, that immigration should be limited to people who bring a net benefit to the society and economy rather than just more bodies, and that we should be encouraging capital investment and discouraging speculation on financial instruments. I don’t think the Biden Administration agrees with me and I’d like to know what they think.