If you’re like me, I am sure you were waiting with bated breath for the Job Openings and Labor Turnover report from the Bureau of Labor Statistics. When looking at the overall health of our labor force, I find the JOLT holds significantly more value than the Unemployment Numbers. For instance, this report lets you see the total number of new hires vs. total separations. While unemployment gives similar statistics, it contains fewer categories and less definition. As well, the JOLT allows you to compare these numbers with the total number of job openings. This allows us to determine if a positive report (unemployment going down) is significant enough to satisfy market demand.
The big takeaways from the April report are job openings are surging while separations, and quits explicitly, are continuing at a robust pace. An interesting change in the Beveridge Curve shows that even while Job Openings continue to soar, the unemployment rate holds steady. This implies that while the workforce exists, it is not translating into employment in numbers sufficient enough to match market demand. IE – Businesses are operating below desired capacity. While the reasons for this can be disputed, as put by Tim Duy of SGH Macro Advisors said, and being the core of my argument today, “it appears that labor market frictions not related to unemployment insurance appear to have been increasing. That’s not exactly great news if you are expecting the end of enhanced UI benefits will dramatically ease labor market frictions.”
To highlight this effect on the ground, I wanted to talk about some observations I have made from my home state of Maine. A not-so-quick run down for those that haven’t done the deep dive. Maine may appear on its surface as a tourist-fueled, service-based economy. However, much like its geography, the actual economy is robust and diverse. When broken down by the Real Value Added to GDP (2020 Values), the top three sectors are Finance and Real Estate ($11.49B), Educational and Health Services ($7.53B), and Government Enterprises ($7.49B). When looked at through total employment, the top three are Educational and Health Services (125,100 or 20.5%), Trade, Transportation, and Utilities (116,000 or 19%), and Government (96,100 or 15.7%). This demonstrates how Maine’s workforce is primarily dominated by low to mid-income, transient workers. To see this in more clarity, you can look to Trade, Transportation, and Utilities which makes up 19% of Maine’s total labor force, while only accounting for 8% of its GDP, in contrast with Professional and Business Services which accounts for 11% of Labor Force and 12% of GDP. Another surprising thing to note is that Arts, Entertainment, Recreation, Accommodation, and Food Services represent 9.3% of the Total Labor Force and only 4% of the total GDP.
While the above numbers are for what can be argued as an incredibly irregular year, they still represent one of Maine’s most significant hurdles and one that has been developing since long before the Pandemic. Maine’s economy is fueled by relatively few, while most work for industries that produce (and pay) less. This dichotomy creates vast wealth difference seen clearly, even when looking at just the four towns of my home School District. This type of work also develops into a second subset of issues. Workers feel less of a sentimental connection with their places of employment and home state, translating into less business investment as they continue to find a smaller, less skilled pool of workers to invest in. Even when looking at my class, it is clear to see that, while there are those that stayed in the state and have been successful, the majority of the money earners are those that left broader horizons. Put more simply, Maine lacks real opportunity and attractive workplaces.
A clear example of how this division in labor (and wages) affects even micro-economies is to compare Brunswick and Lewiston. On their surface, the two towns are pretty similar; both boast relative proximity to the labor hub of Portland, both host well-accredited colleges offering jobs and a steady supply of new consumers, and both benefit from a river running through that offers recreational as well as historical significance. However, the actual towns today are so far apart when it comes to quality of life; it begs you to sit down and ask yourself why? The answer is, like most, too complicated to ever give one definitive point. However, as I was discussing above, I would argue that one of the driving forces is how jobs accumulated within the state. While both towns offered robust labor pools, because of a finite amount of skilled labor in our economy, and human nature being that we want to be close to water, the jobs made their way to the town closer to the coast.
This lead to the dichotomy that we see today. While many Brunswick residents work in skilled jobs, Lewiston’s residents continue to work as laborers. As this division has grown, another issue has arisen. Because their economies often support far less capital than the more educated counties, these same laborers often have to travel further to compete for work. It is this dual problem of low capital communities supporting our labor force as well as being forced to travel to areas that represent demand that has contributed to our ever-worsening labor issues. Yes, the Pandemic and closures halted the very fragile system we had built; however, it is too early to say that just because we’re “opening things up” means that these workers will want to return.
Let’s get back to the JOLTS Report for a second. An interesting point to note is that Job Openings have increased to a series high (beginning in December 2000) of 9.3 million or 6.0%, with the most significant increase being in Accommodation and Food Services. This once again highlights an authentic aspect of Maine’s economy, jobs increase in the summer. As we continue to hear from local business owners, those jobs are here, but no one wants them. Now we again need to ask ourselves why?
As I said previously, my argument is that it has less to do with incentives and more with the nature of Maine’s economy. For years local businesses have relied upon the H-1B Visa to supplement their scarce workforce. As young Mainah’s continue to trickle out of state or be pushed into more rural and affordable communities, this pattern only gained momentum among the more capital-rich communities. This trend certainly didn’t just go away after the pandemic. While Maine’s workforce did grow during 2020, a breakdown of sectors once again shows that those that moved into the state are working the high-paying (now remote) jobs and moving to counties like Cumberland. Because of this, I would argue that as we continue to open up after the pandemic, we will experience higher demand for goods and services than we did before. Meaning that the challenge of maintaining a robust workforce will only grow harder.
Now, you may be wondering, “well, what can we do about it?” The easy answer is, “I don’t know.”
As stated at the beginning of this post, and while I have focused specifically on the quality of work in this example, the reasons for this issue have been worsening for over a decade, and to address all of them would require a focused government effort to support the quality, rather than quantity of jobs offered. This can be done in many different ways. I’ll highlight one as I feel this post is getting long.
Promoting quality jobs is easiest done when you focus on changing the nature of business development rather than trying to alter existing structures. A great example of this is how FAME (Finance Authority of Maine) uses its bond-buying program to support the development of new businesses. FAME, for those unfamiliar, offers several services from traditional loan insurance programs, investment tax credits, tax-exempt bond financing programs, as well as being in charge of administering the State’s higher education finance programs. Their vision is to – “Help Lead the creation of good-paying jobs for Maine residents by working at the nexus between economic and workforce development.” Their success shows the importance of attaching the quality of jobs to the mission of finance. By doing so, we can change the work that is being offered, as well as (in some instances) where. For example, in April of 2021, FAME approved $135Million in Bonds to help develop a previously shut down ski resort at Moosehead Lake. The funds will finance part of the total costs in the acquisition, rehabilitation, design, construction, and equipping of the resort. The project is expected to create 380 full and part-time jobs in Piscataquis County, one of the many that, based on the criteria I have laid out here, could use some new local labor opportunities. Not only does this kind of development promote better labor growth, but it also helps to generate tax revenue, allowing for more of this kind of financing in the future if the programs are in place. While we will have to wait a few years before we deem this project a success, I personally believe in this type of consumer-based growth.
It is up to us to decide how the economic forces we have created over centuries work for us. Increasing GDP has its benefits and should not be overlooked, but at the same time, we should be focusing on the real-life of the people on the ground. Money is far from the only deciding factor in individual lives. To solve our current problems, we need to think critically about what makes a worker want to work and what we can do as a state to promote a healthy market for all.
My Maine Musings 