Worst Job Shortage in US History... 'Inflation Time Bomb' Approaches

March job postings 8 million more than actual hires by over 2 million
Concerns over excessive fiscal spending and economic overheating causing inflation
Fed "Temporary supply chain bottlenecks... patient resolution expected" forecast

A job advertisement offering a $1,000 bonus is displayed in front of a Subway fast-food restaurant location in the United States.

[Asia Economy New York=Correspondent Baek Jong-min, Reporter Kim Su-hwan] There are plenty of jobs available, but no job seekers. This is the biggest problem facing the recovering U.S. economy from the COVID-19 crisis. The imbalance between supply and demand in the labor market is worsening, delaying economic recovery and leading to wage increases, which raises concerns that inflation could spread further. Ahead of the U.S. Consumer Price Index announcement, financial markets are showing extreme anxiety over inflation concerns, prompting Federal Reserve (Fed) officials to collectively attempt to calm the situation.

Employment Recovery Hampered by the Paradox of Unemployment Benefits

According to the March Job Openings and Labor Turnover Survey (JOLTS) released by the U.S. Department of Labor on the 11th (local time), job postings in March surged by 8% (597,000 postings) from the previous month to 8.12 million, marking the highest record since statistics began in 2000.

If all these postings had resulted in hires, there would be no problem, but that is not the case. March hires increased by 3.7% from the previous month to 6 million, which is more than 2 million fewer than the number of job postings. The rate of unfilled job openings reached 5.3%, the highest ever recorded since 2000.

This explains why U.S. employment growth in April was only 260,000, far below the expected 1 million increase. Nick Bunker, an economist at the employment information company Indeed.com, said, "Companies want to hire more people, but few are actively seeking jobs."

The dominant analysis attributes this phenomenon to the federal government's extension of expanded unemployment benefits until September through the stimulus measures implemented in March. Unemployment benefit recipients can receive up to $4,492 (approximately 5.02 million KRW) per month, including an additional $300 (about 340,000 KRW) paid by the federal government. This amount exceeds the income of workers earning $15 per hour.

Some view the difficulty in new hiring as a potential blow to economic recovery. Michael Gapen, an analyst at Barclays, expressed concern that "a shortage of labor input could affect the speed of economic recovery."

For companies, the situation is such that they must offer higher wages than unemployment benefits to attract employees. Some companies have already begun raising wages.

Inflation Concerns... Fed Says "There Is a Long Way to Go"

Ray Allen Brainerd Fed Director
Photo by AP Yonhap News

Ray Dalio, founder and chairman of Bridgewater Associates, the world's largest hedge fund, criticized the Biden administration's economic policy, stating, "Excessive fiscal spending will cause overheating of the economy and inflation," and emphasized that "the government should focus on managing these risks in a balanced manner."

At a regular briefing that day, White House Press Secretary Jen Psaki was asked whether the rise in gasoline prices due to the Colonial Pipeline shutdown would affect the government's inflation outlook. She responded, "We take the possibility of inflation very seriously."

Amid spreading inflation concerns, Fed officials reiterated their stance that inflation worries are temporary ahead of the Consumer Price Index (CPI) announcement on the 12th. Fed Governor Lael Brainard emphasized, "The outlook is positive, but it is important to be patient and focused on achieving full employment and inflation outcomes." She forecasted that inflation is temporary and that supply chain bottlenecks will soon be resolved.

Raphael Bostic, president of the Federal Reserve Bank of Atlanta, also stated, "The economy is on a solid recovery path, but there is a long way to go," and argued that "it is appropriate for the Fed to maintain accommodative policies."