Last week's jobs report brought some interesting news.
Economists were expecting the April jobs report to show that 1 million jobs additional jobs had been filled during the month. This was based on the assumption that more and more businesses would be opening up and starting to return to pre-pandemic levels of activity.
The actual numbers turned out to be 266,000.
That was the largest miss relative to job expectations since at least 1998.
The unemployment rate increased to 6.1%.
The report indicated that college-educated workers have almost recovered to pre-pandemic levels of employment (-0.3%). However, high school graduates (-7.8%) or workers with some college (-7.5%) are still well below pre-pandemic levels of employment.
9.7 million are currently drawing unemployment benefits throughout the country. 30 million were drawing benefits at the height of the lockdowns last May.
What is particularly interesting is that as I travel around these days I see "Help Wanted" signs almost everywhere I go.
The fact is that there are currently 7.4 million job openings available in the United States which is 2 million more than there were a year ago.
How can there be 7.4 million job openings but only 266,000 new jobs were filled in the last month?
Many are pointing to the generous unemployment benefits that have been provided in the Covid relief measures.
For example, the $1.9 trillion Covid relief bill passed in March provides an additional $300 per week in unemployment benefits in addition to any state benefits.
$300 on a 40-hour work week equals $7.50 per hour without considering the state benefits.
State benefits vary by state but average around $350 per week. However, some states have much more generous benefits.
Would it surprise you that all of them are heavily Democrat-led states?
For example, an unemployed worker in Massachusetts can draw $855 per week ($21.38 per hour, $44,460 annualized).
New Jersey's weekly benefit is equal to $17.83 per hour.
California's average weekly benefit is $648 per week ($16.20 per hour), the same as Oregon and Hawaii.
Is it any wonder someone would rather sit home than wash dishes, wait on tables, clean rooms or stand on their feet all day as a cashier?
If you sit at home you don't have to work plus you don't have to pay to put gas in your car or worry about child care.
This is why some California restaurants are now having to pay over $20 per hour for dishwashers and the jobs still go unfilled.
Here is an article from Zero Hedge with a similar message, "The Worker Shortage in New Jersey Is Getting Ridiculous".
Based on national averages for unemployment benefits, if someone was making less than $32,000 before the pandemic, it is now more advantageous to stay at home and forget about working.
Interestingly, the average annual salary for Americans in 2019 before the pandemic was $31,133.
Bank of America estimates that anyone who earned $32,000 before the pandemic can now get more from a combination of state and federal unemployment benefits. They are also allowed to claim benefits for up to 39 weeks - nearly a full year - whereas before, it was capped at 26 weeks. The average US salary in 2019 was $31,133.
Several Republican governors have recognized the problem and are taking steps to remove the disincentive.
What does the Biden administration think about all of this?
Joe Biden disputed any argument that the enhanced federal unemployment benefits are having anything to do with preventing more workers getting back to work.
In fact, Biden claimed that the poor jobs report shows that we need to spend $4 trillion in additional federal funds to get people back to work and improve the economy.
Biden said the jobs figures actually show “more help is needed” via his $4 trillion infrastructure and “families” proposals and denied the slowdown is because of the subsidy that he signed into law in March.
You would think that Treasury Secretary and former Federal Reserve Chairman Janet Yellen would have a better perspective on the issue considering her academic background as an economist.
You would be wrong.
Here is what Yellen said when asked if the enhanced unemployment benefits were a disincentive in the poor jobs numbers and getting people back to work.
Treasury Secretary Janet Yellen dismissed concerns that sweetened unemployment benefits contributed to a slowdown in hiring last month, instead suggesting that a lack of child care and fears of contracting COVID-19 were the reason for the worse-than-expected April jobs report, which was the biggest miss in history.
The fact is that one of the first lessons a first-year student in Economics 101 learns is that incentives matter.
|Source: Foundation for Teaching Economics|
Joe Biden, Janet Yellen and the Democrats surely understand all of this.
Why do they refuse to admit the obvious?
To do so would get in the way of their agenda.
First, Democrats want to create more dependency on government. It is a central principle of what the Democrats see their political power being based on. High unemployment benefits create more dependency.
Second, the high unemployment benefits will undoubtedly further their objective of implementing a $15 (or higher) national minimum wage. If someone has been getting $16 per hour or more for not working are they going to be satisfied working for less? We are already seeing that at play right now and the longer it goes on the harder it will be to return to economic reality. This all fits into the Democrat agenda.
Third, a higher minimum wage will also lead to higher state unemployment benefits in the future. Right now most states set the weekly benefit just slightly higher than the amount of the current federal minimum wage of $7.25 per hour. A higher minimum wage will put pressure to raise unemployment benefits which will further increase labor costs and taxes. This all works into the Democrat agenda.
Fourth, higher labor costs will inevitably result in employers in the business community advocating for more liberal immigration policies and open borders to let more workers into the United States who will work for lower wages. This is also consistent with the direction the Democrats want to take the country in.
It is not about what is best for America's economy or its future.
It is about the Democrat agenda, first and foremost.
What is the average American household likely going to see from on all of this?
A greater strain on government resources.
And we will inevitably see more job losses for those in lower skill positions as higher labor costs will provide a greater incentive (that word again) for the use of technology to be deployed to displace human labor.
That, in turn, will result in a call for higher unemployment benefits or a guaranteed income for everyone (more dependency) affected.
The lessons in all of this?
Incentives drive results.
People will almost always be guided by their self-interest.
If you pay someone to not work...they will not work.
And one more...
Once the wheel starts turning, it is not easy to stop the wheel.
Some of you reached out to inquire why BeeLine has been on a short hiatus.
I have been dealing with a back injury which has made it difficult to sit, research and write.
The back is getting better with rest. I wrote this post in installments between laying flat on my back, heat and ice treatments and back exercises.
The trend looks good. I dare say better than other trends in the United States right now.
Thanks for the concerns.