With the unemployment rate dropping to a 16-month low and U.S. employers hiring the most workers in nearly a year in July, conditions are looking up for the U.S. economy. In July, U.S. nonfarm payrolls increased by 943,000, the Bureau of Labor Statistics reported. The Employment Situation also indicated that the unemployment rate fell to 5.4%, down 0.5% from the previous month. Though more people are returning to the labor force, the number is still higher than the pre-pandemic rate of 3.5% in February 2020.
Initial unemployment claims for the week ending Aug. 7 decreased 5,198 to 320,517 not seasonally adjusted. This is the lowest level in nearly 16 months, when March 14, 2020 showed 251,851 initial claims non-seasonally adjusted. Initial unemployment claims have fallen 70% after reaching a high this year of nearly 1.1 million for the week ending Jan. 9.
Job openings for both private industry and government jumped 590,000 in June to nearly 10.1 million seasonally adjusted. It’s the highest number in the series history dating back to December 2000, according to the U.S. Census Bureau’s Job Opening and Labor Turnover release. Private industry job openings accounted for 9.2 million seasonally adjusted and government job openings accounted for 0.92 million seasonally adjusted.
Unlike the last two recessions, job openings only took 13 months to return to pre-recession levels. That’s likely because this recession was the result of a major health concern rather than an economic issue, says Bret Biggers, ISRI’s senior economist. “The economy went down and then went up right away when things started to open up and people were able to return to work,” he says.
“It was a super deep but brief recession,” adds Joe Pickard, ISRI’s chief economist and director of commodities. “That’s why we see the bounce back being more accelerated, but even though job openings are at historic levels, that doesn’t mean employment is at pre-recession levels yet.”
Total hires in June increased 697,000 to 6.7 million, seasonally adjusted. Total separations, which include retirements, quits, layoffs and discharges, and other separations, increased nearly 254,000 to 5.6 million, seasonally adjusted. “When the economy is growing, separations occur because people are changing jobs and companies are making changes to the workforce,” Biggers explains. By comparison, when the economy is doing worse, there are fewer separations because people want to hold onto their jobs.
“When people are more confident they can get another job they’re less reluctant to leave their current one, so it’s a good thing,” Pickard says. “There’s more opportunity in the labor market for people to move in jobs they’d prefer as opposed to jobs they had to take.”
While hires, separations, and openings all indicate a growing economy, it’s also clear that businesses are still searching for workers to meet high demand. “Economists refer to this as pent-up demand,” Biggers says. “There’s such high demand for goods and services, much of it occurred during the months during the pandemic when people were in lockdown, which then slowly eased away.”
The numbers in the monthly manufacturing purchasing managers’ index (PMI) reflect these issues. According to the Institute for Supply Management, the July Manufacturing PMI registered 59.5%. Though a decrease of 1.1% from 60.6% in June, it’s the 14th month of economic growth since contraction in April 2020. However, manufacturers and suppliers are struggling to meet increasing demand due to several issues, including long lead times for raw materials, material shortages, transportation issues, and labor shortages.
“Difficulty hiring and retaining people for positions were among [PMI] respondents’ main concerns,” Pickard notes. The manufacturing sector added 27,000 jobs in July, with employment in durable goods increasing by 20,000 and machinery accounting for 7,000 of the gain. However, there are 826,000 unfilled positions in the industry this year, while June 2020 saw 336,000 job openings in manufacturing. “If you look at the number there’s still 826,000 jobs,” Pickard says. “That’s a lot of positions that manufacturers are having a hard time trying to fill.”
ISRI’s economists agree that the labor market is becoming more competitive as the unemployment rate goes down and new employees enter nonfarm payrolls. “It’s similar for manufacturers and recyclers,” Pickard says. “They’re having difficulties getting new employees, so the marketplace for that labor is becoming increasingly completive, which is going to pose challenges.”
One of those challenges for employers is keeping their workers from seeking new, available positions. “Each company has to decide what their compensation package is, how they treat their employees, and how they retain their employees,” Biggers says. “That’s the case across all industries, but it’s definitely important for recyclers.”
The economists agree the recycling industry hasn’t felt this problem yet in earnings, thanks in large part to the rising commodity prices during this period. However, if labor costs accelerate faster than commodity prices, then the industry could start feeling these affects. “If things continue at this pace, it’s possible that in the third or fourth quarter we may start hearing companies complain about increased labor costs and reduced profits,” Biggers notes.
Both Pickard and Biggers believe that economic trends are positive. “The economy is continuing to grow; there’s demand for products and services,” Biggers says. Pickard agrees. “The economy is improving and that’s good for everyone, recyclers included,” he says. “There’s going to be more household and company recyclables generated, and that’s a great thing for recyclers, including ISRI members.”