America’s red-hot labour market: inflation undercuts jobs recovery

This is the first in a three-part series on the booming labour market in the US

When Covid-19 hit Georgia in March 2020, the Atlanta Breakfast Club closed its doors to in-person dining for weeks on end. Since it reopened, diners have flocked back for hefty servings of their famous chicken and waffles. On weekends, the brunch spot is now so busy that it boasts four-hour waiting times for a table.

Owners Osiris Ballard and chef Anthony Sanders have since expanded beyond the original location. In September 2020, they launched a counter-service offshoot and last year they resurrected a shuttered neighbourhood staple owned by another restaurateur.

The biggest hurdle they face is no longer finding customers but the staff to make and serve the food. The grand opening of another branch of the restaurant, scheduled for this summer, will add more pressure to the hunt for chefs, general managers and other staff at a time of fierce competition for workers in one of the tightest labour markets in the US.

Georgia is emblematic of the wider US jobs market, which has roared back to life after one of the sharpest contractions in history thanks to unprecedented fiscal and monetary support for businesses and individuals since the start of the pandemic. An additional $1.9tn of stimulus injected into the economy in early 2021 by President Joe Biden’s administration supercharged that growth.

As of the end of April, almost 95 per cent of the 22mn US jobs that were lost due to the pandemic have been recouped. US employers posted a record 11.5mn job openings in March. But with fewer Americans willing to fill those positions, and a labour force that is still shy of its pre-pandemic size, the result is what Sanders calls “a worker’s market”.

Employers in every state and industry are competing fiercely for talent, offering hefty pay increases, improved benefits or more flexible working arrangements to attract prospective employees and keep those already on the payroll. In March, 4.5mn Americans either quit or changed positions.

To help fill their vacancies, Ballard and Sanders have an open-door policy two afternoons a week, when applicants can drop by and be hired on the spot. They also recruit from a steady stream of graduates of the 15-week culinary training programme they run in partnership with a local non-profit.

“It’s proven to be the backbone of our ability to stay ahead of the labour issues and not play catch-up,” says Ballard. Sanders, who has worked in the industry for more than three decades, says the question job-hunters are now asking is: “Why you — as a company — if I can go anywhere and get paid whatever I want now?”

A worker’s market

The intensity of demand has defied expectations. It has also fomented fears about what such a tight market will mean for inflation, which is already running at the fastest pace in 40 years. While Jay Powell, chair of the Federal Reserve, has acknowledged this is a “good time” to be changing jobs or seeking better compensation, he has also characterised the market as “tight to an unhealthy level”, given mounting price pressures.

The paramount concern is of a 1970s-style “wage-price spiral” — a self-reinforcing loop whereby workers demand higher pay to keep pace with rising prices, prompting companies to charge even more for their products and services.

In an attempt to head off that cycle, Powell has vowed to bring inflation under control by cooling the economy with tighter monetary policy, a move the president has endorsed as he prepares for November’s midterm elections. Surging prices and falling real wages have already damaged Biden’s popularity. They now threaten to overshadow what has been the fastest labour market recovery in history.

At the centre of many of these trends sits Georgia, boasting 2.4 job openings per unemployed person — well above the nationwide average of 1.9. In the state capital of Atlanta, which accounts for two-thirds of its economy, employment is at a record high, according to the latest data from the Bureau of Labor Statistics. Georgia’s unemployment rate is now 3.1 per cent, the lowest level on record.

Employers have responded by increasing average weekly wages by 6.8 per cent over 2021, compared with the 4.4 per cent average increase nationally.

“The market has changed,” says Matt Lavery, who helps to lead recruiting at UPS, the package delivery group based in Atlanta. UPS has disbursed bonuses and other incentives to buoy interest in permanent positions from both external applicants and the tens of thousands of seasonal workers it hires each year.

“We are constantly evaluating where we’re at,” he adds. “What we have to figure out is what our candidates’ needs are and what their wants are and meet them there, because if we just leave it . . . we’re not going to meet our needs.”

Recent graduates such as Detriana Kurzeja-Edwards, who attended the Georgia Institute of Technology, have benefited from attitudes like this. “It wasn’t just an interview for me, it was an interview for them,” she says of the recruitment process for her job at an Atlanta-based software company. Without having to negotiate, she received an offer at the highest end of the pay range for her role. “They let me know they wanted me to work there,” she says.

Georgia’s transportation industry has emerged as one of the brightest spots, with more than 15 per cent growth in employment and wages up 12 per cent since 2019. The state has long been a crucial US hub for logistics and transportation, featuring the world’s busiest airport, one of the country’s most active ports, the most extensive rail system in the south-east and 1,200 miles of interstate highways.

In Atlanta, the number of transportation workers is at an all-time high amid a nationwide shortage of truck drivers. The shortfall of 80,000 drivers has exacerbated supply chain bottlenecks caused by sky-high demand for consumer goods.

For Brad Ball, this powerful combination made Conley, on the outskirts of the city, an obvious place to establish the 20th outpost of the training centre he runs, Roadmaster Drivers School. His third facility in Georgia is poised to see about 600 students graduate a year.

“What you hear from all the trucking companies is: ‘It’s all about the driver right now’,” says Ball. “They’re all increasing pay, they’re coming up with hiring bonuses, they’re coming up with better benefits. They’re making the job of being a truck driver better.”

One student, Jhabari Frazier, says he’s been “flooded” with interest from companies. He signed with Werner Enterprises, the parent company of Roadmaster, which will cover his tuition costs and offered a compensation package he says was “a cherry on top of the cake”.

Uneven outcomes

Despite the wealth of opportunities, the picture for Georgia’s workers is more complicated than it looks. The headline figures conceal a series of uneven outcomes across certain sectors and parts of the population.

Georgians are quitting their jobs at a record pace of 3.8 per cent, and employers often find that retaining workers can be more difficult than hiring them in the first place, says Jon Neff, of Atlanta staffing company Employbridge, which focuses on manufacturing and logistics-related roles. The company places 80,000 workers in jobs across the country each week, he says, with turnover rates at times as high as 10 per cent in that seven-day window.

The churn is often interpreted as more evidence of newfound freedom and choice in what has been billed the “great upgrade”. But many workers have retreated to the sidelines for less positive reasons.

Staffing shortages at childcare centres that have led to cuts in hours and enrolment have made it harder for parents to return to work. Covid-related concerns have deterred some, including those suffering debilitating symptoms of long Covid.

Many older workers have also opted to retire early: about 90 per cent of the people who have left the state’s workforce are over 55 years old, according to Chris Clark, who heads Georgia’s Chamber of Commerce. And the dwindling number of legal immigrants entering the country has exacerbated the shortfall.

Across the state, the number of people employed in education has plummeted almost 10 per cent since 2019. In healthcare, employment has only just returned to 2019 levels, even as wages climbed 6.3 per cent. That has put additional strain on hospitals as they battle each wave of Covid infections. More than 36,000 people in the state have died from the virus.

“It almost got into an auction scenario at times between hospitals that looked up and said, ‘We’ve got patients that are basically out in the parking lot waiting to get in,’” says David Alexander, chief executive of Soliant, a Georgia-based healthcare and education recruiting company.

For the childcare sector in particular, Clark estimates the state needs 10,000 more workers — a result of more women, who disproportionately work in the sector, having left the workforce during the pandemic.

And while nationally men and women have returned to work at near pre-pandemic rates, the gender gap in labour force participation is as bad as it was before Covid hit: the participation rate is still 19 per cent greater for men than for women, despite the greater number of opportunities available. Georgia’s numbers reflect the national trend.

Racial inequalities have also persisted. Atlanta’s population has grown by almost 800,000 over the past decade. The city’s Asian and Hispanic communities have come to each represent about 5 per cent of the population, while black and white Atlantans make up 49 and 38 per cent of the population respectively. Yet only white Atlantans saw a sizeable increase in employment between 2020 and 2021, at 9 per cent.

The unemployment rate for black women was 6 per cent in the first quarter of this year, compared with 3.5 per cent for all women. According to the Georgia Budget and Policy Institute, only black Georgians and white women are more likely to be underemployed now relative to the end of 2019.

‘You make $20 an hour but you can’t afford gas’

Even as some workers are pulling in bigger pay cheques, rising costs for everyday items, rent and other essentials have eroded most, if not all, of the gains.

“If we’ve finally got to the point where we’re paying people above $15 an hour — and in some cases significantly above — but if it feels like $12 an hour to them based on other costs, then we’ve accomplished nothing,” says Jennifer Johnson, who runs the General Muir and five other restaurants in Atlanta with her husband. “It just feels like a failure, because we can’t keep up with it.”

Over the past year, prices for urban consumers in Atlanta are up 10.8 per cent, more than the 7.9 per cent increase across the country as of April, according to BLS. Housing and transportation costs in Atlanta have risen faster than national averages, while food prices are up 9.3 per cent.

That has forced more families to rely on the state’s largest food bank, which serves roughly 150,000 households a month. Before the pandemic, the Atlanta Community Food Bank distributed less than 6mn pounds of food a month. By June 2020, that level had reached 10mn, where it hovered at for about 10 months. Demand ebbed over the course of 2021 but surged again in March. Kyle Waide, its chief executive, expects it to continue climbing over the summer.

“We’re confident that lower income households are facing significant pressure right now, related to these inflationary pressures, and that’s in spite of whatever wage increases they may have experienced,” he says, adding that the majority of households the food bank serves include someone who is working. “I don’t think policymakers in general fully appreciate the level of vulnerability that’s out there,” he says.

Soaring costs are among the reasons Sydney Rhodes, an employee at an Apple store in north-west Atlanta, teamed up with her colleagues to form the first union at one of the tech company’s US retail locations. The vast majority of the 107 employees at the Cumberland Mall store back the effort, which came on the heels of Apple raising its minimum wage to $20 an hour in February.

“Yeah, you make $20 an hour, but now you can’t afford gas, now you can’t afford food and [can’t] afford where you live,” says Rhodes, who has been with Apple for four years and wants to continue working there.

“We don’t want to have to have two or three jobs and side hustles. We want to be able to solely work here and put 100 per cent effort into this position . . . but we can’t do that if we have to worry about how we’re going to eat or where we’re going to sleep.”

Apple said in a statement that it offers “very strong compensation and benefits for full time and part time employees”, which include healthcare, tuition reimbursement, paid family leave and annual stock grants.

For Rhodes, the unionisation effort is just one sign of the shift taking place across American workplaces in the wake of the pandemic. What is less clear, however, is whether it represents a permanent change in workers’ ability to not only hold on to the gains they’ve won, but also to continue advocating for better terms going forward.

“The pandemic really showed everybody that these companies don’t run without you,” says Rhodes. “Right now, people have learnt their worth.”