Child care and elder care investments are a tool for reducing inflationary expectations without pain

Inflation is by far the biggest economic concern facing the U.S. economy today. While job growth is historically rapid and survey evidence indicates that workers think now is the best time in years to find a good job, the inflation surge has kept this labor market strength from translating into higher wages and incomes for most households. The most well-known tool to restrain inflation—higher interest rates engineered by the Federal Reserve—is potentially very costly if it leads to higher unemployment and a weaker labor market.

Given all of this, policymakers should look for any tool that can help restrain inflationary pressures without causing significant collateral damage. One such tool could be investments in child care and elder care. By subsidizing families’ use of child care and elder care and providing direct investments to providers, such investments could boost future labor supply by allowing working-age parents and children who want to look for paid employment to do so while remaining confident their family members are receiving care. Further, these investments can help dampen inflationary pressures—that rising wages could in theory contribute to—even well before they fully take effect.  

To understand why, one must realize that developments in the labor market will likely determine just how easily (or not) inflationary pressures can be lowered in the next year or so. The inflationary spike that began in 2021 didn’t start in the labor market—it started in commodities and in supply-chain-snarled durable goods sectors where wage growth was actually slower than in other parts of the economy. But going forward, whether or not the Federal Reserve needs to start applying ever-stronger medicine (with deeply damaging side effects) to slow inflation depends on what happens in labor markets. Specifically, it depends on whether or not the initial inflationary shock leads to unsustainably large wage increases that push up inflation even further, leading to wage-price spirals of the sort that characterized the 1970s.

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March jobs report shows strong growth as the labor market continues to recover at a rapid pace

Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 431,000 jobs added in March.

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Job Openings and Labor Turnover Survey: Job openings were little changed while hires edged up

Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for February. Read the full Twitter thread here.

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Biden can fix the anti-worker H-1B immigration visa scam

This is an excerpt from an op-ed in Jacobin. Read the full op-ed here.

Every April 1, the government decides, via lottery of all methods, which employers will get new visas for the H-1B, a temporary work program that has inflicted serious harm on millions of workers over the past three decades.

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Enforcers take action to protect building superintendents and grocery and construction workers: A snapshot of state and local enforcement actions across the country

Series: The New Labor Law Enforcers

State attorneys general, district attorneys, and localities like cities are increasingly key players in protecting workers’ rights. This new series by Terri Gerstein provides snapshots of enforcement and other actions to protect workers’ rights by these new and emerging labor law enforcers at the state and local level. Gerstein is an EPI senior fellow and director of the state and local enforcement project at the Harvard Labor and Worklife Program, who has chronicled the growing influence of these new enforcers.  

Recent cases brought by state and local enforcers include the recovery of $130,000 for New York City building superintendents, who were paid no wages at all, and a recovery of nearly $220,000 for workers in a Seattle specialty bar and grocery store based on minimum wage and paid sick leave violations. In addition, prosecutors on both sides of the country took action against contractors in the construction industry: The King County (WA) prosecuting attorney concluded a case in which a worker was killed in a preventable trench collapse, while the Manhattan district attorney indicted several interior construction companies and their owners for a conspiracy to evade more than $1.7 million in workers’ compensation premiums.

Here’s a snapshot of some enforcement actions in February and March 2022.

The New York Attorney General (AG) announced the settlement and recovery of $130,000 in a case involving building employers that failed to pay live-in superintendents any wages at all, and compensated them only through providing lodging (which was needed to perform the job).

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The Biden administration can stop H-1B visas from fueling outsourcing: Half of the top 30 H-1B employers were outsourcing firms in 2021

Key takeaways:

  • Through its flawed interpretation of the law and lax enforcement, the U.S. government has made the H-1B—the U.S.’s largest temporary work visa program—the “outsourcing visa.” New data show that half of the top 30 H-1B employers in 2021 were outsourcing firms that underpay migrant workers and offshore U.S. jobs to countries where labor costs are much lower.
  • The 15 top outsourcing firms alone were issued 21,550 H-1B visas, 25% of the annual limit. Amazon, which is not an outsourcing firm, took the top spot with nearly 6,200 new H-1B workers, but the next four were outsourcing firms: Infosys, Tata, Wipro, and Cognizant.
  • President Joe Biden should implement regulations that would prevent outsourcing companies from exploiting the program.

With approximately 600,000 workers, the H-1B is the largest temporary work visa program in the United States—an important program that allows U.S. employers to hire college-educated migrant workers. However, the H-1B program is not operating as intended and needs to be fixed. Instead of being used to fill genuine labor shortages in skilled occupations without negatively impacting U.S. labor standards, the latest data show that the H-1B’s biggest users are companies that have an outsourcing business model that exploit the program by underpaying skilled migrant workers. President Biden can and should implement regulations that would prevent such exploitation.

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Building back better means raising wages for public-sector workers

Key takeaways

  • Thanks to federal recovery funds, state and local policymakers have substantial additional resources to invest in their communities—and they should invest in raising pay for their own employees.
  • Many of the workers providing public services are paid low wages. Roughly one-third of state and local government workers are paid less than $20 an hour, and more than 15% are paid less than $15 an hour.
  • Black and Latinx employees are especially likely to be paid inadequate wages in the public sector. Investing in public services can promote greater racial equity in pay.

The COVID-19 pandemic presented a massive crisis that demanded a large collective response. At times, strong government action—mask mandates, expanded unemployment insurance, stimulus checks, free vaccines—saved lives and livelihoods. At the same time, past underinvestment in public services exacerbated suffering as hospitals were overwhelmed, unemployment claims processing stalled, and schools struggled to adjust to remote learning. Now, thanks to federal recovery funds administered through the American Rescue Plan Act (ARPA) in 2021, state and local policymakers have substantial additional resources to invest in their communities, whether that means preparing for the next unexpected disaster or strengthening the services that help individuals and families through their own difficult times.

Investing in these services also means investing in the workers who carry them out, far too many of whom are paid low wages for their valuable work in providing public education, delivering health services and pandemic response, administering programs such as unemployment insurance, keeping our roads and sewers safe, and getting commuters to work. This blog post presents data quantifying and describing these public-sector workers and shows that Black and Latinx employees are especially likely to be paid inadequate wages.

The U.S. Department of the Treasury is encouraging states and localities to use federal recovery funds with equity in mind. To advance this goal, states and localities should invest in improving pay for their own employees who ensure social needs are met, especially lower-paid state and local employees, many of whom are women of color.

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One year in, the American Rescue Plan has fueled a fast recovery: Policymakers should use remaining ARPA funds in 2022 to make transformative investments that will build a more equitable economy

March 11 marks the one-year anniversary of the signing of the American Rescue Plan Act (ARPA). This $1.9 trillion dollar relief package was both an emergency measure to help the nation through the worst pandemic in a century and an ambitious catalyst to jump-start efforts to redress the staggering economic inequalities in our economy. In its first year, ARPA helped the economy recover at a tremendous pace and aided working families through difficult times. In the year to come, state and local policymakers will have critical opportunities to use their substantial remaining ARPA funds to rebuild the public sector, support low-wage workers, and target systemic inequities.

ARPA supported a year of strong growth

A full labor market recovery took more than a decade after the Great Recession began in late 2007. Federal stimulus, needed to restart the economy in times of recession, was inadequate to circumstances throughout the 2010s. The slow recovery of the economy during the Great Recession also gave ammunition to political forces that supported austerity, the dismantling of labor unions, and the continued weakening of the social safety net.

With inadequate federal fiscal aid, many states faced large budget shortfalls in the wake of the Great Recession, and many state and local lawmakers responded by dramatically slashing budgets and cutting jobs. These cuts to state and local government had a disproportionate impact on women and Black and Hispanic workers, who are more likely to be employed in the public sector. This austerity was not only unnecessary, it also directly contributed to the slow pace of the economic recovery.

This long period of anemic growth also meant a lost decade of potential wage growth for low-income and middle-income workers, and racial employment and wage gaps continued to expand.

Along with COVID-related legislation like the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in 2020, ARPA has gone a long way to making sure the mistakes of the Great Recession were not repeated. Tens of millions were kept out of poverty because of social insurance programs from CARES, ARPA, and other relief legislation. Despite a catastrophic cratering of the economy in March 2020—with more than 20 million jobs lost—the country is on track to return to pre-COVID levels of employment before the end of 2022 (Figure A).

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Equal Pay Day: There has been little progress in closing the gender wage gap

March 15 is Equal Pay Day, a reminder that there is still a significant pay gap between men and women in our country. The date represents how far into 2022 women would have to work to be paid the same amount that men were paid in 2021. Women were paid 22.1% less on average than men in 2021, after controlling for race and ethnicity, education, age, and geographic division.

What’s particularly troubling is there has been little progress in closing the gender wage gap over much of the last three decades, as shown in the figure below. The regression-adjusted pay gap narrowed between 1979 and 1994—falling from a 37.7% pay penalty to a 23.2% pay penalty. But the entirety of the narrowing gap between 1979 and 1994 can be attributed to men’s stagnant wages, not a tremendous increase in women’s wages. Since then, the gap between men’s and women’s pay has narrowed hardly at all. In 2021, the pay gap remained at 22.1%.

Figure

Little to no progress in closing the gender wage gap in three decades: Regression-adjusted gender wage gap, 1979–2021

Date Regression-adjusted gender wage gap
1979 37.7%
1980 36.8%
1981 35.7%
1982 34.5%
1983 33.4%
1984 33.1%
1985 32.8%
1986 32.6%
1987 31.9%
1988 31.2%
1989 28.6%
1990 27.3%
1991 25.6%
1992 24.1%
1993 23.3%
1994 23.2%
1995 24.1%
1996 23.4%
1997 23.8%
1998 23.4%
1999 24.0%
2000 23.9%
2001 23.2%
2002 22.5%
2003 22.3%
2004 22.6%
2005 22.1%
2006 22.4%
2007 22.8%
2008 22.7%
2009 22.5%
2010 21.3%
2011 20.7%
2012 22.0%
2013 21.4%
2014 21.2%
2015 21.7%
2016 21.9%
2017 21.6%
2018 22.6%
2019 22.6%
2020 23.0%
2021 22.1%
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Notes: Wages are adjusted into 2021 dollars by the CPI-U-RS. The regression-based gap is based on average wages and controls for gender, race and ethnicity, education, age, and geographic division. The log of the hourly wage is the dependent variable.

Source: Author’s analysis of Current Population Survey, Outgoing Rotation Group (CPS-ORG), 1979–2021, and Economic Policy Institute, Current Population Survey Extracts, Version 1.0.26 (2022), https://microdata.epi.org/, 1979–2022. 

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Over this period of pay gap stagnation, women have consistently increased their investments in education to increase their pay. Back in 1994, as progress toward closing the gender wage gap stalled, men were more likely to have a college or advanced degree than women. A quarter of men (25.1%) had at least a four-year college degree compared with 23.8% of women. By 2021, women’s educational attainment had surpassed men’s educational attainment. In 2021, 37.4% of men and 43.8% of women had at least a college degree. Unfortunately, even with these advances in educational attainment, women still face a stark pay gap. Women with advanced degrees are paid less, on average, than men with bachelor’s degrees.

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Job Openings and Labor Turnover Survey: Hires and separations were little changed as quits declined

Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for January. Read the full Twitter thread here.

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Jobs report: The labor market continues its strong and speedy recovery because federal relief matched the scale of the crisis

Below, EPI economists offer their initial insights on the jobs report released this morning. The report showed a strong 678,000 jobs added in February, for a total of 7.9 million jobs added since the end of 2020.

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What to watch on jobs day: The economy is recovering fast because federal relief matched the scale of the crisis

This is an excerpt from an op-ed in CNN Business. Read the full op-ed here.

When the coronavirus pandemic shut down businesses in spring 2020, the labor market lost 22 million jobs in just two months—more than twice as many jobs lost during the entire Great Recession and financial crisis of 2008–2009. Given that a full labor market recovery from the Great Recession took a decade, there were sincere worries that Covid-19’s economic wound could take even longer to heal. But because we undertook a radically different—and better—policy response to the latest crisis, the labor market is far healthier today than anybody expected it would be in those grim early days of the pandemic.

Over the last 12 months, the economy has added 6.6 million jobs, an astonishing pace. And while there is still a significant gap in the labor market, we are on track to return to pre-pandemic labor market conditions before the end of 2022—a recovery that is roughly eight years faster than the recovery from the Great Recession, as shown in the figure below.

Figure A

Federal fiscal relief at the scale of the problem led to a faster recovery from the pandemic recession: Private-sector employment change since business cycle peak, December 2007 and February 2020

Months since peak 2007 2020
0 100 100
1 99.999138 98.8860174
2 99.9060474 83.7870781
3 99.8414012 86.1978785
4 99.6284995 89.6771456
5 99.44749 90.6746384
6 99.2707902 91.6104147
7 99.0578886 92.3502411
8 98.8191284 92.9666345
9 98.4484899 93.2798457
10 98.0235485 93.1965284
11 97.3874293 93.5228544
12 96.7823404 94.0574735
13 96.0867467 94.55892
14 95.4489036 94.7224687
15 94.7731347 95.0163934
16 94.0732313 95.4082932
17 93.8301614 95.9004822
18 93.4629706 96.2838959
19 93.2173149 96.5994214
20 93.0457868 97.134812
21 92.9121845 97.6185149
22 92.6777341 98.0065574
23 92.68032 98.3490839
24 92.4924148
25 92.4863812
26 92.420011
27 92.5398221
28 92.6949731
29 92.7923735
30 92.8932216
31 92.9682113
32 93.0923321
33 93.1854227
34 93.3733278
35 93.4896911
36 93.5698524
37 93.5931251
38 93.8129224
39 94.0353055
40 94.3128534
41 94.4473176
42 94.6205696
43 94.7714108
44 94.907599
45 95.1377396
46 95.3006482
47 95.4376982
48 95.6264653
49 95.9384912
50 96.1634602
51 96.373776
52 96.4547993
53 96.5582333
54 96.6047787
55 96.7504482
56 96.8961178
57 97.0495449
58 97.2055579
59 97.3572611
60 97.5598193
61 97.7399669
62 97.9692456
63 98.0985381
64 98.2640325
65 98.4596952
66 98.636395
67 98.7544821
68 98.9492829
69 99.1070197
70 99.3052682
71 99.5216177
72 99.6009171
73 99.7569301
74 99.8905323
75 100.102572
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Source: EPI analysis of Bureau of Labor Statistics' Current Employment Statistics public data series.

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Congress should boost NLRB funding to protect workers’ well-being

The National Labor Relations Board (NLRB) enforces the National Labor Relations Act (NLRA), the nation’s fundamental labor law that guarantees most private-sector workers the right to organize and the right to collective bargaining. Years of static funding has undermined the Board’s ability to fulfill its statutory mission, to the detriment of workers and the economy. The chronic under-resourcing of the Board has created challenges in its enforcement capacity amid the surge of union interest—and unfair labor practices. As Congress debates upcoming budget and spending legislation, it is critical that lawmakers boost NLRB funding to protect workers’ well-being.

NLRB funding has remained flat

The Board’s staffing level has not kept up with the growth in the national private-sector workforce. The number of full-time employees at the NLRB dropped by nearly 31% from 1,789 to 1,320 between 2006 and 2019. During the same period, the number of covered workers per NLRB staff increased by 50%, from one full-time employee per 74,809 workers to one full-time employee per 112,201 workers, as shown in the figure below. Further, staffing levels at regional offices, which typically handle the intake of complaints filed by workers, dropped by 33% between 2010 and 2019.

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Enforcers take action to protect workers from workplace violations at Domino’s and Family Dollar stores: A snapshot of state and local enforcement actions across the country

Series: The New Labor Law Enforcers

State attorneys general, district attorneys, and localities like cities are increasingly key players in protecting workers’ rights. This new series by Terri Gerstein provides snapshots of enforcement and other actions to protect workers’ rights by these new and emerging labor law enforcers at the state and local level. Gerstein is an EPI senior fellow and director of the state and local enforcement project at the Harvard Labor and Worklife Program, who has chronicled the growing influence of these new enforcers.  

Recent cases brought by state and local enforcers include the recovery of $2 million for workers of a Seattle Domino’s franchisee that underpaid workers and didn’t give required notice of schedules; citation of Massachusetts Family Dollar stores for $1.5 million for thousands of meal break violations; and prosecution of several cases involving egregious violations of wage payment, unemployment insurance, and workers’ compensation laws.

Here’s a snapshot of some enforcement actions in early 2022.

The Seattle Office of Labor Standards obtained a $2 million settlement with a Domino’s franchisee that violated fair workweek, minimum wage, and overtime laws. The employer, with 14 locations in Seattle and more than 30 through the Puget Sound area, allegedly violated the city’s Secure Scheduling Ordinance, which requires large retail and food service employers to provide workers with their schedules at least 14 days in advance and provide workers with good-faith estimates of their work schedules, among other requirements. Domino’s also allegedly paid below Seattle’s minimum wage for all time worked in Seattle, and didn’t pay overtime when workers were assigned to multiple locations for over 40 hours per week. The Seattle Office of Labor Standards also reached a settlement for more than $250,000 with a national traffic control company that paid below the city’s minimum wage, among other violations.Read more

How public-sector workers are building power in Virginia

Until recently, the Commonwealth of Virginia was one of three states in the country with a state prohibition on local public-sector bargaining. In 2020, a coalition of labor advocates and public-sector unions representing thousands of working families across Virginia joined together as the “Stronger Communities, A Better Bargain” coalition and successfully lobbied the Virginia General Assembly to approve legislation (H.B. 582/S.B. 939) repealing the prohibition on local public-sector bargaining.

The repeal permits local governments to bargain collectively with their employees upon the approval of a collective bargaining ordinance or resolution. Since the repeal took effect in May 2021, multiple Virginia localities have seen remarkable organizing efforts by and for public-sector workers to pass strong collective bargaining ordinances.

Alongside these efforts, we at The Commonwealth Institute for Fiscal Analysis (TCI) have provided timely and accessible research on how collective bargaining helps close disparities in pay and benefits for public employees in specific communities.

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U.S. trade deficits hit record highs in 2021: More effective trade, industrial, and currency policies are needed to create more domestic manufacturing jobs

The U.S. goods trade deficit reached a record $1.09 trillion in 2021—an increase of $168.7 billion (18.3%) from the 2020 trade deficit—according to new U.S. Census Bureau data. The broader goods and services deficit reached $859.1 billion in 2021, an increase of $182.5 billion (27.0%). These records were driven by a $576.5 billion increase in goods and services imports, including a $501.8 billion increase in goods imports.

The surge in the U.S. goods trade deficit extends a surge in offshoring that has eliminated more than 5 million manufacturing jobs and nearly 70,000 factories since 1998, with overlooked costs for Black workers and other workers of color, as we describe in this new EPI report.

While both imports and exports were depressed in 2020 due to the COVID recession, U.S. trade deficits increased sharply in both 2020 and 2021, as shown in the figure below. This is because the United States was unable to produce the goods needed to respond to the pandemic and to meet increased domestic demand for consumer goods.

However, contrary to popular opinion, the growth in U.S. imports was not just caused by increased domestic goods consumption coming out of the 2020 COVID recession. Imports explained more than 60% of the growth in U.S. goods consumption in 2021, and U.S. goods imports increased faster (21.3%) than domestic goods consumption (17.8%).

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Profits, wages, and inflation: What’s really going on

If you’re following debates over inflation, you’ve probably read contradictory things in recent weeks about the relationship between it and whether it is workers (labor) or their bosses (capital) who will be able to protect their incomes from rising prices.

For example, some well-known economists have mocked the idea that inflation is related to corporate profiteering. Yet some of the world’s most influential policymakers have expressed concern that inflation could spark an outbreak of excessive wage growth. One of these policymakers essentially pled with workers to moderate their wage demands in coming months in the name of slowing inflation. Finally, a Nobel Prize-winning economist claimed not only that inflation has nothing to do with the distributional conflict between labor and capital, but that even raising the specter of this will make it harder for policymakers to tamp inflation back down.

So what is the real story about profits, wages, and inflation? Simply put, while changes in the relative bargaining power of labor versus capital are not the root cause of the inflationary shock in 2021, this relative bargaining power will crucially determine whether or not inflation sustains momentum throughout 2022 and requires more sharply contractionary macroeconomic policy to slow.

In turn, policy efforts (like, for example, transformative reform to labor law or ramping up anti-trust enforcement) to change the relative bargaining position of labor vis-à-vis capital would be highly desirable for lots of reasons—but they wouldn’t take effect quickly enough to be relevant to the current inflationary episode. Jawboning from policymakers is unlikely to stop any incipient wage-price spiral—but jawboning only workers and not capital owners to stand down in the distributive conflict is particularly perverse.

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Project labor agreements on federal construction projects will benefit nearly 200,000 workers

President Biden recently signed an executive order (EO) requiring project labor agreements on federal construction projects over $35 million, a move that is expected to affect $262 billion in federal construction contracting and improve job quality for nearly 200,000 workers.

Project labor agreements (PLAs) are used primarily in the construction industry to establish the terms of employment for all workers on a project. Generally, PLAs specify workers’ wages and fringe benefits and may include provisions requiring contractors to hire workers through union hiring halls, otherwise establish a unionized workforce, or develop procedures for resolving employment disputes. PLAs often include language that prevents workers from striking during the project while also preventing employers from locking workers out.

PLAs are effective mechanisms for controlling construction costs, ensuring efficient completion of projects, and establishing fair wages and benefits for all workers. PLAs also help ensure worker health and safety protections while providing a unique opportunity for workforce development. These agreements can be written to engage local populations, provide jobs for underrepresented groups, and develop experience for apprentices.

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Inflation and the policy response in 2022

As the inflation debate continues, it’s worth reiterating some important points that policymakers should keep in mind in coming months as they ponder what to do about inflation that emerged last year.

  • The argument that too-generous fiscal relief and recovery efforts played a large role in the 2021 acceleration of inflation by overheating the economy is weak, even after accounting for rapid growth in the last quarter of 2021.
  • The COVID-19 pandemic is the primary factor driving excessive inflation through demand and supply-side distortions. Going forward, the economic distortions imposed by COVID-19 are highly likely to become less extreme in 2022, providing relief on inflation.
  • The worry that inflation “expectations” among workers, households, and businesses will become embedded and keep inflation high is misplaced. What matters more than “expectations” of higher inflation is the leverage workers and firms have to protect their incomes from inflation. For decades this leverage has been entirely one-sided, with workers having very little ability to protect wages against price pressures. This one-sided leverage will stem upward pressure on wages in coming months and this will dampen inflation.
  • Moderate interest rate hikes will not slow inflation by themselves. The benefit of these hikes in convincing households and businesses that inflation is taken seriously by policymakers needs to be weighed against their possible downsides in slowing growth.

Inflation in 2021 was not driven by generalized macroeconomic overheating

Dean Baker recently authored a strong post surveying the evidence about inflation and macroeconomic overheating. I’ll just add one or two points to his argument. In the last quarter of 2021, rapid growth in gross domestic product (GDP) pushed it 3.1% above the level it had reached in the last quarter of 2019 (the last quarter unaffected by COVID-19).

Should this level of GDP have put severe stress on the economy’s ability to produce it without inflation? Not really—inflation was low (and falling) in 2019. The economy’s supply side has been damaged since 2019, but it’s easy to overstate this damage. While employment was down 1.8% in the last quarter of 2021 relative to 2019, total hours worked in the economy is only down 0.7% (and Baker notes in his post that including growth in self-employed hours would reduce this to 0.4%). While some of this is due to people working longer hours than they did pre-pandemic, most of it is due to the fact that the jobs that have yet to return following the COVID-19 shock are much lower-hour jobs than average. Since labor is only about 60% of the inputs into production, the 0.4% decline in economy-side hours would only generate about a 0.2% decline in output, all else equal.

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The unequal toll of COVID-19 on workers

The surge of the Omicron variant in the United States sickened millions, hospitalized young people at record rates, killed Americans at a far higher rate relative to other high-income countries, and led to widespread work absences and societal disruptions.

Household Pulse Survey (HPS) data reveal stark inequities in COVID-19-related outcomes by income. Among working-aged Americans, those with 2019 household incomes less than $25,000 were 3.5 times as likely to report missing an entire week of work mainly due to their own or loved ones’ COVID-19 symptoms, relative to those earning $100,000 or more (Figure). The United States does not collect national COVID-19 surveillance data by income or occupation, so the HPS data are among the best sources for evaluating disparities, although the survey response rate is low.

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Strong job growth despite Omicron shows the strength of this recovery

Below, EPI economists offer their initial insights on the jobs report released this morning. The report showed an increase of 467,000 jobs in January—far exceeding expectations. 

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What to watch on jobs day: Omicron will weigh heavily on the labor market

While the official pandemic recession ended two months after it began, it is clear the pandemic is not behind us, as the Omicron variant has driven a huge uptick in COVID caseloads. On Friday, I’ll be looking for the fingerprints of Omicron on the jobs report, including top-line payroll jobs as well as labor force participation. I’ll also continue to track sector-level job shortfalls, notably the lack of public-sector job growth, and differences in the economic recovery by race and ethnicity. With the release of January data comes annual benchmarking procedures as well: the establishment survey is benchmarked to unemployment insurance tax records and the household survey incorporates new population controls.

The Centers for Disease Control and Prevention (CDC) COVID tracker shows that nearly seven times the number of cases were reported during the January reference week (January 9-15) compared with the December reference week. Average new caseloads exceeded 800,000 in the week ending January 15, the peak of Omicron in the United States. This is nearly five times the peak level during the Delta surge (164,000) and more than three times the peak last winter (250,000). The labor market experienced a slowdown in payroll employment growth during the Delta surge, and that is likely to happen again in January (or even a temporary decline).

The Census Bureau’s Household Pulse Survey also provides striking evidence of what to expect in the January jobs numbers. The number of people not working between the survey periods ending on December 13, 2021 and January 10, 2022 rose by 6.5 million. This dramatic rise is primarily due to a three-fold increase—5.8 million more people—reporting they did not work because they were caring for someone or sick themselves with coronavirus symptoms. Figure A illustrates the dramatic uptick in people not working because they were caring for themselves or someone else in the most recent survey.

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Job Openings and Labor Turnover Survey: Layoffs rate hits historic low while hires and quits declined

Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for December. Read the full Twitter thread here.

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The Biden administration’s Federal Reserve nominees are highly qualified and deserve a fair hearing

The Biden administration has forwarded five nominees for open slots on the Federal Reserve’s Board of Governors: Jerome Powell (nominated for another term as chair of the Board), Lael Brainard (vice chair), Sarah Bloom Raskin (vice chair for financial supervision), Philip Jefferson (governor), and Lisa Cook (governor). Notably, given the poor track record in picking Fed governors that represent the country’s diversity, Jefferson would be just the fourth Black man in the Fed’s 109-year history to serve on the Board and Cook would be the first Black woman. If this slate of candidates is confirmed, it will also be the first time that women hold the majority of seats on the Board of Governors.

This is an excellent slate of nominees, with each having better qualifications than dozens of past nominees and eventual Board governors. Despite this, political opponents of the Biden administration have started a campaign to figure out which of the nominees can be defeated by weakening their candidacy in the run-up to the confirmation process. The organized opposition has mostly settled into a focus on Cook and Raskin.

The opposition to Raskin concentrates on her policy record of regulating the powerful financial sector and seeking to make the Fed center climate change concerns in its policymaking. However, these aren’t weaknesses or flaws in her candidacy, they are strengths. The opposition to Cook is even uglier, deriding her qualifications for the nomination using barely disguised racial code words. The wellspring of much of this opposition also included attacks aimed at Jefferson, but this gross campaign against the Biden slate has clearly decided it’s more strategic to direct attacks about “qualifications” on Cook.

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Up to 390,000 federal contractors will get a raise starting next week

Next week, federal contractors will begin paying workers at least $15 an hour. Pay will rise for up to 390,000 federal contractors, about half of whom are Black or Hispanic (see Table 1). The new rule from the U.S. Department of Labor will also phase out the subminimum wage for tipped workers on federal contracts and continue to increase the federal contract minimum wage in line with inflation.

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Chicago and New York take action to protect domestic workers: A snapshot of state and local enforcement actions across the country

Series: The New Labor Law Enforcers

State attorneys general, district attorneys, and localities like cities are increasingly key players in protecting workers’ rights. This new series by Terri Gerstein provides snapshots of enforcement and other actions to protect workers’ rights by these new and emerging labor law enforcers at the state and local level. Gerstein is an EPI senior fellow and director of the state and local enforcement project at the Harvard Labor and Worklife Program, who has chronicled the growing influence of these new enforcers.  

 Recent cases brought by state and local enforcers address misclassification of workers as independent contractors and wage theft in Washington, D.C. and Illinois. They also enforced paid sick leave laws for domestic workers in New York and prevailing wage laws for construction workers in Massachusetts.

Here’s a snapshot of some enforcement actions at the close of 2021 and dawn of 2022.

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U.S. workers have already been disempowered in the name of fighting inflation: Policymakers should not make it even worse by raising interest rates too aggressively

Earlier this year, debate over the inflation spike in 2021 polarized around the question of whether it was “transitory” or “persistent.” But it turns out that this was the wrong distinction. Instead, what should decide if the Federal Reserve is pushed into raising interest rates to cool off growth and tamp down inflation is whether this inflationary shock will be amplified or dampened in the labor market.

If it’s amplified, this means that wage increases will quickly follow price increases, as workers are able to protect their real (inflation-adjusted) wages from higher prices. Higher wage costs will in turn lead to firms raising prices again to protect their profit margins. This tit-for-tat escalation of wages and prices is what led policymakers to intervene decisively to cut short the famous inflation of the 1970s—sparked by a rise in oil prices but then amplified by these types of labor market dynamics.

If it’s dampened, then wage increases will lag price growth and workers will largely not be able to protect their real wages from the inflationary wave. This will reduce their wages but will also stem pressure for subsequent inflationary waves. The recent shock of price increases will hence be steadily smothered in the labor market, even if these price increases are relatively persistent.  

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Tariff increases did not cause inflation, and their removal would undermine domestic supply chains

An earlier version of this blog appeared in The Hill.

The pronounced inflation uptick in 2021 has attracted enormous attention from both the media and policymakers. While it would be better for working families if inflation were lower, by far the biggest danger this episode poses is the prospect that policymakers will overreact, prescribing a cure that is worse than the disease. One obvious example of a policy overreaction would be a swing toward more-contractionary monetary and fiscal policy, most notably an increase in interest rates.

However, another potentially damaging overreaction to last year’s inflation would be a return to pre-2016 trade policy. Yes, it is true that the Trump administration’s trade policy amounted to little more than unfocused rhetoric. In particular, the Trump administration’s tariffs on steel, aluminum, and other specific products—as well as the general tariffs of up to 25% on more than half of all U.S. imports from China—were treated too often as an end goal rather than a strategic tool to pair with other efforts to restore American competitiveness.

But it is equally true that the pre-Trump status quo in trade policy for decades was deeply damaging to working families and domestic business. Many of those who inflicted this damaging status quo on U.S. workers have tried to leverage the current inflationary episode to roll back all tariffs introduced under the Trump administration in the name of containing inflation. This is a deeply dishonest linkage. Tariffs introduced over the past five years were not large enough, and the timing of them is completely inconsistent with them being a cause—or plausible significant solution—for today’s inflation.Read more

New U.S. Treasury final rule supports state and local spending for an equitable economic recovery

The U.S. Department of the Treasury last week released its final rule for the $350 billion in State and Local Fiscal Relief Funds (SLFRF) provided by the American Rescue Plan Act (ARPA). This rule provides clarity to states and localities, including tribal and territorial governments, on what they can do with the substantial federal resources made available to them through the ARPA. The rule also encourages state and local governments to spend the fiscal relief rapidly and directly, prioritizing economic recovery and equity.

This final rule replaces the interim final rule that has been in place since May 2021, and in this final guidance from Treasury, three new elements stand out. First, the rule expands governments’ ability to use the funds to hire and retain public-sector employees. Second, the rule provides new options to assist low-income workers and families dealing with the economic impact of COVID. Finally, the rule recognizes “the disproportionate impact of the pandemic on people of color,” and adds additional uses for ARPA funds to address inequities exacerbated by the pandemic.

The $350 billion, passed as part of the American Rescue Plan signed into law by President Biden in March 2021, is designed to help state and local governments mitigate the public health and economic impact of COVID. More than $200 billion has already been distributed, with the rest being disbursed starting in May of this year. Recipient governments can use the funds for many purposes, so long as they fall under one of these broad categories:

  • Fighting the pandemic
  • Addressing the economic impacts of the COVID pandemic
  • Replacing lost revenue for state and local governments
  • Providing premium pay for essential workers
  • Strengthening water, sewer, and broadband infrastructure

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The Freedom to Vote Act would boost voter participation and fulfill the goals of the March on Selma

In March 1965, Dr. Martin Luther King Jr., John Lewis, and several other civil rights activists and leaders led thousands of nonviolent demonstrators on a march from Selma to Montgomery, Alabama. This five-day, 54-mile march was conducted in an effort to register Black voters in the South safely and campaign for broader voting rights regardless of race and ethnicity. The Civil Rights Act of 1964—passed only a few months before—prohibited unequal application of voter registration requirements, racial segregation in schools and public accommodations, and employment discrimination. However, the law was inadequately enforced and had done very little to ensure and protect Black people’s right to vote.

The culmination of literacy tests, economic retaliation, and racial terrorism prevented many Black people from registering to vote and fully participating in our democracy, particularly in Southern states. The inexplicable link between brutality and voter suppression is deeply entrenched in American history and has shaped many of the historical events within the civil rights era.

The racial violence and tension that many Black people had experienced daily reached a boiling point during the first attempt at marching from Selma to Montgomery where demonstrators, led by John Lewis and others, were beaten and tear-gassed by state troopers and Ku Klux Klan members, leaving them unable to progress forward.

Infamously known as “Bloody Sunday,” the events of this gruesome demonstration shocked the nation. The fierce outrage led to a federal court order permitting the voting right marchers to finish their journey while under the protection of the National Guard. The events in Selma and the growing public support for the protestors later motivated Congress to pass the Voting Rights Act of 1965 prohibiting racial discrimination in voting and barring voter registration loopholes like poll taxes and literacy tests. Following the passage of the Voting Rights Act, voter registration increased significantly as seen in Figure A.

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