The Scary Truth About Our Grueling Labor Shortage

Andy Snyder|September 21, 2022

“This has never happened to me before,” he looked at us and said. “It’s embarrassing.”

The sweat was dripping off his forehead.

He couldn’t get the job done. They’re words no man wants to say.

We certainly didn’t want to hear them. After all, we were paying for the job.

But the contractor working on our old house restoration is in a tough spot. He can’t get the help he needs.

“Every day, I’ve got guys who are supposed to work,” he said desperately. “But you’ve seen it. They never show up. I’ve got ads everywhere.”

Our contractor is facing the same issues so many others face. But the problem isn’t just affecting the trades. It’s rearing its ugly head at Ford… FedEx… United Airlines… and Dollar General. Its effects are being felt at Teva Pharmaceuticals… Home Depot… and even the Pentagon.

The nation is facing one of the most grueling labor shortages in its history, and it’s cutting deep. Only a major recession can fix what ails us.

“I’ve got to compete with gas stations that are offering sign-on bonuses and $18 an hour,” our contractor said. “That means I’ve got to pay $25 an hour to start. And these guys want cash.”

It’s a trend we’re seeing across the business world.

Begging for Help

One local warehouse is so desperate for help that it’s raffling off iPads and PlayStations to folks who show up for work each day. It’s offering free lunches and on-site food trucks.

Walmart is giving bonuses to folks who simply make it in for all their scheduled shifts.

We even heard about workers getting free mattresses and cash just for signing on.

It’s surely on Jay Powell’s mind this week. As perks and wages rise, inflation jumps right alongside them.

He’ll surely mention it during his speech this afternoon.

But is this a problem the Fed can fix? (Is there any problem the Fed can fix?)

Lots of folks have caught the blame for this mess.

Just yesterday, The Wall Street Journal ran an editorial that wagged a finger at the White House.

Biden went on TV and declared the pandemic over… but he’s failed to lift the emergency declaration that “enables the government to hand out billions of dollars in welfare benefits to millions of people as long as the emergency is in effect.”

The declaration, of course, cuts the work requirements folks need to meet to receive those benefits.

But that’s only a small part of what’s happening. Plenty of studies over the years have shown that people would rather work than not, even when free handouts are available.

There’s hope for humanity yet.

The Pig in the Python

Still, some of the ugliest numbers in the latest labor force participation rate report are from young workers with nothing but a high school education – aka unskilled workers. They’re opting not to work at one of the highest rates we’ve ever seen.

Then again, as our conversation with our contractor proves, many are indeed working… but just not telling Uncle Sam about it.

But even accounting for these variables, the numbers don’t add up. Something bigger is going on here.

For investors, it’s important to pay attention to it.

Most likely, what ails us is the result of a huge but quiet demographic shift. We’ve written about it many times in the past.

The baby boomer generation has often been described as the “pig in the python.” From the time of this huge population group’s birth to today, we’ve seen boomers have an oversized effect on the American economy.

In fact, when we first got into the money game, our wise, gray-haired mentor warned us that things would get tough once boomers started rotating out of stocks.

Many readers will be shocked to know that the oldest of the group reached retirement age… in 2008.

Indeed, it wasn’t a good time for stocks.

In fact, we argue that the stimulus that’s been needed to keep the economy and the markets afloat during the last 14 years can be largely attributed to this demographic trend.

Without the pig in the python buying stocks… the government had to step in.

Scary

It’s looking to be a similar trend in the jobs market. There are 600,000 fewer Americans in the jobs pool today than there were in 2019. Many folks who worked in 2019 are now retired.

Just 38.7% of folks over the age of 55 are working or are looking to work.

Just a few years ago, nearly 80% of those over 55 had jobs.

That difference is huge. It’s a troubling number that few folks have opened their eyes to.

Yes, we’ve got short-term issues with jobs. But the bigger problem – the problem that is likely to last for a decade or longer – is a demographic issue.

We simply don’t have the workers.

In other words, this may be the first time our contractor couldn’t get a job done… but it won’t be the last.

Indeed, getting old is no fun.