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Last week I looked at how companies were planning for Q4 and the hidden pain that will accompany this year’s Holiday season. Conveniently the BLS also released the jobs report the same day. That set the stage for a broader look into the current labor situation in America. It’s a bit long, I had to put on my old economics hat, but it’s critical to understand our labor market in order to know how to sell to consumers. I go in-depth at the end explaining the unique relationship that exists between workers and consumers, but it hopefully provides a better understanding of the current labor situation in the states, and how inflation impacts that reality. You won’t need to get out any textbook to understand the Phillips Curve, because the reality of our current labor market is a far better example.
And as well, I feature a couple of great things I’ve read or started reading this week.
And as always, download my 130 slide consumer research deck looking at the future consumer in 2021, It’s a ton of primary research, and you can download it for free.
3 Stories
Jobs still down 22% for low-wage workers. They're up for everyone else - CNBC
Last Friday, the BLS reported that the economy generated 943,000 jobs last month, and the unemployment rate improved by 8% in July (5.4% in July, 5.9% in June). The so-called underemployment rate, including discouraged workers, dropped to 9.2% from 9.8% in June. And the most recent JOLTS report it highlighted that 3.9 million workers quit their jobs in June, which is a good sign because it typically means workers feel confident enough that they’ll find a better opportunity. With all this good news, the labor market should appear back in full swing, and the economy should be back to normal, yet why doesn’t it feel that way for most individuals? Because so many of these proxies capture averages or aggregates, it doesn’t capture the ongoing inequality seen both in society and in the recovery. While no one has mentioned the K shape recovery for many months, the byproduct of that still hasn’t gone away, as the recovery continues to address better and reward higher earners than mid to low-wage workers.
Aldi Plans to Hire 20,000 U.S. Workers in Holiday-Season Ramp-Up - WSJ
While employment opportunities for low-skill or low-wage workers haven’t caught up to higher pay positions, that may soon change given the rapid reopening, unpredictable delta lockdowns, and consumer demand for a strong Q4. Aldi, Walmart, and many other large US employers offer bonuses, significant pay increases, and everything else they can think of to attract employees to meet their holiday needs and demands. This increased need for workers to meet Q4 demand will give lower-wage employees, for the first time, in a long time, more power. And hopefully, cause employers to rethink how they’ll do business in the future, given the new pandemic realities to keep these higher-paid employees and maintain these higher wages.
Working Moms Face Greater Mental Load and Burnout During the Pandemic - Business Insider
We’ve spent a lot of time talking about the Holidays but haven’t spent nearly enough time talking about the “Back to School” season and the physical act of kids going back to school. Last year, during this time, parents, especially mothers, had to endure another school year of at-home virtual learning if you were so lucky even to have or provide a space for your child to take part in a virtual classroom. Daycare, child needs, home duties, and household duties are typically the mother’s responsibility on top of everything else. These pressures drove many women out of the workforce, and we need to acknowledge that for many women, they were not in high pay jobs that could allow them to maintain work-from-home flexibility while also being a mother. Now, as offices reopen, it doesn’t magically mean that everything is back to normal, as the pandemic still looms in the background. Your child may suddenly find themselves back to virtual learning for various reasons, and once again, the responsibility to be both parent and teacher will fall onto the shoulders of mothers. We, as a society, can’t afford to lose mothers again from our workforce (they are the best bosses and best teammates). We need to hold employers accountable for these realities. Hence, they create a new hybrid work model that allows mothers, across all skill levels and wages, to feel safe, comfortable, and confident to return to work and have confidence that they can be excellent moms.
2 Takeaways
Workers with less than a college degree are left behind as unemployment continues to improve.
As the US added 943,000 jobs in July, the gap to reach pre-pandemic US employment levels stands at 5.7 million jobs. The total number of jobs pre-pandemic was 152.5 million, and today we’re sitting around 146.8 million jobs. Digging deeper, we can see that college-educated workers have unemployment of 3.1%, while non-college unemployment is at 6%, and some college unemployment stands at 5.2%.
Essentially, college-educated workers are nearly back to full employment, showing that the initial pandemic-driven unemployment for college-educated workers has stabilized and is almost back to normal. That observation makes sense, as companies and workers can adopt hybrid models that improve efficiency and output. Contrast that with non or some college-educated workers, and it’s a very different story, given the jobs typically available to this cohort of workers. The realities of this number helps explain the current employment scenario we see across a specific employment sector. Partially because of pandemic relief or businesses not taking the pandemic seriously enough, jobs typically filled by the non or some college-educated cohort aren’t able to fill those positions fast enough. With the inability to fill these jobs and the rapid reopening within America, this gap in employment is one of the significant chokepoints preventing the economy from recovering more quickly.
Higher wages will soon dominate the conversation about employment as labor continues to be scarce.
As businesses want to take advantage of the reopening, the hiccups caused by Delta and the shortage of workers to facilitate the reopening are causing employers to raise wages quickly. For workers to apply and fill these jobs, businesses need to address the fears of the delta variant for their workers or pay workers a high enough wage to prevent them from going to a higher paying employer. Large employers like Walmart are issuing bonuses left and right to retain warehouse employees as the holiday season approaches (see last week’s newsletter on Q4 and Holiday Planning). As businesses and employers continue to offer higher wages or better incentives, these cost increases are being passed onto the consumer, raising prices across the board. These price increases have driven a lot of the discussion regarding rising inflation. Still, given several indicators, it appears as though the current inflation the country is feeling is most likely transitory. This transitory inflation, though, is driving higher wages across the board for new employees, especially for jobs that many in the past overlooked or took for granted that was critical for our consumer-driven economy. After this period of transitory inflation stabilizes, motivating workers with higher wages will no longer be sustainable or realistic as larger businesses will be able to outspend smaller companies and win more employees simply. Instead, leading companies will need to find additional benefits and incentives for employees. Some of these benefits come as better hours or work schedules to let mothers have more flexibility and allow them easier re-entry into the workforce. Benefits include retraining programs that middle or low-wage employees can buy into and see a future and path to progression as society continues to deal with unexpected pandemic lockdowns, economic chokepoints, or other events that will make transitory inflation an ongoing consideration for all businesses. Employers will need to stop relying on higher wages as the only mechanism to attract workers and focus and prioritize employee retention.
1nsight
The pandemic, a tight labor market, and a federal mission to reach full employment mean that transitory inflation is our new reality and impacts the buying behavior of the new consumer.
Workers and consumers have always had an interconnected relationship. The dynamic that exists between the two is the foundation of our capitalistic society. Suppose something happens to a worker (for example, a pandemic) that affects that worker’s decisions as a consumer and vice versa. The pandemic changed work, affecting how we consume, which further strains and complicates the worker/consumer relationship. Consider that because of the pandemic, the fundamental way so many Americans consume products has forever changed. The accelerated shift to eCommerce changed how we, as a society, buy things. The hybrid work model changed how/when,/where we work and the traditional expectations. Unpredictable lockdowns have changed how we plan and how we use our supply chain. All these changes compound the complexity of the worker/consumer relationship.
The country is grappling with stage a rapid reopening while dealing with increasing demand from across all avenues as the pandemic continues to play out. This reality will only exacerbate the present imbalance that exists in the worker/consumer relationship. We will see employers having to pay more to fill low and medium-pay jobs. Businesses will charge more to account for the increased pay or pandemic unpredictableness. Those two dynamics will hopefully allow employees, significantly lower and middle-wage employees, to have a louder voice and more power, especially when compared to the historic unfair power dynamic that employees had with employers.
So while most Americans welcomed this new reality, keep in mind that the pandemic is powering a lot of the dynamics at play here. COVID, and the world’s inadequate response to it, has created a nesting ground for transitory inflation, especially tear through specific sectors. Leisure and hospitality, auto, and travel have all been victims of transitory inflation because the pandemic has had the most significant direct impact on those sectors. And as inflation runs wild through those sectors, we also see those sectors with the highest labor demand and wage increases.
These factors will continue to empower the employee. And a more powerful employee will create a new consumer, which will create a new behavior that creates new demand. A new consumer, with new behavior and new demand, only means that you will need to be a new type of business to succeed.
Other things I’ve been reading:
I want to highlight a few fantastic things I’ve come across the past week as I try to quench my thirst for random content.
To Tweet or Not to Tweet, an awesome post from Nick deWilde featured on Paul Millerd’s substack Boundless. A fantastic essay that looks into the addiction that so many of us have to social media.
The Eternal Audience of One by Rémy Ngamije is a just-released book by Rémy Ngamije, who has a dope Instagram account. The novel extrapolates and contextualizes Rwanda, pre, and post-1994, with characters from all over the world. I can’t wait to finish it.