US Employment Mystery

Michael Rudd, CFA | President, CEO and Portfolio Manager

Last week, we wrote about the US and Canadian job situation; this week, we received more data to think about. In the US, there has been a net loss of 7.3 million jobs since the beginning of the pandemic (Figure 1) and Weekly Jobless Claims dropped again this week (Figure 3). Total US Job Openings (Jolts) was reported this week and have reached an all-time high (Figure 2). This is a divergence from what we would have thought.

  • The Jolts report reached 9.3 million job openings. There is always a baseline for this data, which we estimate to be 4.7 million (ex-COVID & GFR), so it is just a little more than double the normal openings. At the same time, there remains a net loss of 7.3 million jobs since the start of the pandemic. Furthermore, short-term job losses are back to pre-pandemic levels with only 376k jobless claims for the week (the average was 351k from 1967 to just before the pandemic). The data is confusing because it looks both strong (low claims / high openings) and weak (record job loss) at the same time.
  • There are probably several reasons for this situation, but it has been somewhat politicized: “employment benefits are too high, and people are choosing not to work”. We suspect that the reasons are somewhat more complex. Skills mismatch, people leaving the workforce, lifestyle changes (work from home desirability has gone way up for example). This situation is indeed evolving for a new normal as well.

This means that” we need to follow this closely. As we mentioned in previous Investment Outlooks, there has been a real shock to the system. This continues to be an area of the economy where there are still more questions than answers.

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