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Economic Impact: Businesses are hiring and wages are up, but workers are still missing
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Economic Impact

Economic Impact: Businesses are hiring and wages are up, but workers are still missing

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It seems that most businesses are hiring right now based on all the “help wanted” signs posted around town.

Not only are they hiring based on demand for their goods and services, but they are also seeing record high quit rates.

Based on the Bureau of Labor Statistics’ Job Opening and Labor Turnover Survey, 4.3 million people quit their jobs in August for alternative employment. That’s 2.9% of all employees — the highest percentage since the Labor Department started this survey in December 2000.

Complicating the matter even further is the low participation rate, which represents the percentage of people either working or looking for work. In January 2020, prior to the COVID lockdown, the participation rate was 63.4%. It fell to a low of 60.2% in March 2020 when nonessential businesses closed or had their employees work from home. As of September 2021, it has risen to only 61.6% as some people have not yet returned to the labor force for fear of contracting the virus or other reasons such as caring for children who are attending school online.

Due to the large number of workers quitting and low participation, many employers are having a difficult time filling jobs. That is the reason wages have increased, particularly in industries that employ lower-wage workers.

According to the Bureau of Labor Statistics Employment Cost Index, total compensation rose 0.7% for the three months ending with June. In contrast, compensation in the accommodation and food services sector rose 2.6%, followed closely by a 2.5% gain in the leisure and hospitality sector over the same period.

Individual state compensation is not available. However, based on job ads in Chmura’s JobsEQ, and the above-average wage increases in the nation, raises in Virginia and the Richmond metro area are also occurring at a faster pace for lower-paying jobs.

Within online job ads, wages in the 12 months ending with September 2021 grew 4.2% in the nation compared to average wages in 2019, before the pandemic started. However, wages for jobs making less than $20 per hour jumped 7.8%. Trends were similar in Virginia and the Richmond metro area where wages increased 3.4% and 3.9%, respectively, for the 12 months ending with September 2021. They rose 7.4% and 12.2% over the past 12 months for low-paying jobs.

Compared to the last 12 months of 2019, some of the occupations seeing the largest rate increases in the state included stockers and order fillers (up 13.3%), fast-food workers (up 11.6%) and retail salespersons (up 8.6%).

As the spread of the delta variant winds down and people feel safer working in establishments where social distancing isn’t possible, the participation rate should begin to rise; but some observers question whether it will hit the level seen before the pandemic began.

Christine Chmura is CEO and chief economist at Chmura Economics & Analytics. She can be reached at (804) 649-3640 or chris.chmura@chmuraecon.com.

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