BEWARE THE simple solution to a complex problem. In recent weeks at least 25 states, all with Republican governors, have cut off federal unemployment benefits. This is in spite of the fact that the programmes in question are fully funded to early September and cost the states nothing. Kim Reynolds, Iowa’s governor, blamed the payments for “discouraging people from returning to work”. In fact, argues a report from Morgan Stanley, a bank, it is likely that those benefits are “no more of a factor than other impediments” that stymie the return of workers to their old jobs. Child care is harder to come by than before the pandemic, and employees with health concerns may remain wary about returning to full-time in-person work.
Whatever the reason, America’s labour market is tighter than it has been in years. Workers are quitting jobs at rates not seen this century. In April, according to preliminary data from the Department of Labour, 2.7% of the workforce quit their jobs—well above the previous peaks of 2.4%, briefly reached in 2001 and 2019. Though they have been rising for years, resignation rates were especially high in retail and hospitality, two sectors badly affected by the pandemic as people stopped travelling and did much of their shopping online.
There is no evidence of a massive wave moving from office to sofa. Job openings in April hit a new record of 9.3m; employers hired 6.1m people, about as many as were hired in March. Accommodation and food services—a subsector of the broader hospitality sector—boasted more openings and hired more people than any other sector. Competition for workers has grown fierce: restaurant chains including Chipotle, Olive Garden and McDonald’s all plan to raise wages. Non-managerial wages in the hospitality sector hit a record $15.70 per hour in April.
For the Biden administration, the salary rises are both welcome and worrying. They are welcome because Mr Biden has long advocated more power and leverage for workers. Higher wages—along with quit rates, a tacit and widespread sign of faith in the economy—indicate that they have more of both. They are also worrying because rising wages and prices could presage a long-lasting inflationary surge, which might leave workers no better off in real terms.