Holding Out for the Right Job? Don't Dawdle Too Long

(Bloomberg Opinion) -- The U.S. is in the midst of “a great reassessment of work,” so say the headlines. Covid-19 has led people to “rethink their careers.” Because of the pandemic, we now know “how much we hate our jobs.” The “Great Resignation” is sweeping through the labor market.

Let’s hold our horses. The unusual circumstances of the U.S. labor market that have led to the “Great Resignation” are likely temporary. And there are good reasons to be grateful that this won’t last.

The “great reassessment” moment is happening in an economy with an unusual imbalance between demand and supply. Demand is surging. Consumer spending on goods was 15% higher in August than in February 2020, the month before the pandemic hammered the economy.

This is fueling white-hot demand for workers. There were 10.4 million job openings in August, up from 7 million in February 2020.

At the same time, the supply side of the economy can’t keep up. Supply-chain problems are making it harder for goods to reach shelves. And many workers are on the sidelines.

The rate at which people ages 25 to 54 — generally speaking, people who are too old to be in school and too young to be retired — are participating in the workforce is only a bit higher than it was in the summer of 2020, and is still 1.5% lower than its February 2020 level.

This imbalance means employers are chasing workers, who in turn have gained a lot of leverage in the labor market. This is leading workers to quit their jobs in large numbers, confident they will be able to find new and better jobs. In August, 4.3 million workers quit their jobs — the highest number on record. It is also leading some to question whether they want to continue working at all.

But this situation probably won’t last because the circumstances that have created it will fade over the next year. Demand is so strong because of huge government stimulus payments to households (President Joe Biden’s $1.9 trillion March stimulus law was a forecastable mistake) that overlapped with the economy gradually normalizing.

Households are sitting on around $2.5 trillion of excess savings, pumping up demand. Adding to the cushion were generous unemployment benefits.

Workers are on the sidelines not only because they are confident they can get another job. The pandemic continues to discourage their return to normal life.

According to a Census Bureau survey from late September, 4 million were home sick with Covid symptoms or caring for someone in the same situation, 3 million weren’t working because they were worried about Covid, and 5 million were at home looking after kids not in school or day care. The same stimulus checks and generous unemployment benefits that have pushed up economic demand are also slowing workers’ return to jobs.

None of these factors will last. Over the course of 2022, demand for goods will moderate, and supply-chain bottlenecks will ease. Excess savings will be depleted. As the danger of Covid continues to fade, school attendance will be more predictable. Generous unemployment benefits have already expired.

As the economy normalizes, workers will have considerably less leverage in the job market than they currently enjoy. So-called “dead-end jobs” will look more appealing without thousands of dollars of unemployment benefits arriving in checking accounts each month. People without jobs will be less choosy when their savings account balances come back to earth.

A sustained change in the labor market situation, including wage growth that endures, would require something different from a temporary demand-supply balance — for example, workers increasing their productivity through acquiring more skills. As the economy normalizes, so will the distribution of bargaining power between workers and employers.

The part of the “Great Resignation” that could last are early retirements, driven in large part by pandemic savings, the stock market boom and home equity gains. But even that could reverse to some degree.

This may sound like bad news for workers, but the sooner it happens the better for those who are idle for pandemic-related reasons. Though there are around 7 million fewer jobs than there should be right now, economic output has exceeded its pre-pandemic level, and is growing rapidly.

The upshot is that businesses have figured out how to produce goods and services with many fewer workers. The longer workers sit it out, the more businesses will have permanently adapted to the labor shortage.

Those who wait too long for the right job might find themselves with no job.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”

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