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    Biden and the Fed Wanted a Hot Economy. There’s Risk of Getting Burned.

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    So far, in a real-world test of a new approach to economic policy, prices have been rising faster than wages.Seen at a U-Haul in Overland, Mo., earlier this summer. A “high-pressure” economy has brought more people into the labor market and pushed up wages at the lower end of the income scale. Whitney Curtis for The New York TimesThere is a big idea in economic policy that has become ascendant in recent years: Great things can be achieved for American workers if the economy is allowed to run hot.The notion of creating a “high-pressure” economy is that government should be willing to risk a bit of inflation in the near term to achieve conditions that will over the long run lift people out of poverty, prevent the scars of recessions from becoming permanent, and make the nation’s economic potential stronger.This idea has origins in a 1973 paper by Arthur M. Okun, and was largely confined to think tank conferences in the 2010s. Now, it is the intellectual underpinning of American economic policy, embraced at the highest levels by the Biden administration and the Federal Reserve.It makes for a real-world test of a new approach to economic policy. The results so far show that pushing the economic accelerator to the floor has trade-offs, specifically the combination of trillions in federal spending with interest rates held near zero.While that combination has some created some important beneficial effects, the summer of 2021 has not produced quite the high-pressure economy its enthusiasts were hoping for.The good news is that job openings are abundant, wages for people at the lower end of the pay scale are rising quickly, and it appears that the post-pandemic recovery won’t be like the long slog that followed the three previous recessions.But consumer prices have been rising faster than average wages — meaning that, on average, workers are seeing the purchasing power of their paycheck fall. People looking to buy a car or build a house or obtain a wide variety of other products are finding it hard to do so. And while much of that reflects temporary supply disruptions that should abate in coming months, other forces could keep prices rising. These include soaring rents and the delayed effects of higher prices from companies having to pay higher wages.“I don’t think of the last few months as either vindication or repudiation, yet,” said Josh Bivens, director of research at the Economic Policy Institute and a longtime enthusiast of policymakers seeking a high-pressure economy.In effect, unlike the slow-moving developments of the 2010s, when the debates over running the economy hot took shape, things are moving so fast right now that it is hard to be sure how things will look as conditions stabilize.Still, “I think the benefits of carrying on the go-for-growth strategy will come,” Mr. Bivens said, noting exceptionally strong job creation in recent months.A more traditional view has been that it is unwise for policymakers to try to push unemployment too low, because doing so will generate inflation. That thinking lost credibility as the 2010s progressed — the jobless rate fell ever lower, with few signs of an inflation spike.But while the tight labor market from 2017 to 2019 generated strong inflation-adjusted wage gains for workers, especially at the lower end of the pay scale, there is nothing automatic about that process. In a booming economy, if companies raise prices more rapidly than they increase worker pay — taking a higher markup on the products they sell — it will mean workers are effectively making less for each hour of work.In the past, it has cut both ways. In the strong economies of the late 1960s and late 1990s, average hourly earnings for nonmanagerial workers persistently rose faster than inflation. In the late 1980s, the reverse was true.And it is also true now. Wages and salaries in the private sector were up 3.6 percent in the second quarter from a year earlier, according to Employment Cost Index data, the strongest since 2002. But the Consumer Price Index was up 4.8 percent in that same span, meaning workers lost ground. Other measures of compensation and inflation tell a similar story.One big question is whether elevated inflation is simply an unavoidable consequence of the reopening of the economy after a pandemic, or is at least partly a result of the aggressive use of fiscal and monetary policy to heat up the economy quickly.For example, automobile prices are through the roof, which analysts attribute mainly to microchip shortages caused by production decisions made during the pandemic. But is part of the spike in prices also a result of high demand, spurred by stimulus checks the government has sent and low interest rates that make car loans cheap?Jason Furman, a Harvard economist and former chairman of the White House Council of Economic Advisers, points out that the United States is experiencing significantly higher inflation than other countries that are facing the same supply problems. Consumer prices rose 2.2 percent in the year ended in July in the euro area, compared with 5.4 percent in the United States.“My guess is that real wage growth is faring better right now in Europe than it is in the United States, and it’s faring better because there is less demand and thus less inflation,” Mr. Furman said.The story is better when you look at how lower-paid workers in the United States are doing. The shortages of workers, especially in service industries, are translating into raises for people who don’t make a lot. Data from the Federal Reserve Bank of Atlanta shows that median hourly wages for people in the bottom 25 percent of earners have risen at a 4.6 percent rate over the last year, compared with 2.8 percent for the top 25 percent.And many of the benefits of a hot economy come in the form of pulling more people into the work force and enabling them to work more hours. Employers have added an average of 617,000 jobs a month so far in 2021, versus 173,000 a month in 2011, in the aftermath of the global financial crisis. If sustained, the United States is on track to return to its prepandemic employment level two years after the recession ended. Such a recovery took five years after the previous recession.Advocates of running a hot economy emphasize that a rapid recovery is good for reducing inequality, in part by ensuring there are plenty of job opportunities so that people don’t have to be out of work for long stretches.“We are seeing ongoing stimulus and expanded income support programs doing what they’re supposed to do,” said J.W. Mason, a fellow at the Roosevelt Institute and a longtime proponent of running the economy hot. “The numbers we should really be looking at are employment growth and wage growth, especially at the low end, and those trends are positive and encouraging. They’re the numbers we would have hoped to see at the beginning of the year.”In the late years of the last expansion, employment gains were particularly strong for racial minorities, people with low levels of education, and some others who often have a hard time getting hired.“The thing we know for certain is that when you run a hot economy, people get jobs who wouldn’t otherwise get jobs,” Mr. Furman said. “That by itself is sufficient reason to want to run a hot economy. You’re talking about some of the most vulnerable workers getting hired, and that’s a wonderful thing.”Still, even some supporters of running the economy hot see risk that the scale and pace of stimulus actions have been too much.“It’s not that my commitment to a tight labor market has weakened,” said Michael Strain of the American Enterprise Institute, one of the center-right voices who favored the approach. “It’s that the specific policy mix is a mistake, for a bunch of reasons. There is such a thing as too much stimulus, which becomes counterproductive, either because inflation eats away wage gains or the supply side of the economy can’t keep up.”Even people who believe in a high-pressure economy, in other words, would do well to keep an eye on just how high that pressure is getting, and how sustainable it really is. More

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    New York City’s Economy Is Dealt a New Blow by the Delta Variant

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    For New York City and its trillion-dollar economy, September was supposed to mark a return to normal, a moment when Broadway theaters reopened, stores and restaurants hummed, and tourists and office workers again filled the streets.But that long-awaited milestone has been upended by the Delta variant of the coronavirus. One big company after another has postponed plans to come back to Manhattan’s soaring towers. Trade shows have been canceled. Some small businesses have had orders evaporate.It is a setback for a city that has lagged behind the rest of the country in its economic recovery, with a 10.5 percent unemployment rate that is nearly twice the national average. Now, rather than seeing the fuller rebound it was counting on, New York is facing fresh challenges.“The Delta variant is a meaningful threat to the city’s recovery,” said Mark Zandi, the chief economist at Moody’s Analytics. “This is not going to be easy. It’s going to be a long time before New York City gets its economic groove back.”Covid-19 cases have risen sharply in the city since early July, reaching the highest level since April. Hospitalizations have not risen as greatly, and the death rate has remained low. The situation is worrisome enough, however, that the city has begun requiring patrons and employees of bars, restaurants, gyms and indoor entertainment venues to show proof of vaccination — a development unforeseen when the summer began.Staff members checking the vaccination status of patrons at the Beacon Theater.The city has established a vaccination mandate for some indoor establishments. Beginning Sept. 13, it will fine businesses that do not comply. There are signs of hope, or at least determination. Broadway shows, a major tourist magnet, are on track for a September reopening, as is in-person instruction in city schools, which will free some caregivers to return to the work force. But even as the city sponsored an official Homecoming Week, capped by a concert on Saturday in Central Park that was cut short by lightning, cancellations of trade shows and other big events have mounted.Regaining momentum could be painfully slow. James Parrott, an economist with the Center for New York City Affairs at the New School, expects the city to add 20,000 to 30,000 jobs a month in the fall, instead of 40,000 to 50,000, because of Delta.Overall employment remains more than half a million jobs below where it was before the pandemic, with steep losses persisting in the leisure and hospitality industries and in other blue-collar fields. Recouping those service jobs depends in part on the return of white-collar workers who have worked remotely — and have even left the city.Many companies had aimed to bring employees back to the office shortly after Labor Day, at least part-time. But those plans have been scrapped. Facebook, which employs 4,000 people in New York, has put off a return until January, while the financial giants BlackRock and Wells Fargo are now planning a return in October.“Data, not dates, is what drives our approach for returning to the office,” Facebook said in a statement. “We continue to monitor the situation and work with experts to ensure our return to office plans prioritize everyone’s safety.”Boston Properties, which owns nearly 12 million square feet of space in the New York region, said about 40 percent of prepandemic occupants had returned to its buildings earlier in the summer, based on lobby badge swipes. In August, amid Delta’s rise and vacation getaways, that figure had dipped to around 30 percent, said Owen Thomas, the company’s chief executive.“I think the return to the office is a ‘when’ question, not an ‘if’ question,” he said. “Delta is affecting the when.”There are some “if” questions nonetheless. As remote work extends well into a second year, and as much of the contact between professionals and clients continues to be conducted online, it is less clear whether some suburban workers will ever return to the city and to their sometimes-arduous commutes.As companies put off bringing employees back to offices, service businesses that cater to office workers have suffered.An empty plaza in Midtown Manhattan.A shuttered newsstand.As remote work extends well into a second year, the eventual return of some suburbanites to Manhattan’s office towers becomes more uncertain.Greenberg Traurig, a global law firm, was planning to move into four floors of a new building near Grand Central Terminal in October. But many of Greenberg’s lawyers and investor clients relocated to Long Island during the pandemic, prompting the firm to reduce its office space in Midtown to three floors. It plans to open two new offices on Long Island, including one in Bridgehampton.“For me, this is a no-brainer,” said Richard Rosenbaum, the executive chairman. “We accept that this is likely a permanent change in the way people work.”At the same time, corporate get-togethers are in renewed jeopardy. Mr. Zandi, the Moody’s economist, had two in-person speaking engagements set for September and October, but they were recently turned into remote events.“People are nervous about the variant,” he said. “At the very least, it dents New York’s recovery, and if cases continue to mount, then it will delay the recovery.”The on-again, off-again situation among big companies, as well as for events like weddings and parties, has been destabilizing for businesses that depend on them.Patrick Hall, a co-owner of Elan Flowers in the SoHo neighborhood of Manhattan, has been dealing with a flurry of changes as clients have grown more skittish about the virus.Soon-to-be brides are cutting their guest lists in half and changing venues at the last minute. One client, who has not yet paid a deposit, had been emailing Mr. Hall about a nonprofit organization’s gala in October for 300 people and recently went silent.Some large companies had asked Mr. Hall to prepare flowers for return-to-office parties in the fall, but Mr. Hall wonders whether he can bank on those. He had planned to expand his staff of seven people to handle an increase in business in September but is now unsure about how many employees to hire.“I’m trying to hang on and not lose it,” Mr. Hall said. “I need these larger events in September for my business to survive.”New York’s huge travel and leisure industry is also having an uneven recovery.More than any other American city, New York counts on international tourists. So the Biden administration’s decision in late July to continue barring entry to visitors from Europe and several other parts of the world was a blow.“It’s just reinforcing that the recovery isn’t going to happen in a straight line,” said Fred Dixon, the chief executive of NYC & Company, the city’s tourism promotion agency.Having written off the bulk of foreign tourism in August, when New York is usually awash with European vacationers, tourism industry officials fear that the Delta variant could keep visitors away during the crucial holiday season, too.New York’s travel and leisure industry is experiencing an uneven recovery, punctuated by the ups and downs of virus cases.Tourism officials fear that the Delta variant could keep visitors away during the usually bustling holiday season.Domestic travelers have returned to New York in rising numbers, Mr. Dixon said — foot traffic in Times Square has been above 200,000 a day, higher than in May and June — but they do not stay as long or spend as much as overseas tourists.At the Loews Regency, a Park Avenue hotel known as a gathering spot for local power brokers and tourists alike, occupancy has been around 75 percent, according to Jonathan M. Tisch, the chief executive of Loews Hotels. But getting to the full-occupancy levels of late 2019 and early 2020, he said, would require a return of business travelers and especially international tourists.“If you could tell me the impact of the Delta variant, I could tell you the occupancy for the rest of the year,” Mr. Tisch said. “It’s a great unknown.”The Javits Convention Center was preparing to host its first trade show in more than a year when the organizers of the New York International Auto Show said in early August they were calling off their 10-day event there. A week later, the Specialty Food Association announced that its annual Fancy Food Show, scheduled for late September at Javits, would not take place.“Given the current significant national upswing in Covid-19 cases due to the Delta variant, we believe that holding a large indoor event and protecting the general safety of all show participants will be nearly impossible,” the food show’s organizers said.New York City’s largest hotel, the 2,000-room Hilton in Midtown, began taking reservations with a plan to reopen in August. But the hotel’s managers canceled those bookings and tentatively reset the reopening for Sept. 1.Still, some businesses have plowed ahead. Genting Group, a Malaysian operator of casinos, opened a 400-room Hyatt Regency hotel at its Resorts World gambling parlor near Kennedy International Airport in early August.After spending $400 million and three years getting the hotel built, the company did not want to wait any longer to open it, said Bob DeSalvio, the president of Genting Americas East.“We understand that it’s going to take a while for travel to fully ramp back up,” he said, so the hotel was staffed for 50 percent occupancy. But there clearly was pent-up demand, because the hotel’s first weekend was sold out, Mr. DeSalvio said.Caroline Hirsch, the owner of Carolines on Broadway, has not canceled any shows at her comedy club and is moving forward with the New York Comedy Festival, which is scheduled to begin on Nov. 8 and feature more than 100 shows across the city.But this month, she noticed for the first time since reopening in May that some people who bought tickets for the club did not show up.“We were off to a great start,” Ms. Hirsch said. “We thought we were going to be over this hump. Now there’s another hump. We’re all up in the air again.”Ms. Hirsch hopes that the city’s new executive order requiring proof of at least one vaccination to enter many indoor establishments will make audience members more comfortable. The mandate went into effect on Tuesday, and on Sept. 13 the city will begin fining businesses that fail to comply.Other business owners are less sanguine about the mandate; it has produced at least one legal challenge. And as September approaches, the prospect of business as usual, which seemed tantalizingly close a few months ago, is proving elusive.At the Shambhala Yoga & Dance Center in Prospect Heights, Brooklyn, a wave of students signed up after in-person classes resumed in late April, when vaccination efforts were in full swing. But in recent days, attendance has ebbed and flowed with news of the Delta variant’s outbreak, said Deanna Green, Shambhala’s owner.“Once we saw uncertainty around the vaccines and the Delta variant, I have noticed a little bit of a lull,” Ms. Green said. Some yoga classes that typically had 10 students dropped last week to six or seven, she said.“We’re really dependent on a steady flow of people coming through the doors,” she said. “I wish there was more of a level of certainty.”Eduardo Porter More

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    Liz Shuler Is Named President of the A.F.L.-C.I.O.

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    Ms. Shuler was the No. 2 official before Richard Trumka’s death. A vote to fill the top post for a full term will be held in June.The A.F.L.-C.I.O. has chosen Liz Shuler, its acting president since the death of Richard Trumka this month, to lead the federation until it holds elections next year.Ms. Shuler had served as secretary-treasurer, the A.F.L.-C.I.O.’s second-ranking official, since 2009.The decision to name Ms. Shuler president came at a meeting of the A.F.L.-C.I.O. executive council on Friday, which Ms. Shuler was obligated to call within a few weeks of Mr. Trumka’s death under the federation’s constitution. Ms. Shuler is the group’s first female president.“I believe in my bones the labor movement is the single greatest organized force for progress,” Ms. Shuler said in a statement. “This is a moment for us to lead societal transformations — to leverage our power to bring women and people of color from the margins to the center — at work, in our unions and in our economy, and to be the center of gravity for incubating new ideas that will unleash unprecedented union growth.”Before becoming the federation’s secretary-treasurer, Ms. Shuler held a variety of roles with the International Brotherhood of Electrical Workers. She said in an interview the day after Mr. Trumka’s death that she had been preparing for years to lead the A.F.L.-C.I.O. and that she expected to be a candidate for a full four-year term next June.“You don’t just show up one day and ask for support — the groundwork has been laid for years,” she said. “I studied under the best, and I am ready to lead.”Union presidents and senior A.F.L.-C.I.O. staff members have spent years debating the proper role of the federation, with some arguing that it should mostly coordinate among its member unions and help advance their shared priorities in Washington and state legislatures. Others argue that the federation should play a leading role in organizing new workers and building alliances with progressive groups, like those promoting civil rights.Mr. Trumka, known for his close relationship with President Biden, was primarily associated with the first view during his later years as A.F.L.-C.I.O. president. Ms. Shuler is also identified with this approach, although she stressed in the interview that adding union members was a priority and has supported organizing initiatives in the past.Some officials who favor more emphasis on organizing want Sara Nelson, the president of the Association of Flight Attendants, to lead the federation.But few sought to challenge Ms. Shuler at a moment when the stakes are high for organized labor. The A.F.L.-C.I.O. is pushing for the large jobs and infrastructure measure proposed by Mr. Biden, as well as for legislation that would make it easier for workers to form unions.“There is a need to unify the labor movement to get where we need to go,” Ms. Shuler said in the interview. “My job would be to promote unity and solidarity around a common agenda.”The executive council also voted Friday to name Fred Redmond, a top official of the United Steelworkers, to fill the opening for secretary-treasurer that Ms. Shuler’s elevation created.Mr. Redmond, who is the first Black official to serve in one of the A.F.L.-C.I.O.’s top two positions, has been a vice president of the steelworkers’ union since 2005 and coordinates bargaining for members in the health care, pharmaceutical and shipbuilding industries, as well as those in the public sector. He also oversees the union’s civil rights department and has worked with other progressive groups to campaign for voting rights.The steelworkers’ president, Tom Conway, is close to Mr. Biden and has been outspoken in support of his jobs and infrastructure plans. More

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    Cutting off jobless benefits early may have hurt state economies.

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    When states began cutting off federal unemployment benefits this summer, their governors argued that the move would push people to return to work.New research suggests that ending the benefits did indeed lead some people to get jobs, but that far more people did not, leaving them — and perhaps also their states’ economies — worse off.A total of 26 states, all but one with Republican governors, have moved to end the expanded unemployment benefits that have been in place since the pandemic began. Many business owners blame the benefits for discouraging people from returning to work, while supporters argue they have provided a lifeline to people who lost jobs in the pandemic.The extra benefits are set to expire nationwide next month, although President Biden on Thursday encouraged states with high unemployment rates to use separate federal funds to continue the programs.To study the policies’ effect, a team of economists used data from Earnin, a financial services company, to review anonymized banking records from more than 18,000 low-income workers who were receiving unemployment benefits in late April.A Small Rise in EmploymentShare of workers on unemployment in late April who later began working.

    Note: Chart reflects data in 19 states that have cut off benefits, and 23 that have retained them. Source: Earnin via Coombs, et al.By The New York TimesThe researchers found that ending the benefits did have an effect on employment: In states that cut off benefits, about 26 percent of people in the study were working in early August, compared with about 22 percent of people in states that continued the benefits.But far more people did not find jobs. In the 19 states ending the programs for which researchers had data, about two million people lost their benefits entirely, and a million had their payments reduced. Of those, only about 145,000 people found jobs because of the cutoff. (The researchers argue the true number is probably even lower, because the workers they were studying were the people most likely to be severely affected by the loss of income, and therefore may not have been representative of everyone receiving benefits.)A Big Drop in BenefitsShare of workers on unemployment in late April who continued to receive benefits in some form.

    Note: Chart reflects data in 19 states that have cut off benefits, and 23 that have retained them. Source: Earnin via Coombs, et al.By The New York TimesCutting off the benefits left unemployed workers worse off on average. The researchers estimate that workers lost an average of $278 a week in benefits because of the change, and gained just $14 a week in earnings (not $14 an hour, as previously reported here). They compensated by cutting spending by $145 a week — a roughly 20 percent reduction — and thus put less money into their local economies.“The labor market didn’t pop after you kicked these people off,” said Michael Stepner, a University of Toronto economist who was one of the study’s authors. “Most of these people are not finding jobs, and it’s going to take them a long time to get their earnings back.”Less Income, Less SpendingAverage impact of ending federal programs on weekly unemployment benefits, earnings and spending, among people who were on unemployment in late April.

    Notes: Data is as of Aug. 6 and includes 19 states that have cut off benefits. Source: Earnin via Coombs, et al.By The New York TimesThe findings are consistent with other recent research that has found that the extra unemployment benefits have had a measurable but small effect on the number of people working and looking for work. The next piece of evidence will come Friday morning, when the Labor Department will release state-level data on employment in July.Coral Murphy Marcos More

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    When Will Unemployment End? Biden Urges Some States to Extend Benefits

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    President Biden is encouraging states with stubbornly high jobless rates to use federal aid dollars to extend benefits for unemployed workers after they are set to expire in early September, administration officials said on Thursday, in an effort to cushion a potential shock to some local economies as the Delta variant of the coronavirus rattles the country.Enhanced benefits for unemployed workers will run through Sept. 6 under the $1.9 trillion economic aid bill enacted in March. Those benefits include a $300 weekly supplement for traditional benefits paid by states, additional weeks of benefits for the long-term unemployed and a special pandemic program meant to help so-called gig-economy workers who do not qualify for normal unemployment benefits. Those benefits are administered by states but paid for by the federal government. The bill also included $350 billion in relief funds for state, local and tribal governments.Mr. Biden still believes it is appropriate for the $300 benefit to expire on schedule, as it was “always intended to be temporary,” the secretaries of the Treasury and labor said in a letter to Democratic committee chairmen in the House and Senate on Thursday. But they also reiterated that the stimulus bill allows states to use their relief funds to prolong other parts of the expanded benefits, like the additional weeks for the long-term unemployed, and they called on states to do so if their economies still need the help.That group could include California, New York and Nevada, where unemployment rates remain well above the national average and governors have not moved to pare back benefits in response to concerns that they may be making it more difficult for businesses to hire.“Even as the economy continues to recover and robust job growth continues, there are some states where it may make sense for unemployed workers to continue receiving additional assistance for a longer period of time, allowing residents of those states more time to find a job in areas where unemployment remains high,” wrote Janet L. Yellen, the Treasury secretary, and Martin J. Walsh, the labor secretary. “The Delta variant may also pose short-term challenges to local economies and labor markets.”The additional unemployment benefits have helped boost consumer spending in the recovery from recession, even as the labor market remains millions of jobs short of its prepandemic levels. But business owners and Republican lawmakers have blamed the $300 supplement, in particular, for the difficulties that retailers, restaurants and other employers have faced in filling jobs this spring and summer.Two dozen states, mostly led by Republicans, have moved to end at least some of the benefits before their expiration date.In their letter to Congress, the administration officials said the Labor Department was announcing $47 million in new grants meant to help displaced workers connect with good jobs. They also reiterated Mr. Biden’s call for Congress to include a long-term fix for problems with the unemployment system in a large spending bill that Democrats are trying to move as part of their multipart economic agenda. More

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    Will the Pandemic Productivity Boom Last?

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    Fewer workers are making more stuff. If it lasts, that’s big news for the economy of the 2020s.For most of the last 15 years, the United States economy was mired in a period of low productivity growth. Who would have guessed that the pathway out of it might include a pandemic?Yet that is what the numbers show. Since the second quarter of 2020, labor productivity — the amount of output per hour of work — has risen at a 3.8 percent annual rate, compared with 1.4 percent from 2005 to 2019. New data published Tuesday showed the trend persisted this spring, with a 2.3 annual rate of productivity growth in the second quarter.A different way to look at it: Since the pandemic recession bottomed out in the spring of 2020, the nation’s gross domestic product has more than fully recovered, with second-quarter output 0.8 percent higher than before coronavirus. The number of jobs decreased 4.4 percent in the same span. Productivity growth accounts for most of the wedge between those.What is less clear, though, is how much this growth represents real progress toward deploying the work force in ways that will make Americans richer over time. It’s a murky story — like any attempt to connect big-picture productivity numbers to what’s happening in the guts of the economy — but crucial for understanding the economic outlook for the 2020s.There are several parts to the story, and each has different implications for the future.The jobs lost were low-productivityIn terms of economic output, not all jobs are created equal. A worker in a well-managed factory with state-of-the-art equipment produces more economic output for each hour of work than a counterpart in a poorly run place with worse equipment.The differences are even starker when you compare productivity across sectors, and that’s where there is a clear pandemic story. Many more job losses were in low-productivity sectors than in higher ones.Restaurant employment, by contrast, was down 8 percent in the same period.Emily Elconin for The New York TimesFor example, on the eve of the pandemic, manufacturing jobs — highly productive, with lots of automation — paid on average $28.23 an hour, while restaurant jobs paid $15.23 on average. Employment in manufacturing in July was down 3.4 percent from its February 2020 level, while restaurant employment was down 8 percent.As people currently out of work return to the labor force, how many will take higher-productivity jobs vs. lower-productivity ones? That’s vital in determining the economy’s future growth potential.Doing more with lessThe labor shortage facing many types of businesses, especially in the service sector, is forcing some hard decisions. And in many cases, companies unable to return to normal staffing levels are getting creative.Restaurants are experimenting with people ordering on their phones rather than through a waiter. Retailers are offering more self-checkout options. And there is evidence that the difficulty recruiting workers is making companies invest more in training employees — potentially shifting people from low-productivity jobs to higher-productivity ones.Sometimes there are tricky measurement questions. For example, if a hotel charges the same prices but, with fewer housekeepers on the payroll, no longer provides a daily cleaning service, that arguably is a worsening in the quality of the product and therefore a form of inflation, rather than higher labor productivity.But to the degree that something fundamental is shifting in terms of businesses’ willingness to make labor-saving investments, rethink processes to be less labor-intensive, and move individual workers higher up the skill ladder, there’s opportunity for a productivity surge that outlasts the pandemic.Running themselves raggedThe flip side of this could be that the apparent productivity boom, especially in the first half of this year, simply reflects people working harder than usual.If a restaurant normally has 10 waiters for its dinner shift and cuts back to seven, each of whom has to work that much harder, it could look like a productivity gain. Fewer person-hours of work would be generating the same economic output. It also may or may not be sustainable.Having customers order with their phones, as at this bar in San Francisco, is one way restaurants are dealing with their labor shortage.Ulysses Ortega for The New York TimesBut perhaps people will be willing to work harder at certain jobs if compensation is higher. There is a theory of “efficiency wages” that suggests, in effect, that employers get what they pay for — that paying more means a higher-performing work force.“If you want extra effort, you pay people extra,” said Steven J. Davis, an economist at the University of Chicago Booth School of Business. “You would expect to see some positive productivity benefits of compensating people to put forth more effort per hour than they normally would. Will it be sustained? Maybe if wages stay high.”The work-from-home effectIn the space of just a few weeks in 2020, millions of American workers who once commuted to an office most of the time learned how to work from home. It could have lasting economic ripple effects if even a modest portion of them continue to work from home some or all of the time.“Employers are embracing this as a long-term solution and taking the steps to invest in the appropriate technology to make it really effective,” said Julia Pollak, a labor economist at ZipRecruiter. “There is a lot of soul-searching going on and companies sharing best practices on how to create corporate cultural virtually.”.css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-w739ur{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-w739ur{font-size:1.25rem;line-height:1.4375rem;}}.css-9s9ecg{margin-bottom:15px;}.css-uf1ume{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;}.css-wxi1cx{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;-webkit-align-self:flex-end;-ms-flex-item-align:end;align-self:flex-end;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}At the height of the pandemic, the vast majority of office workers worked from home. In the post-pandemic world, those jobs that most require in-person collaboration may return to offices, but those that can be easily done remotely may stay remote.“The important thing to understand is that it’s not that working from home is better for everybody, but that once the pandemic is over, the kinds of people for whom it doesn’t work very well won’t continue it,” Professor Davis said. “It’s a selection of people who have figured out how to make remote work work, and that’s where the productivity gains are coming from.”Empty office buildings in Midtown Manhattan earlier this year. How many office workers will return to their offices, and how quickly, remains a question, and one with big implications for productivity.George Etheredge for The New York TimesThere are several implications for the years ahead. For one, companies would be likely to need less office space, desks and cubicles relative to the size of their work force than in the past. That could mean higher “total factor productivity,” which takes into account not just the efforts of workers, but the capital investments that they use to do their jobs.For another, workers themselves say in surveys that they are more productive working at home — though not necessarily in ways that show up big in the official productivity numbers.A working paper by Jose Maria Barrero, Professor Davis and Nicholas Bloom that is based on a survey of 30,000 workers finds that widespread working from home could generate a 4.8 percent boost to productivity relative to the pre-pandemic economy, but that only 1 percent of that should be expected to show up in the official statistics.The reason? Much of the gain comes from time saved commuting, and official labor productivity statistics do not include commute time in the “hours worked” denominator.In effect, the pandemic forced a lot of innovation around office work practices to happen far more rapidly than would otherwise be the case.“The adoption of technology has accelerated, new firms are being created at an historic pace, and the shift to remote work is likely to outlast the crisis,” said Lydia Boussour, lead U.S. economist at Oxford Economics, in a note analyzing the new productivity data. “While some of the pandemic-driven efficiencies could take years to be fully realized, we think these four forces will lead to a sustained productivity revival in the medium run.”The future is always uncertain, and economists’ understanding of what truly drives productivity gains is poor. But for now, the evidence suggests that many of the key drivers of this particular pandemic bump aren’t likely to go away anytime soon. More

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    This Is the Job Market We’ve Been Waiting For

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    The new monthly numbers show job growth not seen in recoveries from the previous three recessions.America is getting back to work.That’s the simplest, clearest analysis of the labor market that emerges from nearly every line of the July employment numbers released Friday morning. It is a welcome sign that, as of the middle of last month, the economy is healing rapidly — and that the previous couple of months reflected healthier results than previously estimated.There are caveats worth mentioning: The surveys on which this data is based were taken before people were worrying very much about the Delta variant of the coronavirus; the share of Americans participating in the work force hasn’t really budged; and we still haven’t achieved the kind of one-million-plus monthly job gains that seemed plausible back in the spring.But the overall picture is not a particularly nuanced one. The job market is getting better, and the economy is healing.The 943,000 jobs added to employers’ payrolls in July is impressive on its own (though with an asterisk involving education employment, about which more below). It’s all the more so when combined with sharply positive revisions to May and June numbers.Before the July numbers were released, average job growth over the previous three months was 567,000. Between the strong new number (943,000) and revisions, that average is now up to 832,000 jobs. That is a sign that despite all the headaches businesses are reporting in trying to attract workers, employers and workers really are connecting with each other at a pace not seen in a recovery from the previous three recessions.That is evident in the data on how many people are working and looking for work.The share of the adult population that was employed rose 0.4 percentage points in July, to 58.4 percent. Other than last year when the country emerged from pandemic shutdowns, the last time the share of Americans working rose that much in a single month was May 1984.This was matched by a sharp decline in the unemployment rate. The new jobless rate of 5.4 percent (down from 5.9 percent) is the kind of number that not too long ago would have prompted quite a few economists and central bankers to declare “Mission Accomplished.” (The experience of 2018-2019, with sustained jobless rates around 3.5 percent — combined with the fact that the share of people working now remains well below prepandemic levels — means that you will hear few such declarations of victory.)A broader measure of unemployment — including people out of work because they gave up looking for a job, and people working part time who want full-time work — fell by even more, to 9.2 percent from 9.8 percent. The number of Americans who were working only part time because of slack business conditions fell by a whopping 465,000.Look for the new numbers to become central to debates over whether expanded unemployment payments have been a factor in holding back job creation by incentivizing people not to work. Many states suspended those expanded benefits earlier in the summer, which would be reflected in the July data.The early verdict? Maybe. The steep decline in the number of people unemployed — 782,000 people — is certainly consistent with people returning to work instead of receiving jobless benefits. But the strong and steady growth in payroll employment in May and June is not what you would expect to see if unemployment benefits (or the lack of them) were the primary driver of the labor market.Either way, we’ll know more when state-level data is released in coming weeks.Education employment in public and private schools contributed a combined 261,000 jobs, but not because schools went on a strange midsummer hiring binge.In the normal seasonal pattern, many teachers and other educators fall off their schools’ payrolls at the end of the academic year, which the Labor Department’s seasonal adjustment procedures account for. But with many schools closed or in limited operation this academic year, there were fewer people losing their jobs, meaning the seasonal adjustment appears to report a misleading gain in the number of jobs.There are still plenty of problems in the United States economy, and it would be foolish to think that a single month of data, or even a few good months in a row, signaled a healing of the scars of the pandemic recession. Among other things, the share of the adult population working remains 1.7 percentage points below its prepandemic level. And the labor force participation rate barely edged up in July.But there’s little question, when the employment numbers are combined with other recent data, that the trends are heading in the right direction. More

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    July 2021 Jobs Report: Employers Add 943,000 to Payrolls

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    The American economy roared into midsummer with a strong gain in hiring, but there are questions about its ability to maintain that momentum as the Delta variant of the coronavirus causes growing concern.Employers added 943,000 jobs in July, the Labor Department reported Friday, but the data was collected in the first half of the month, before variant-related cases exploded in many parts of the country.While the economy and job growth overall have been strong in recent months, experts fear that the variant’s spread could undermine those gains if new restrictions become necessary. Already, some events have been canceled, and many companies have pulled back from plans for employees to return to the office in September.Still, with schools planning to reopen, at least for now, and Americans continuing to dine out and travel, the economy’s expansion remained on track last month. Some experts foresee a slight cooling on the horizon, but most think unemployment will keep falling as the labor market recovers the ground lost in the pandemic.“It’s been a sprint in terms of growth, but we may be moving into more of a marathon,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “Travel season is winding down, and the Delta variant is a big concern.”The unemployment rate fell to 5.4 percent, compared with 5.9 percent in June. Before the report, the consensus of economists polled by Bloomberg forecast a gain of 858,000 jobs, with the unemployment rate dipping to 5.7 percent.The education arena, often a laggard in July as schools close and teachers go off the payroll, was a leader last month. Instead of letting teachers go as they have in the past, schools kept more workers on the payroll, creating a larger seasonal adjustment upward in the number of teaching jobs.Local government added 221,000 education jobs, after a jump in June, and 40,000 jobs were added in private education. Leisure and hospitality businesses, which were hit hard by lockdowns last year, recovered further, adding 380,000 jobs. That included 253,000 in food and drinking establishments, along with hiring gains in lodging and in arts, entertainment and recreation.Manufacturing and construction showed more modest increases, hampered by higher goods prices and a shortage of components like semiconductors. Employment in professional and business services jumped by 60,000, a sign that the white-collar sector is on the upswing.“Business is unbelievable,” said Tom Gimbel, chief executive of LaSalle Network, a recruiting and staffing firm in Chicago. “Companies are continuing to hire salespeople in numbers that I’ve never seen. It shows me that companies are very optimistic about the future.”“We’re seeing demand for senior people, but it’s not crazy,” he added. “The huge demand is entry to midlevel, with salaries ranging from $45,000 to $90,000. It’s the rebirth of the middle manager.”Despite the hiring gains, many managers report difficulty in finding applicants for open positions. Jeanine Lisa Klotzkin manages an outpatient addiction treatment center in White Plains, N.Y., and has had only limited success in her search for addiction counselors.“Normally, we’d have dozens of candidates,” she said. But six weeks after posting an online job ad, her clinic has received four applications. The positions pay $50,000 to $63,000 a year, said Ms. Klotzkin, who added: “These aren’t low-wage jobs. I don’t know where the people went.” More