PROVO, Utah — While Chad Pritchard and his colleagues are trying everything to staff their pizza parlor and bistro, they’ve turned to new tactics.
Violations that previously led to quick dismissal are no longer practiced at the chef’s two locations, Fat Daddy’s Pizzeria and Bistro Provenance. Consistent shipping issues are no longer a deal breaker. Workers who recently showed up drunk are sent home to sober up.
Employers in Provo, a college town at the foot of the Rocky Mountains where unemployment is high Near lowest domestic 1.9 percent, there is no room to lose workers. Bistro Provenance, which opened in September, was unable to hire enough employees to open for lunch and dinner on Sundays and Mondays. Employees here are often new to the industry or younger. On a recent Wednesday night, a 17-year-old was found lighting creme brulee.
Down the street, Mr. Pritchard’s Pizzeria relies on outside cleaners to clean up its lean staff. And above and below the wide street that separates the two restaurants, storefronts have either posted “Help Wanted” signs or announced that the stores must temporarily reduce their hours.
The desperation for Provo workers is a severe version of the labor crisis that has plagued employers across the country over the past two years, prompting changes in hiring and layoff practices that could have a major impact on the U.S. economy. brought. Policy makers hope employers will be reluctant to lay off workers even as the economy cools after suffering the worst labor shortage the US has experienced in at least decades.
This could help prevent the kind of painful recession the Federal Reserve (Fed) hopes to avoid as it battles persistent inflation. The US economy is facing a marked (and deliberate) slowdown as the Federal Reserve (Fed) hikes interest rates to cool demand and keep prices down. Such setbacks usually result in significantly higher unemployment rates. But officials still hope to achieve a soft landing in which growth slows without triggering widespread job losses. Some speculate that today’s staffing shortages will help them pull it off.
“Companies that have experienced unprecedented difficulty restoring or expanding their workforces after the pandemic are hiring more people than usual when faced with a slowdown in economic activity,” said Rael Brainerd, Vice Chairman of the Federal Reserve. may tend to make greater efforts to retain members,” he said in a recent speech. “This could mean that a slowdown in aggregate demand will lead to an increase in unemployment, smaller than seen in previous recessions.”
For now, the job market remains strong. Employers said he added 263,000 workers in September. This is less than in recent months, but more than pre-pandemic normal. The unemployment rate for him is 3.5%, the lowest in 50 years, and the average hourly wage is up 5% compared to his year ago.
But that is expected to change. When the Federal Reserve raises interest rates and slows the economy, so does the labor market. Wage growth will slow, paving the way for inflation to cool and unemployment to rise in the process.
The state of jobs in the United States
Economists have been surprised by recent strength in the labor market as the Federal Reserve (Fed) plots to slow the economy and curb inflation.
In the 1980s, when inflation was entrenching faster than it is now, the Fed raised interest rates significantly, about 20 percentsent unemployment to t 10 percent or moreToday’s spike in inflation is expected to be short-lived and interest rates are not expected to rise much, so few economists expect such a serious outcome.
Still, the Federal Reserve itself expects the unemployment rate to rise by almost 1 percentage point to 4.4% next year, and policymakers say that’s a modest estimate given how much they’re trying to slow the economy. Some economists point to worse results. Deutsche Bank, for example, predicts an unemployment rate of 5.6% by the end of 2023.
The labor hoarding offers a glimmer of hope that could help the Federal Reserve’s (Fed’s) more benign unemployment forecast become a reality.
Julia Pollak, chief economist at career site ZipRecruiter, said: “They are definitely clinging to workers for their beloved lives simply because they are sorely lacking.”
As the job market slows, employers will recall recent first-hand memories of how much it costs to recruit and train workers. Many employers could enter a slowdown with still severe labor shortages, especially in industries such as leisure and hospitality, which have struggled to hire and retain workers since the start of the pandemic. These factors may make layoffs less likely.
And after months of a very tight labor market (nearly two job vacancies remain for every unemployed person), firms believe labor availability will continue to rise. You may hesitate.
“There’s a lot of uncertainty about the scale of the recession we’re facing,” said Benjamin Friedrich, an associate professor of strategy at Northwestern University’s Kellogg School of Management. “You’re the one who wants to be prepared when the opportunity presents itself. The way I think about labor hoarding is that it has option value.”
Instead of laying off workers, businesses may look for other ways to cut costs. Provo’s Pritchard and his business partner Janine Coons said that if the business fails, the first thing to do is cut time. The second is to cut salaries ourselves. Shooting will be the last resort.
Pizzerias didn’t lay off workers during the pandemic, but Pritchard and Koons saw firsthand how tough it can be to hire. Even if demand recedes, you can easily reduce the number of employees.
“People are not going to fire people,” Pritchard said.
But economists warn that what employers think before the economic slowdown and what they actually do when they start experiencing financial pain are two different possibilities.
The idea that companies may be hesitant to layoffs because of a tight labor market has yet to be tested. Some economists said they could not recall another recession in which employers widely resisted cuts to the workforce.
“It’s going to be a pretty remarkable shift in how employers are reacting so far,” said Nick Bunker, director of North American economic research at career site Indeed.
And even if they don’t lay off full-time employees, companies have increasingly turned to temporary or just-in-time help in recent months. Gusto, a small business payroll and benefits platform, conducted an analysis of its clients and found that the contractor-to-employee ratio has increased by more than 60% since his 2019.
As the economy slows, these temporary worker gigs may dry up and start looking for full-time jobs. Unemployment and underemployment can increase even if no one is formally laid off.
Policy makers know a soft landing is a long way around. Federal Reserve Chairman Jerome H. Powell said at a previous press conference that the Fed’s own estimate of how much unemployment would rise in a recession would be “given the expected fall in inflation. , from a historical perspective, is a modest increase in the unemployment rate.”
But he also added, “We consider the current situation to be outside historical experience.”
The reason for hope goes beyond labor reserves. Job vacancies are now so high that policymakers hope workers can move to available positions even as some firms start laying off as the labor market slows. Companies that have been desperately hiring for months, like Utah State Hospital in Provo, may rush to pick up people who have been displaced from their homes.
Mental hospital Dallas Earnshaw and his colleagues are having a very hard time hiring enough nursing assistants and other workers. Unable to do so, Earnshaw is poised to recruit employees on the fly should the labor market cool.
“We are desperate,” Earnshaw said.
But for now, it remains difficult to find workers. At the bistro and pizzeria in downtown Provo, Pritchard worries that labor costs will be so high that, combined with rapid raw material inflation, he won’t be able to raise pizza and prime rib prices significantly. making it difficult or impossible to make a profit on Consumers’ intolerance of change.
“It’s not the economic slowdown that I fear most. It’s the job shortage that we have.”