Jobs, Workers, More & Less
February 16, 2023
Jobs and the Workforce
Permit me please to digress a moment from commercial real estate in San Antonio and look at a larger issue – jobs. This certainly bears on commercial real estate, because, after all, that is where jobs get done and where people work.
We are all well familiar with the Pandemic Two-Step: close jobs down to stop the contagion, then open back up and try to find workers again. Now we are on the third step (yes, that is clumsy for a two-step but clumsy applies here) – right sizing our workforce for the Next Normal, while the FED raised interest rates to squelch hiring. Let’s consider all the variables, because there are a bunch!
Co-Star tells us that recently the Labor Department revised its job numbers, saying “the previous reports showed monthly job gains averaging 375,000 in 2022, the new data shows monthly job gains averaged 401,000 . . . The revisions showed job growth to be stronger in each of the final seven months of the year in 2022. Moreover, preliminary figures show that firms added an additional 517,000 jobs in January, more than twice the 175,000 that was broadly expected.”
So, despite the FED’s efforts to slow inflation by slowing the economy, instead the overall job market is full speed ahead. One sector, however, that did get hit hard is real estate. The FED’s interest rate hikes nearly stopped real estate in Q4 2022.
Currently, the U.S. has nearly 11-million job openings available for hiring new workers. That means there are nearly two jobs available for every unemployed person! The U.S. unemployment rate just fell from 3.5% to 3.4%, a low not seen in 50 years, since 1969. Yes, we are having layoffs by many firms who over-hired to meet the Covid demand on their services and goods and now must cut costs. However, many employers are going to hold on to the employees that they had such a hard time enticing back to work. Why would they lay off good people and then try to hire them back yet again? Saying goes, ‘you can’t fire someone you didn’t hire.’
Quiet Quitters and Job Openings
Do you expect as do I, that the “quiet quitters” are the first to be laid off? Do you suspect that those who opted to not return from Work-From-Home are the ones the boss now finds the easiest to let go? The boss is going to find it easier to release someone he/she doesn’t know very well, doesn’t come into the office and no one will really miss. But then there is a job available right around the corner for this newly laid-off employee, so there is really no problem getting rehired, if you want a new job.
There are so many job openings, it is a good sign that the actual labor participation rate rose from 62.3% to 62.4%. However, we were at 63.4% pre-pandemic and the record high was in 2000 at 67%. So, that is a reduction of a couple of million people who could work but don’t. Maybe, some are folks who decided to be stay-at-home parents during the Pandemic when they found out how bad the schools were. Or GenZ’s that dropped out to go back to live with mom and dad. Or 3-million folks who retired early during the pandemic.
We truly have very real shortages in teachers, accountants, engineers, pilots, doctors, nurses, veterinarians, truck drivers, welders, plumbers, A/C repairmen, and many other professions (lawyers excepted). To an extent this represents our Middle Class, which is shrinking. Sadly, the people coming across our southern borders do not generally have these professional skills. And, sadly, our dysfunctional legal immigration system only handles about ½-million people per year. D.C. can’t/won’t act.
Low Birth Rate
Adding to this labor shortage, we in the U.S. are now reproducing at such a low rate that our population is actually declining; 1.7 births per mom versus the break-even rate of 2.1 births. Fewer people mean lower productivity and that leads to a lower GDP for the entire nation. Can robots and AI take up the slack in the worker shortage? Doubt it can do more than slightly lessen the shortage. Think about autonomous driving trucks for example.
In A Nut-Shell
To Recap: 1) We have inflation that is too high. 2) So the FED raises interest rates to try to squelch pay increases (ouch) and raise the unemployment rate. Interest rates are the only tool the FED has. Too bad when you need a screw driver, all you have is a hammer. 3) But, unemployment has dropped to a 50-year low, 4) and we are very short of trained people in every job category, 5) and we are looking at a long-term decline in population making the labor shortage even more critical, 6) and this reduces our productivity and eventually our standard of living in the U.S. (insert frowny face here).
San Antonio is the top ranked city for growth in 2022
Now the good news. We live in the ASA-MSA, aka the Austin-San Antonio Corridor, where we are racking up some pretty strong rankings. San Antonio is the top ranked city for growth in 2022 and the top city for home building for 2023, according to the National Association of Realtors. The Federal Reserve Board reports that, though labor demand is softening in the U.S. and in Texas, San Antonio is still performing better than both.
The prediction for San Antonio is 1 to 1.5% growth this year; not slamming but not a decline. Then, New Braunfels is the fifth fastest growing ‘small city’ in the U.S. and the city council says they will be out of land to develop by 2035. Our area’s affordability and pleasant life style remains appealing to a nationwide audience, drawing in more relocations from less attractive states and cities.
On to the Next Normal
Reports I get from my commercial and residential real estate contacts say that the freeze brought on last Fall by the FED’s rate hikes has now turned to an early thaw this year. Thank you, Mr. Groundhog. Activity is getting back to normal, or, at least the Next Normal as the interest rate shocks of last year have been absorbed, adjusted to and we have adapted. Can’t wait to see what happens next.