Eric Ruark's picture


  by  Eric Ruark

The headlines on May 3 blared the news that 263,000 new jobs were created in April. This figure comes from the Current Employment Statistics (CES) survey of employers. Based on the results of this survey, the Bureau of Labor Statistics puts out a monthly report that includes the number of people added or subtracted from employer payrolls (nonfarm) in a given month.

As we wrote back in 2016, the monthly job figure “means next to nothing when presented as a stand-alone data point.” What really matters is the information gathered in the household survey, which tells us about the employment status of U.S. residents. That’s where the official unemployment rate (U-3) comes from, which now stands at 3.6%, the lowest since 1969.

The jobs number combined with the low unemployment rate has President Trump crowing about the performance of the economy under his administration, while it also has corporate lobbyists claiming there is a “labor shortage” that can only be solved by increasing immigration.

President Trump has backed away from his previous commitment to reduce overall immigration levels, now saying that the economy is doing so well at creating jobs the U.S. needs “the largest numbers ever” of legal immigrants. Surely, the President is hearing from some members of his administration who are relaying the complaints from corporate lobbyists (a constant complaint no matter the employment situation) that there aren’t enough workers to fill employer demand.

Without question the economy has been on the upswing, and President Trump reserves the right to claim credit for it, as any president in his place would. However, beyond the headline numbers there are other relevant statistics that are being glossed over. There are still millions of Americans who are out of work, and millions more who are working, yet struggling to make ends meet.

What didn’t receive any attention from the media about the April job numbers was that there were 103,000 fewer people employed that month than in March despite the working-age population increasing by 156,000, and the number of those who were not in the labor force grew by 646,000. There were 96.2 million people not in the labor force, including 43.5 million people between the ages of 18 and 65. The labor force participation rate went down from 63% to 62.8%. That is not a good indicator.

Even if one argues that all those not in the labor force are in school, retired, living with a partner who supports them both, independently wealthy, or just plain lazy, we do know that there were at least 5.1 million not in the labor force in April who said they “want a job now.” Added to the 5.8 million people who were officially unemployed (meaning actively seeking work) and the 4.7 million who were working part-time and couldn't find full-time work, that's 15.6 million people who were unemployed or underemployed. There's a long way to go before it can truly be said that the fundamentals of the U.S economy are strong.

A Shortage of Employers Willing to Hire Americans

There is no labor shortage in the United States, nor is there any chance a labor shortage will occur at any point in the foreseeable future. Any claims to the contrary are simply false.

“Labor Shortage” is a term of art in economics which means there is an insufficient supply of workers to meet employment demands at any price. If there were a labor shortage, the effects would be obvious. What is obvious is that there is still a lot of slack in the labor market, as Minneapolis Federal Reserve Bank President Neel Kashkari continues to point out. Wages for American workers are finally beginning to show slow but steady growth over a decade after the Great Recession ended, and Americans are reentering the workforce.

What employers mean by “labor shortage” is that there is a lack of available Americans willing to work at the wage employers want to pay. As the labor market tightens, corporate lobbyists are pushing for more foreign labor, and fighting hard against immigration reductions that would benefit American wage earners.

Jared Bernstein, former chief economic advisor to Vice-President Biden, once summed up the matter thusly:

Employers are very quick to raise the specter of a labor shortage, but often it’s another way of saying they can’t find the workers they want at the price they’re paying…they are unwilling to meet the price signal the market is sending, so they seek help in the form of a spigot like immigration.

To claim there is a labor shortage in the United States, one must redefine the term to mean employer preference for lower-wage foreign workers is a fixed demand that has no relation to the available labor supply.

Or, if one writes for Vox, one can newsplain it all away, Vox's Alexia Fernández Campbell did in March.

Campbell declared “It’s official: The US economy doesn’t have enough workers” and cited the Job Openings and Labor Turnover Summary (JOLTS) survey (actually she just linked to it without explaining what it is or how it supported her declaration). The JOLTS survey is a useful metric, and indicates, among other things, the level of labor market “churn.” It tells us about employer demand but nothing about job seekers or available workers.

One can compare the number of job seekers captured in the household survey with the number of job openings as reported by employers, but it is not possible to simply contrast these results and draw a substantive conclusion about the supply of available and willing workers, as Campbell did.

Campbell ended up inadvertently refuting her lede because she at least recognized two obvious things: that wages are far below what they should be, and higher wages would attract available workers back into the labor force.

She wrote:

Employers are having a harder time filling blue-collar positions….This means that — for once — low-skilled workers have the most leverage in the current labor market….There’s no better time for working-class Americans to demand better wages, benefits schedules, and work conditions.

And she pointed out that wages have lagged:

Employers need to raise wages by a lot…Economists agree that employers need to do more to entice workers to join the labor market. They need to sweeten the deal…. Slow income growth has been the most persistent problem affecting the US economy in its recovery from the Great Recession. Wages have barely kept up with the cost of living, even as the unemployment rate dropped and the economy expanded."

Yet, Campbell's contention was that:

In order to fill all the open jobs and keep the economy growing, Congress will need to allow more low-skilled immigrants to work.

Despite having explicitly acknowledged there were Americans available to work, and not citing a single data point to back up her assertion that the country “needs” more low-skilled immigrants to fill open jobs, Campbell ended up endorsing the employer preference for paying lower wages in order to assert that there is a demand for labor that can only be met through an increased supply of foreign workers.

This isn’t to pick on Campbell. She is far from the only one who conflates the two. In fact, hers is the default position of most journalists (and newsplainers) who cover immigration. The value of Campbell's treatment is that she so succinctly and thoroughly refuted the very premise of her article. Within the space of only a couple of sentences she demonstrated the inherent contradiction between concern for working Americans and support for mass immigration so that the United States can “grow the economy.” Compare this to The New York TimesThomas Friedman, whose readers after more than a decade are only just leaning the world may not be flat after all.

One of the biggest political questions Americans face is whether to reduce immigration in order to give American workers more bargaining power, or to continue to accede to employer preference for lower-wage foreign labor. One thing is certain: when it come to the question or whether or not there is a labor shortage in the United States, the facts are on the side of those who say there isn't. Even Vox agrees on that point.

ERIC RUARK is the Director of Research for NumbersUSA

Updated: Sat, May 25th 2019 @ 2:10pm EDT

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