Welcome to the second week of May (already)!

Because there's a busy week ahead and "Bare Minimum Mondays" isn't in our vocabulary, let's jump right into it.

Today's newsletter is 1,261 words, 5 minutes.

1 big thing: The forever labor shortage

Data: OECD and Moody's Investor Service; Chart: Axios Visuals

More Americans are getting too old to work.

Why it matters: Even if the job market cools off from its current hotness, that could mean labor shortages will be with us for the long term.

State of play: Declining fertility rates and increasing life expectancy is expected to lead to a drop in working-age populations across all G20 countries, according to projections cited in a recent report from Moody's Investors Service.

  • "Korea, Germany and the U.S. are expected to see the sharpest declines over the next decade," Moody's states.

Driving the news: The job market is still going strong, per the latest report from the Labor Department.

  • So-called "prime-age" workers are indeed working. The labor force participation rate among those age 25–53 is now at 83.3% — slightly higher than where it was in February 2020.
  • But overall labor force participation — that is the share of the total population either working or looking for work — is still slightly lower than where it was then.
  • That's partly to do with more older workers retiring.

The big picture: The percentage of Americans age 55 and over has doubled over the last 20 years, as this 2020 paper notes, and that population (the baby boomers) is expected to grow.

  • And while certainly many older Americans are working longer than ever before, they still do retire at some point.
  • This was a demographic trend in place long before COVID-19 but was accelerated by the pandemic, which pushed many older workers into retirement.
  • Moody's estimates that 70% of the decline in labor force participation since the end of 2019 was due to aging workers — about 1.4 million additional Americans retired.

What's next: Labor shortages, in certain industries, will likely ease up as the economy cools off, Moody's says. They note that mentions of the term "labor shortage" were overtaken by the phrase "job cuts" in the first quarter of 2023 — the first time since May 2021.

  • However in certain industries, things aren't getting better. For instance, worker shortages in low-wage health care jobs — in greater demand as the population ages but with a lower supply — could grow by 3.2 million over the next five years, per a Mercer study.

What's next: More older employees leaving the workforce could particularly impact industries that depend on knowledge and expertise, "human capital," says Michael Madowitz, director of macroeconomic policy at Equitable Growth.

  • When the boomers first entered the workforce and replaced older folks, the change was a drag on productivity in the 1970s and 1980s, he says.
  • That kind of brain drain would be a concern going forward in the U.S., and could put a little more pressure on companies to figure out ways to hang on to older workers.
  • Not all companies though. At the lower-wage end of the scale, employers would be more likely to turn to automation. "Is this going to affect [fast-food chain] Jack in the Box," Madowitz says. "It's not."

2. Catch-up quick

🚨 Yellen: No way to protect U.S. finances beyond raising debt ceiling. (Axios)

🛫 Airlines add workers as they gear up for summer travel bonanza. (Axios)

💸 Tech workers aren’t as rich as they used to be. (WSJ)

3. What earnings recession?

S&P 500 earnings-per-share
Data: FactSet; Chart: Axios Visuals

Despite plenty of hand-wringing over the economy, first-quarter profit and sales numbers have been strong, and analysts are lifting expectations for the rest of the year.

State of play: Corporate America's results almost always arrive better than expected, a reflection of executives' penchant for underpromising and overdelivering.

By the numbers: Data provider Refinitiv says that the roughly 420 companies that have reported first quarter results are posting net income 7.2% higher than expected. (That's better than the roughly 4% over-performance they typically deliver.)

  • Top line sales have been better-than-expected too, arriving 2.5% higher than expected, compared to the long-run average of 1.3% positive surprise.

Yes, but: For the record, as of right now, earnings for the first quarters are still expected to be down about 2%, from the first quarter of 2022.

The bottom line: Even so, the numbers — but more importantly the outlook from executives whose helpful winks and nods guide the analyst forecasts — have been pretty darn good.

4. NYC's office returns have stalled

Data: REBNY; Chart: Axios Visuals

More people went to the office in Manhattan in the first three months of 2023, compared to the same time last year, per a report out Monday.

But there are signs that these office visitation rates are stalling, according to the data from the Real Estate Board of New York (REBNY).

What's happening: REBNY uses location analytics — using randomized cellphone data tracked by analytics firm Placer.ai — to assess how many visits were made to 250 office buildings across Midtown Manhattan, Midtown South and Downtown.

  • Visitation rates were at 61% of their pre-pandemic baselines in Q1 2023 — that's a ten point increase from Q1 2022.
  • But it's down slightly from a peak of 65% in the third quarter of last year.

The big picture: The office market is lagging behind other sectors of New York City's economy in terms of a bounce-back from the pandemic (the emergency phase is officially over now, per the WHO).

  • That's a big headwind for the city's tax coffers and overall economic health: Property taxes on office buildings makes up about 20% of the city's overall property tax collections.
  • "If you walk around on the streets there's tons of tourists and residents walking around and doing things," said Keith DeCoster, director of market data and policy for REBNY. "But in terms of return to office it's still roughly 40% below where it was, this time in 2019."

5. Buffett and the banks

Photo illustration: Annelise Capossela/Axios. Photo: Tasos Katopodis/FilmMagic

Warren Buffett revealed why he hasn’t moved to buttress a U.S. banking system suffering a confidence crisis — more accountability is needed from executives.

Why it matters: The irrepressibly pro-America billionaire could take action. He has an established history with retail banking plus nearly $130 billion worth collectively in his holding company of dry powder to invest in banks, or even buy a few outright.

Driving the news: Buffett and his business partner Charlie Munger spoke frankly — and in less than flattering terms — about what ails the banking sector, and hinted at why they were cautious about investing there.

What they’re saying: Buffett keyed in on First Republic Bank’s bespoke — and generous — jumbo mortgages for high-end clients, calling them a “crazy proposition. You don’t give options like that. That’s what First Republic was doing and it was in plain sight and everyone ignored it until it blew up.”

  • He also called for executives who take on excessive risk to be held accountable if the bank has to be rescued. “You have to have … punishment for people that do the wrong things,” the billionaire added.

The bottom line: “Banking can have all kinds of new inventions but it needs to have old values…depositors should not lose money [but] stockholders and debt holders should lose money — too bad,” Buffett said.

Read the whole story

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Axios Markets was edited by Javier E. David and copy edited by Eileen O'Reilly.