Free Trial

MNI INTERVIEW: Jobs 'Mismatch' a Misnomer--Rich. Fed Economist

The notion of a widespread U.S. labor market 'mismatch' is misleading because most new job openings require relatively little prior training or credentials, Richmond Fed economist Claudia Macaluso told MNI, adding that firms may simply not be offering enough pay.

"There are a couple of measures that try to get directly at how much mismatch there is in the labor market and most of those don't point to an increase," said Macaluso, whose research focuses specifically on labor market dynamics, in an interview.

While measures of labor supply imbalance focus on occupational change and how easily skills can be transferred from one job to another, much of the jump in employment openings in recent months to a record 11 million in July falls into the so-called "low-skill" category in areas like hospitality and food service, she said.

"If you look at historical pattern, people who used to be employed in jobs with those skills could transfer relatively easily to similar jobs. The skills don't take that long to acquire."


Macaluso said it's more helpful to look at the gap in wages and working conditions as a source of the apparent incongruence between near-record job openings and a labor market that is still some 5 million jobs short of pre-pandemic levels.

"It's a bit of a puzzle. The mismatch may be in wage levels and wage growth," she said. "I've seen some respondents citing career growth perspectives, this idea that economists sometimes call a job ladder. The job ladder sometimes is very long and it carries quite a bit of wage growth."

Macaluso expects lackluster wage growth at the bottom end of the income scale to persist despite rising demand for workers as the economy exits the pandemic.

"I would be surprised if we had dramatic change," she said. "That's a combination of automation, trade, changes in the skill supply. I don't think those things are going away."

Macaluso took issue with the term 'labor shortage' to describe current conditions.

"It's a term that I dislike. There is no such a thing. For a sufficiently high wage, workers will come," she said. "Now, you may not be able to offer a sufficiently high wage, or you may not be willing to offer it. That's a little harder to determine."


Another possible factor making it harder for firms to hire is that many workers in highly-exposed industries may have sickened or died of Covid, she said.

"This is entirely possible. Although we don't quite count deaths by occupation, it is reasonable to think that the people who were most exposed in fact may have had the highest death rate. So that's a literal drop in the labor supply."

The pandemic may also be making workers more reluctant to return to some jobs.

"Part of it may be that the perceived risk is still quite high, people don't really want to go back to being in a high contact occupation, and the wage premium that they require is higher than what the firms could do while keeping their profitability," said Macaluso, noting that the pandemic highlighted difficult conditions in some industries.

"That's something we've heard a lot from the hospitality and restaurant workers, that their hours just weren't sustainable," she said.


It is too early to determine whether labor force participation, a key metric for Fed interest rate hikes, will return to pre-pandemic levels, she said. While early retirements and shifts such as more childcare provision by elderly relatives may be permanent, moves to hybrid and remote work could also expand opportunities for people in remote locations or with caregiving needs.

"I don't think we could exclude that we're going to go back to the roaring labor market we had right before the pandemic" but it's not something to count on, she said.

U.S. job growth slowed to 194,000 new jobs in September after strong readings earlier in the summer, in part due to a hit from the Delta variant on highly-exposed sectors.

MNI Washington Bureau | +1 202 371 2121 |
MNI Washington Bureau | +1 202 371 2121 |

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.