By Ray Birch
PLANO, Texas—The labor market currently is a “big game of musical chairs,” according to one expert, who is cautioning credit unions that it’s going to be some time before the game stops—or even slows down.
And the reasons for the labor shortage, with which many credit union leaders have wrestled along with every other employer, are not economic red flags.
Instead, credit unions are encountering a market in which the lack of workers is simply the result of effects of broad changes in workers’ attitudes and their expanding opportunities as a result of the pandemic and other factors, explained Betsey Stevenson, professor of public policy and economics at the University of Michigan.
“We’re seeing job quits hitting their record high of four-million in July,” Stevenson told Catalyst Corporate’s Economic & Payments Forum. “That's happening because there's so much opportunity out there. Employer job reallocation has absolutely doubled, so, people are twice as likely to have changed jobs over the past year compared to 2019.
“The U.S. economy is in the midst of a huge reallocation of people, and the reason we're seeing so much weirdness in the labor market and economy is because it’s become like a big game of musical chairs, where people have walked into a big room and everybody's standing around and looking for the seat that’s the best fit for them,” continued Stevenson.
What is leading to many workers either quitting or thinking about changing careers is a direct result of the pandemic’s impact on businesses, reminded Stevenson. She explained that consumers’ habits—what they do every day and what products and services they use—have changed during the health crisis, which has affected different businesses in different ways.
A Reversal
Stevenson noted that during the 2007-2008 recession, the goods industry was hit the hardest while the service industry was much less affected. She stressed how that scenario has reversed itself during the recent economic downturn.
“The service sector, which is more than just restaurants, is a big part of the U.S. economy,” said Stevenson. “In this latest recession nearly all the lost jobs were in the service industry. In the 2007-2008 recession it was the opposite where the goods-producing jobs were lost and the service sector remained intact. The service sector is often the biggest driver of economic recovery.”
Stevenson noted that the current “unprecedented” high rate of workers looking to change employers over the next year is highest among Gen Z and Millennials. She said Black and Hispanic workers, more so than White, are switching industries.
Again, consumer habits are forcing businesses to pivot and create new roles, many of which are being taken by individuals moving out of the service industry into roles in other lines of business created out of the pandemic.
Beginning to Fade
Stevenson predicted the labor shortage will begin to fade away once people decide what they want to do and once employers find the right people.
“It takes time to get people in these jobs—to find the right matches,” she said. “That's what's happening with workers; they're taking some time. There's so many opportunities out there now that they can afford to quit. If you woke up tomorrow and said you wanted to find the right spouse and get married, you’re probably not going to get married tomorrow.”
Another broad cultural change that has led more people to changing jobs is all the time they have spent at home during the pandemic, according to Stevenson. All of that time has allowed many people to reflect and look more closely at their lives, their families, their futures and their careers.
“Initially, when the pandemic struck, the U.S. in March of 2020, people felt a great deal of uncertainty about their future,” reminded Stevenson. “Now, that fear has receded and people have had time to reflect on their career and life, asking themselves what do they really want from their job and life. And, data show that 52% of workers now want working flexibility, as well.”
The ‘Return to Normal’
Stevenson pointed out that the rate of retirements has risen coming out of the pandemic-driven recession compared to those retiring during the Great Recession.
“Recovery in the labor force requires getting people into jobs and then keeping them there,” said Stevenson, adding this “return to normal” will be a slow process. “It’s going to be a little bit unsettling, but in the end it will increase the labor force size. It can be slow to bring back people who exited the labor force, and the Delta variant is slowing things down a bit, as well.”