The Week Behind

The labor market has been hot since nationwide restrictions eased in the United States, and pandemic concerns took a backseat to a push back toward normalization. A year and a half after the total amount of workers claiming unemployment insurance peaked at 23.1 million, just 2.5 million remain, only 800,000 above the pre-pandemic level on March 2020. Despite continued claims in the unemployment insurance program nearing normalcy, the BLS reported more than 3 million more job openings in August 2021 than in February 2020. There is a serious gap in employment at the moment, and at a time when demand is surging on consumers' excess savings.

It is at these points in time that laborers have the most power over employers. Across industries, companies are dealing with new order growth that is faster than capacity growth. Unfilled orders, especially in manufacturing, are building. Nondefense capital goods (ex-aircraft) unfilled orders were up 9.9% YoY in August 2021 and haven't been this high since 2012. Many of the supply distortions can be traced to shortages in commodities; however, there is no shortage of "for hire" signs. Workers can sense a heightened demand for them and, after historic levels of stimulus from the government, feel that compensation should align with that demand.

Indeed, it's a perfect storm for labor disputes. Many sidelined workers and employed workers (who have been forced to fill the gaps in the workforce) are ready to take action to improve their conditions. Strikes have been threatened are have already started in many industries. The Hill reports that around 100,000 unionized employees have authorized strikes with some currently striking. Here are some of those groups:

• 2,000 Buffalo, NY hospital workers¹
• 700 Massachusetts nurses¹
• 1,400 Kellogg plant Workers in Michigan, Nebraska, Pennsylvania, and Tennessee¹
• More than 24,000 Kaiser Permanente health care workers in California and Oregon¹
• 450 steelworkers in Huntington, West Virginia²
• A one-day walk-off of 2,000 telecommunications workers in California²
• 1,000 Alabama coal miners²
• 400 whiskeymakers in Kentucky²
• 200 bus drivers in Reno, Nevada, were already on strike²
• 2,000 carpenters in Washington (settled)²
• 600 Frito-Lay workers in Kansas (settled)²
• 1,000 Nabisco factory workers at five plants (settled)²
• 60,000 members of the International Alliance of Theatrical Stage Employees (IATSE) authorized a strike with 98% members approving (pending settlement)^{3 4}

Cornell University's New York State School of Industrial and Labor Relations has tracked 254 different labor strikes that have started in 2021 so far with 111 of those in the last three months. In the two years of before (2019-2020), the ILR school tracked only 59 labor strikes. The BLS, which only tracks work stoppages of 1,000 employees or more, has recorded 12 so far in 2021 which is up from 8 in 2020 and so far in line with 20 in 2018 and 25 in 2019.

These labor disputes, if they continue, could contribute to the forces driving above trend wage growth in the US. The latest employment situation report in September saw average hourly earnings of production and nonsupervisory employees up 5.5% YoY up from 4.8% YoY in August. Annualized wage growth for these lower level employees has averaged 4.8% YoY since the pandemic started, well above the 2.9% YoY average from September 2016 to March 2020. At the moment, it seems elevated wage growth will continue as the hot labor market gives workers leverage in an economy wanting desperately to get back to full capacity.

Chart of the Week

As manufacturing orders have rebounded strongly as pandemic restrictions eased, manufacturing employment has not kept up. The ratio of manufacturing orders, new and unfilled, to manufacturing employees has reached its highest point since June 2013 (disregarding a July 2014 outlier).

The Week Ahead

Economic news out of the US slows this week but invites big inflation reports from Canada and the eurozone to take center stage. The Bank of Canada is another central bank that has been grappling with a tapering decision as its own surge in inflation has grown out of the recovery. We will also get a glimpse into manufacturing with IHS Markit Flash Manufacturing PMIs on Friday.