AGF Management Limited

01/12/2023 | News release | Distributed by Public on 01/12/2023 04:53

Biggest Problem for the U.S. economy — An Acute Labor Shortage

POLITICIANS IN BOTH PARTIES are calling for policies that boost employment and the economy but that laudable goal overlooks the most important factor: there aren't enough workers.

THE REFRAIN WE HEAR across the country is that the labor shortage is still acute,
but there's a disconnect. As President Biden touts the benefits of new spending on jobs, he overlooks the obvious problem: there aren't enough workers to fill jobs in manufacturing, hospitality, food service, retail, health care, etc.

AN OBVIOUS SOLUTION to this problem would be an immigration reform bill that would increase quotas for legal aliens - that option would be good for companies and workers - but any progress on this front is lost in the heated rhetoric over illegal
immigration at the Texas border.

WE HAVE A VERY CYNICAL VIEW that neither party really wants immigration reform. With no movement, the Democrats can claim that Republicans are heartless, while the GOP can point to Biden's incoherent immigration policies and the threat of higher crime. Both sides have their talking points.

IN THE MEANTIME, millions of jobs go unfilled. We were struck by a piece
earlier this month on the Reuters web site titled "Biden's Climate Agenda Has a
Problem: Not Enough Workers."

U.S. CLEAN ENERGY COMPANIES are scrambling to find workers in the wake of enactment of the poorly named Inflation Reduction Act, which provides $370 billion in solar, wind, and electric vehicle subsidies. Like much of the tidal wave of spending in the past three years, much of the money hasn't been spent.

THE RENEWABLE ENERGY INDUSTRY says this legislation could provide up to 500,000 new jobs a year for the rest of this decade, but companies are grasping at straws - offering sign-up bonuses, high salaries and generous benefits. Some firms are even buying competitors just to get their workers.

THE WORKER SHORTAGE is particularly acute in electric vehicle and battery
production, and solar panel and home efficiency installations, the Reuters article

THE LACK OF WORKERS, AND A HIGH QUIT RATE, has finally persuaded many analysts that a recession is not imminent - not with unemployment at 3.5%. Because much of the stimulus money hasn't been spent yet, the economy could continue to grow modestly for at least the first half of this year, until aggressive Fed tightening eventually softens the economy in the second half.

FOR THE POLITICIANS who demand the creation of good jobs, they will not utter the obvious: the country is awash in good jobs that are unfilled. These politicians should talk with business owners in their congressional districts.

BUSINESSS OWNERS would happily train new workers but they can't find many; they would welcome an infusion of foreign labor. That's not likely to happen, so companies will have to boost compensation - that's the real inflation threat, not commodity prices, which are expected to show continued moderation in this morning's CPI data.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

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