Monday Morning Optimism: 6/5/23

A Good Labor Market for Labor

The labor market is extremely tight (i.e., many available jobs, few available workers). That’s usually framed as a bad thing—it causes inflation, worsens the customer experience, and makes it so it takes like four weeks to get your car back from the body shop when the car in front of you kicks up a piece of debris that shatters your windshield and cracks your bumper (in my hyper-specific experience).

But from workers’ perspectives, a tight labor market is great. Not only are wages rising, companies are also handing out jobs like it’s an Oprah giveaway. The chart below shows the share of new hires that come from outside the labor force (as opposed to from an existing job or unemployment). Put another way, Americans can go from not looking for a job to employed without having enough time to respond to a survey saying, “I’m looking for a job but don’t have one.”

This is good for a few different demographics, including many that typically have worse labor market outcomes. The Black or African American unemployment rate is currently at its lowest level ever, and the teenage unemployment rate is at the lowest level since the early 1950s (while still low by historical standards, the teen labor force participation rate has started to edge higher recently).

The ease with which people can obtain employment also provides a layer of security for those not in the labor force, including recent retirees. Maybe the biggest winners have been recent college graduates: research has found that graduating into a weak labor market negatively affects lifetime earnings.

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