National

Axios Future

The endgame of the pandemic is giving both employers and workers a chance to create a more humane relationship — both in the office and out of it.

The big picture: Companies need workers, but many employees aren't ready to go back to the way things used to be. A hybrid setup could provide the best possible way forward, if both sides are willing to give.

What's happening: As the most acute stage of the pandemic draws to a close, American companies face a new challenge: getting workers back to work.

There were 9.3 million job openings in April, the highest level since at least 2000, while the number of resignations and layoffs reached record highs and lows respectively.

Wages are rising, and companies are offering everything from educational assistance to free appetizers to get potential employees to sign on. But millions of unemployed workers are holding back, while millions more who are employed are eyeing the exit signs.

Between the lines: The primary conflict — and the primary opportunity — is in where work will take place: in the office, at home or somewhere in between.

While the pandemic demonstrated that white-collar productivity, for the most part, could be maintained remotely, with a few exceptions most companies are pushing for at least a partial return to the office.

Workers appear to be significantly less eager. 64% would pick permanent work from home over a $30,000 raise, according to a survey last month by the professional network Blind of employees at 45 of the largest companies in the U.S.

What they're saying: "This is our new industrial revolution, equivalent to when everyone was moving off the farms and into the cities," says Kristi Woolsey, associate director at the consultancy BCG.

"We're not going back to the way things were, and companies know that if they want to attract the best and the brightest, they're going to have to offer a level of flexibility that they didn't beforehand."

Be smart: It's not that white-collar employees hate the office or have fallen in love with working out of spare bedrooms and off kitchen tables during the pandemic.

But workers absolutely hate commuting — it's ranked as the least favorite daily activity overall — and they've come to value the control that the option of remote work gives them over their lives.

"It used to be that you fit life into work," says Kate Duchene, the CEO and president of the global human capital company RGP. "Now it's the opposite — how do you fit work into life?"

What to watch: How companies handle both current and prospective employees who say they value flexibility above all.

A hybrid setup — where workers come to the office at most a few days a week — offers the best opportunity to provide flexibility on both sides.

Yes, but: As Microsoft CEO Satya Nadella wrote recently, "Everything becomes more complex, not less complex, in hybrid work."

Out are the ping-pong tables and free kombucha of the pre-pandemic times, says Matt Watson, CEO and co-founder of the benefits management company Origin. Instead, "companies are looking to offer benefits that directly impact a worker's life" outside of the office.

What's next: Sheer demographics mean that U.S. workers could find themselves with unaccustomed leverage for years into the future.

Population growth for Americans 20 to 64 turned negative last year for the first time in U.S. history, while the Congressional Budget Office predicts that the potential labor force will grow for the 2020s at roughly half the rate it did from 2000 to 2020.

The bottom line: It's been a very long time since U.S. workers held this much leverage, and that could help shape some better compromises in the work world.

A new industrial revolution presses the reset button on work

Coming: More flexibility for workers, benefits for life rather than the office, and more bargaining power.

Illustration of a hand pressing a reset button on a briefcase

Future of work

Jobs

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Teenagers are stepping up to staff an economic comeback that's expected to kick into overdrive this summer. 

Why it matters: A working teen renaissance is underway in America as businesses scramble to find employees. 

Summer is always the most popular time for teens to get paying gigs, but the pace this year is eye-popping. 

Roughly one-third of 16- to 19-year-olds were employed last month, according to the latest jobs report — the highest share since 2008. 

Flashback: The adolescent labor market last peaked in the summer of 1978 when half of the teenage population was working. 

It's fallen ever since. Typical summer gigs for at least some teenagers were increasingly replaced with volunteer work, school or unpaid internships.

What they're saying: A senior White House official said vaccinated younger workers could help fill the avalanche of job openings — once they "feel more comfortable about returning to public-facing jobs," like hotels or bars, Politico reported today.

There are already signs teens are helping release the pressure valve for leisure and hospitality — a sector with a record number of job openings.

The intrigue: Adults may have taken the place of teens during the last recession, but now those opportunities are going back to teen workers, staffing firm Challenger, Gray & Christmas said in a report this week.

One upshot: Teens are reaping the benefits of businesses desperate for workers — perks and higher pay, which might be necessary after an economically devastating year.

Small businesses have been hiking pay for teens in service sector jobs, payroll platform Gusto told the New York Times last month.

Teens juice the summer recovery

A working teen renaissance is underway in America as businesses scramble to find employees.

Illustration of a young worker sweeping up COVID-19.

Economy

Axios Closer

About two-thirds of service-sector workers said they could not take leave, or took less leave than they wanted, when they experienced a major life event, according to a Harvard and UC San Francisco study released today. Within this group, 71% said the reason was they couldn’t afford to. 

Why it matters: Part of President Biden’s American Families Plan provides 12 weeks of guaranteed paid family and sick leave to workers, marking the first time that a U.S. president has introduced a national-level paid leave program.

By the numbers: The study, which Axios is first to report, shows exactly how difficult it was for low-income workers to think about taking time off in the fall of 2020 —  whether for a personal medical need, caregiving, new child or a combination of qualifying events. 

Men (38%) were more likely than women (28%) to say they didn't take leave or as much as they would have liked to out of fear that they would lose their jobs.

Hispanic workers (53%) and Black workers (49%) were the most likely to say they felt pressure to avoid taking time off or fear job loss compared with white workers (39%).

The survey covered 8,500 of those who worked for 85 of the largest companies across retail, grocery, delivery and fulfillment and food service, including Walmart, Target and Starbucks. 

The median wage of workers surveyed was $12.75 per hour.

What they're saying: The study is among the first to document the extent to which paid leave is inaccessible among front-line low-wage workers, researchers Elaine Zundl, Julia Goodman and Daniel Schneider tell Axios.

The bottom line: Making the case for paid leave, financially fragile workers "are serving food and going hungry," Schneider says.

Study reveals inaccessibility of paid leave for low-income workers

Hispanic and Black workers were most likely to say they felt pressure to avoid taking time off.

Paid leave

Joe Biden

Retail

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

The acting administrator of the Transportation Security Administration issued an internal memo on May 30 warning that 131 of the largest U.S. airports will face staffing shortages as in June, the Washington Post reported Wednesday.

The state of play: The memo asks TSA office workers to volunteer for up to 45 days to help run queues and perform administrative tasks, with summer travel expected to ramp up, per the Post.

The big picture: TSA has resorted to other measures to boost staffing amid the expected travel surge in recent weeks, including offering $500 monthly bonuses to screening officers at short-staffed airports, expanding employees' overtime hours, and making some part-time workers full-time, per the post.

Union leaders told the Post that TSA had also required some employees to work on their days off.

TSA has hired more than 3,000 employees in the last few months and aims to hire another 3,000 by the end of summer, per the Post.

What they're saying: “With this increase in volume, TSA must maintain operational readiness and ensure that the screening workforce is available to perform screening functions,” Darby LaJoye, TSA's acting administrator, wrote in the memo obtained by the Post.

TSA asks office workers for help as America's largest airports face staffing shortages

The TSA administrator has asked office workers to volunteer for up to 45 days to help run queues.

 TSA screening  at Los Angeles International Airport (LAX)

 TSA screening  at Los Angeles International Airport (LAX). Photo: Patrick T. Fallon/AFP via Getty Images

Airports

Small business owners' optimism pulled back slightly during May.

Why it matters: Small businesses were hit hard during the pandemic, but optimism had grown in each of the prior three months. The slight pullback last month appears to stem largely from hiring challenges — offering yet another data point on how labor issues are playing out across the country. 

The details: The NFIB Small Business Optimism Index eased by 0.2 points in May, to 99.6, from April.

The index is up from a reading of 95 in January, but down from 104 in the fall.

The reading is about 2 points above the historical average.

What they’re saying: "This tells me that overall small business sentiment is still elevated, and we continue to see increases in consumer activity as things are opening up and spending gains,” Sharon Miller, head of small business at Bank of America, tells Axios. 

Yes, but: Finding quality employees continues to be challenging. 

About 93% of those trying to hire reported few or no "qualified" applicants for the positions they were trying to fill. 

A net 34% of owners reported raising compensation in May, up 3 points from April. That’s the highest level of the past 12 months. 

The bottom line: As the economy strengthens, small businesses are still forging ahead with their growth and reopening plans. 

About 27% plan to make capital outlays, steady from the prior month. 

Small businesses adjust to the reopening normal

The slight pullback in optimism last month appears to stem largely from hiring challenges.

Small businesses

Reproduced from S&P Global; Chart: Axios Visuals

Economic inequality has been exacerbated by the pandemic and left Black women — and potential growth for the broader U.S. economy — even further behind, according to a new report today from S&P Global.

Why it matters: Black women have been hindered by economic disparities in nearly all aspects of American life, particularly when it comes to wage growth and opportunities in school and at work.

What they found: If Black women were able to obtain college degrees at the same rate as white women from 1960 to 2019, the U.S. would have generated an additional $107 billion in economic activity, according to the report.

Moreover, if Black women in the professional world were in positions that matched their education and skills, the productivity boost alone would have added another $507 billion.

What they're saying: The inequities faced by a demographic group that makes up over 6% of the U.S. population has impacted the economy's potential growth outlook, S&P Global U.S. chief economist Beth Ann Bovino tells Axios.

"If you look at potential growth, where it was back before the financial crisis and Great Recession, we were looking at about 2.75% … and it has slowed now to under 2%," Bovino says, adding that CBO estimates call for a further dip in the next decade.

What to watch: The impact of the corporate world’s increasing focus on anti-racist causes since the murder of George Floyd.

Goldman Sachs, for one, launched in March a decade-long plan to inject $10 billion into projects that it says will impact 1 million Black women.

The economic impact of Black women

Closing the financial gaps between Black and white women would generate billions in economic growth.

Economic inequality

Last week’s economic data dump was nothing if not consistent. Spanning the May jobs report, the Federal Reserve’s Beige Book and business activity indicators, the picture that emerged was one of an economy in recovery — albeit slower than some expected, and jammed with labor and supply shortages.

Why it matters: Taken together, the data gives the Fed cover from making any big monetary decisions or changing its course over the next few months. 

Catch up quick: Friday brought a "Goldilocks jobs report," in that it was "not too hot, and not too cold," Kristina Hooper, Invesco’s chief investment strategist, tells Axios. 

"From a markets perspective, this is the best possible scenario. We saw enough job creation, but not too much," Hooper says. 

There were 559,000 jobs created in May — which is still 7.6 million below pre-pandemic levels.

The market generally expected the Fed to begin telegraphing plans for tapering by late summer or fall. After last week's reports, that hasn’t changed. 

Meanwhile: The Fed governors in Wednesday's Beige Book highlighted increased growth compared with earlier in the year.

Yes, but: They also noted labor shortages and increasing input costs for businesses.  

"It's unusual to see continued slack in the economy, together with labor shortages which are very clearly being signaled by employers," says Sonal Desai, fixed income CIO at Franklin Templeton.

And it’s not just low-skilled jobs. "There appears to be a genuine difficulty in finding both unskilled and skilled workers," she notes. 

What to watch: Whether the June and July jobs and price data show the bottlenecks working themselves out as the pandemic recovery progresses. 

What else to watch: The mismatch of available jobs to available labor could ultimately become part of the conversation on immigration reform. 

Go Deeper with Axios Re:Cap🎙 to unpack the jobs report.

What to make of the "Goldilocks" economic reports

The data gives the Fed cover from making any big monetary decisions.

Illustration of three different colored bowls filled with money

Jobs report

The pandemic has recalibrated the power dynamics between employers and would-be employees in favor of workers, and this shift "could persist for years," the New York Times reports.

Why it matters: With workers having the upper hand, employers are trying to lure them into the workforce by offering higher wages and more benefits, as well as loosening up the stringent requirements for potential applicants.

The big picture: "Up and down the wage scale, companies are becoming more willing to pay a little more, to train workers, to take chances on people without traditional qualifications, and to show greater flexibility in where and how people work," reports the Times.

More and more job listings are sharing posts that say "no experience necessary" or offering signing bonuses.

Higher rates of employees are voluntarily leaving jobs that they find unsuitable or inflexible on issues such as working from home, per the Times.

Of note: The erosion of employer power began "during the low-unemployment years leading up to the pandemic" and demographic trends indicate the changes could be here to stay.

While the size of the work force rose about 0.8% annually from 2000 to 2020, the labor force is only expected to increase 0.3-0.4% annually for the rest of the 2020s, per the Times.

"An important question for the overall economy is whether employers will be able to create conditions attractive enough to coax back in some of the millions of working-age adults not currently part of the labor force," writes the Times.

Zoom in: One consequence is that companies are lowering standards — "thinking more expansively about who is qualified for a job."

IBM execs, for instance, "concluded that the qualifications for many jobs were unnecessarily demanding. Postings might require applicants to have a bachelor’s degree, for example, in jobs that a six-month training course would adequately prepare a person for."

What they're saying: Obed Louissaint, I.B.M.’s senior vice president for transformation and culture, noted that the company has also expanded its worker training programs as it has loosened hiring restrictions.

"[I]t’s about making managers more accountable for mentoring, developing and building talent versus buying talent," he told the Times.

“Companies are going to have to work harder to attract and retain talent,” Karen Fichuk, chief executive of Randstad North America, which closely tracks supply and demand for labor, told the Times. “We think it’s a bit of a historic moment for the American labor force.”

Workers gain upper hand for first time in a generation

Employers are trying to lure in workers with better wages, benefits, and less strict hiring requirements.

Activists take part in a protest outside of the Old Ebbitt Grill to call for a full minimum wage with tips for restaurant workers in Washington, DC 

Activists call for a full minimum wage with tips for restaurant workers in Washington, DC in May 2021. Photo: Mandel Ngan/AFP via Getty Images

Employers

Axios Capital

The U.S. economy added 559,000 jobs last month, while the unemployment rate fell to 5.8% from 6.1%, the government said on Friday.

Why it matters: Vaxxed America isn't surging back to work as quickly as economists, who had predicted 670,000 new jobs, hoped it would. Still, the total number of jobs in the U.S. rose by a reasonably healthy amount in May — much faster than the anemic growth of 278,000 we saw in April.

The big picture: There's reason for optimism. 

The unemployment rate hit a fresh pandemic-era low of 5.8%, with 496,000 fewer people considered unemployed.

Wages also jumped: Average hourly earnings rose 2% from this time last year. 

Details: Leisure and hospitality led the pickup in hiring, with 292,000 new jobs gained. Two-thirds of those gains happened at food and drinking places, despite widespread complaints of worker shortages.

Pandemic-related unemployment fell sharply. The number of people who said their employer was closed or lost business because of the pandemic fell by a whopping 1.5 million, down to 7.9 million.

Construction employment, however, hasn’t followed the housing market upwards. The total number of jobs in construction fell in May by 20,000, though the decline was mostly in nonresidential jobs.

What they're saying: "My main takeaway from this jobs report (as from the last one) is that you can't just flip a switch and turn an economy back on," tweeted the N.Y. Times' Binyamin Appelbaum. "Recovery is messy and it's just going to take more time than anyone would like."

What it means for President Biden: There are still 7.6 million fewer Americans employed than there were pre-pandemic. At this rate, that gap won't close for another 13 months. That's going to help President Biden as he tries to push through his trillion-dollar job-creation bill. 

What it means for Wall Street: The Fed wants to see a strong burst of hiring before it changes its monetary policy stance. This report, while good, doesn't satisfy that. 

The bottom line: We're back on the path to a labor market recovery. But the path won't be a short one.

U.S. unemployment rate falls to 5.8%, a new pandemic low

The 559,000 new jobs was slightly below estimates.

Photo: Yuri Gripas/Abaca/Bloomberg via Getty Images

Axios Sneak Peek

Democrats and Republicans are preparing to seize on today’s jobs numbers to argue for — or against — Biden’s proposal for $4 trillion in infrastructure and social safety net spending.

Why it matters: Like early in the Obama administration, the job report is serving as a monthly assessment of the president's economic policies.

In Biden's case, the efficacy of his $1.9 trillion relief bill will be on the line, with economists estimating an increase of 671,000 jobs, after last month's disappointing 266,000.

Biden raised expectations for the report Thursday afternoon when he touted the latest weekly jobless data, tweeting: "Unemployment claims are down 50% and 64% of adults are vaccinated since I took office. That’s progress."

Behind the scenes: The jobs report includes the total number of jobs added or lost, as well as the unemployment rate. It's typically delivered to the president the night before its 8:30 a.m. release, with a crisp memo prepared by the Council of Economic Advisers, highlighting trends and flagging warning signs. 

President Obama tended to avoid appearing in public on Thursday night ahead of jobs day, lest his demeanor betray either positive or negative news.

President Trump wasn't as disciplined and rarely followed a regulation that forbids government officials from commenting on market-moving data for 60 minutes. 

In June of 2018, Trump jolted financial markets with a pre-release tweet at 7:21 a.m.: "Looking forward to seeing the employment numbers at 8:30 this morning.”

Biden officials follow the regulations and won’t appear on the financial news networks before 9:30 a.m.

Between the lines: Biden himself said he consumed some of the cable commentary on last month’s numbers while “I was getting dressed.”

Flashback: In response to those less-than-stellar April numbers, Biden himself went to the cameras and pleaded for more time.

“When we passed the American Rescue Plan, I want to remind everybody, it was designed to help us over the course of a year — not 60 days, a year.  We never thought that, after the first 50 or 60 days, everything would be fine," he said from the East Room.

What to watch: The political conversation will focus on the headline jobs number and the unemployment rate, which is estimated to drop to 5.9% from 6.1%.

Republicans will jump on any number that misses expectations as evidence that Biden’s $1.9 trillion infusion didn’t actually bolster the economy.

Economists will want to look under the hood for any signs of inflation and will eye how much average hourly wages increased. Estimates are for a 0.2% increase. 

Investors will try to view the jobs report through the lens of the Fed, and may assume that a stronger-than-expected number could lead the central bank to accelerate its timetable for tapering asset purchases.  That would likely lead to a drop in the stock market.

The bottom line: May’s number —  like all jobs reports — will look backwards. 

But it will help frame the debate for how effective Biden's first tranche of spending was — and how much more spending the economy needs.

May jobs report to frame debate on Biden's spending plans

Biden raised expectations for the report Thursday afternoon.

Policymaking

The next U.S. jobs report could be a big market-moving event.

Why it matters: The Fed wants to know if the U.S. labor market has made “substantial further progress,” the vague threshold that would give the FOMC the confidence to dial back some of its emergency bond purchase program.

By the numbers: According to FactSet, economists estimate U.S. employers added 756,500 jobs in August, which would be a slowdown from the 943,000 added in July.

The unemployment rate is estimated to have fallen to 5.2% in August from 5.4% the month prior.

What they’re saying: “The softening in employment activity would be consistent with other economic data that have weakened since the surge in COVID case counts due to the Delta variant,” Bank of America U.S. economist Joseph Song says.

“Related to that,” Wells Fargo economists write, “the FOMC is likely to again consider deteriorating public health conditions as a detriment to ‘substantial further progress,’ which removes some heft from the August employment report when it comes to determining the timing of potential tapering.”

In other words, assuming job growth did decelerate significantly in August, then the FOMC may wait until after its Sept. 22 meeting to announce the timing of tapering.

What to watch: The August U.S. jobs report will be released at 8:30am ET on Friday.

Go deeper: The harm the Fed wants to avoid by tapering too early

What economists expect from the August jobs report

The Fed wants to know if the U.S. labor market has made “substantial further progress.”

A man walks by a "Now Hiring" sign outside a store in Arlington, Va.

A man walks by a "Now Hiring" sign outside a store in Arlington, Va. Photo: Olivier Douliery/AFP via Getty Images

A survey of C-suite executives found more than a quarter are considering moving their operations to another state or country.

Why it matters: The forced march to remote work during the pandemic has shaken loose the bonds that tie large businesses to their home territory — and that could be bad news for high-cost cities and states.

By the numbers: In a poll of 150 C-suite executives released today and conducted by the consulting firm West Monroe, 29% of companies reported they were considering moving major operations or headquarters to another state or country.

The biggest reason was the cost of talent and living in their current location, followed by the burden of taxes.

Not surprisingly, the No. 1 destination under consideration was Texas, followed by Florida — two states with generally low costs of living and low tax burdens.  

Of note: West Monroe's chief strategy officer Tom Bolger tells Axios the West Coast "had by far more companies looking to relocate than any other geographical area in the survey."

That dovetails with recent reporting about tech companies and founders looking to relocate out of the Bay Area, which has some of the highest housing prices in the country.   

That includes Tesla and SpaceX CEO Elon Musk, who said in December that he was moving from California to Texas. 

Be smart: Companies complaining about the high cost of living and working in states like California or New York is hardly new, but the embrace of remote work — accelerated by the pandemic — has given workers and CEOs more options.

Nearly half of the executives polled by West Monroe said they had plans to split their workforces between remote and onsite, though only 1% said they would go fully remote.

"If I'm paying major city taxes in a place like New York City and it doesn't really matter for me if I'm in New York, why not go somewhere that's less expensive?"

The bottom line: Mayors of high-cost cities may need to fight to keep their businesses.

New survey shows companies are open to moving to cheaper locales

Remote work — accelerated by the pandemic — has made it easier for companies to seek out less expensive regions

The Phoenix office tower in Houston, Texas. The Lone Star State was the top stated destination for executives considering moving their operations. Photo: Loren Elliott/Getty Images

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