II What Wall Street Doesn’t See, Labor Shortages
On Monday Night Football, before thousands of fans in the stadium and millions more at home, 24-year-old defensive back Damar Hamlin collapsed. Hamlin went by ambulance to the University of Cincinnati Hospital, where he was in critical condition.
A collapse like this is an infrequent occurrence in the National Football league, but it has brought into focus a trend throughout the workplace; the mortality rate among the general population, and working-aged Americans in particular, is increasing.
According to a recent study by the National Academy of Science, Engineering and Medicine, entitled: High and Rising mortality Rates Among Working-Age Adults, the United States is seeing a significant increase among that critical demographic of 17 to 54 years old. The working-age population.
The United States is seeing death rates last seen in the country over half a century ago. So impactful are these higher death rates that our country’s life expediencies are beginning to decline. A measure of the overall health of a nation, lowered life expectancy numbers, indicates that something is critically wrong with Americans’ health.
Currently, there is no definitive answer as to just what is causing this massive rise in deaths. You’ve no doubt heard of several of the assumed causes. Beginning with the Covid-19 Pandemic to the social quarantines and the Covid Vaccine, many possible contributors exist to this wave of deaths.
Incidentally, that there are so many proposed causes is a good thing. Science performs best when it can look at all the possibilities, leaving out none, before Scientists can determine the central factor in this rise in mortality.
However, the discussion of what is causing these excess deaths is beyond today’s scope. The fact that people are dying in increasing numbers, which is having a profound impact on our economy, is our focus.
Economists use two fundamental measures of the Nation’s Workers. First is called: the Labor Force, that’s the actual number of people at work, and second, the Participation Rate, the percentage of the population that is working.
So, let’s look at the actual number of people working. As of November, the latest numbers we have, there are 164.4 million people at work. That’s 156,000 fewer workers than we had at work two years ago. That’s a sporadic occurrence. Generally, the US Labor Force increases, right along with the population. This country has a solid work ethic, and most people can seek employment.
There are two exceptions to that general rule. First is the case of a major war, as men and women join the military. The second instance is during a recession. Workers are laid off as companies cut back on expenses to make ends meet.
Since the end of the Vietnam War, when vast numbers were in the Army, Navy, and Air Force, since that war, the only time we’ve seen a decline in the Workforce like we’re seeing now is during recessions.
Here is a point I’ve made before. However, the National Bureau of Economic Research tells us we weren’t in a recession in the first two-quarters of negative growth in 2022. However, here are the employment numbers, which tell a different story.
So, as a general rule, the labor force declines during wars and recessions. And now I’d like to propose a third alternative. As anyone who’s watched a loved one pass, you know that a period of extended illness often comes before death. During that time, the person is unable to work. They still count in the population but are no longer in the Workforce.
In other words, I believe there is a correlation between the high mortality rate and many people’s inability to work. These two factors, illness and near death, go hand in hand.
And that brings us to our final measure of the Labor Force, the Participation Rate. The number of people with a job, compared to the entire population.
And if my “theory” is correct, this measure demonstrates it. As we discussed, the number of workers has held steady (actually declined slightly) over the past two years. However, over that time, the population has grown by 3 million. That means that the percentage of workers is declining. And that’s true. In two years, workers in the country versus the overall population declined by 1.5% as the population grew, but the number of workers was unchanged.
There need to be more workers for a growing population. But that’s something you likely already knew from all those “help wanted” signs we saw just after the Economic Lockdown in 2020.
The bottom line, we are entering a period with too few workers for this economy to operate optimally. And the likely cause of this labor shortage is related to the health issues in the country. The massive uptick in mortality also causes an enormous uptick in pre-mortality, the people who are too sick to work.
Few, if any, on Wall Street are recognizing this significant demographic trend. And this “Labor Shortage” has my vote for the likely biggest surprise in 2023.
Econ Briefs
In economic news today, Germany and France reported substantially lower inflation rates. Germany said yesterday that its inflation dropped to 8.6% from 10% the month before, while France reported its inflation fell to 5.9% from 6.2%, much more than analysts expected.
What’s fascinating about both of these inflation reductions is that Germany and France are accomplishing this without the economy killing higher interest rates used in the US. Germany and France have interest rates of a mere 2 1/2%, far below the US rate of 4 1/2%. In other words, France and Germany are seeing inflation cool without putting on the harsh monetary brakes that the Federal Reserve is using.
Speaking of higher interest rates, the Mortgage Bankers Association reported that the average 30-year mortgage rose to 6.58%, up another 24 basis points in just a couple of weeks. Real Estate financing continues to tighten.
Shortly we will get the latest JOLTS Job Openings report. For a year and a half, employers have been unable to find willing workers to fill their positions. Beginning in mid-2021, the JOLTS have reported that companies cannot fill more than 10 million open positions. That trend is expected to continue today.
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