Thread by @EconomicPolicy

Recent economic data suggest labor shortages in leisure and hospitality have popped up—but there is little reason to worry about spillover into the rest of the economy and no reason to rein in stimulus or unemployment benefits. epi.org/blog/restauran…

The leisure and hospitality labor market is highly segmented off from other sectors, and wage pressures—upward or downward—have typically not spilled over from it to other sectors. For example, jobs in leisure and hospitality have notably low wages and fewer hours.

Millions of workers in accommodations and food services lost their jobs during the COVID-19 economic shock, and wage growth tanked. Yet very little of this sectoral distress spilled over into wage growth in other sectors, which saw only the smallest dip in wage growth trends.

5 other reasons why we must not change policy course:
1) The leisure & hospitality labor shortage so far is not dragging sharply on growth even within this sector—the sub-sectors within leisure and hospitality saw by far the most rapid employment growth in the last month.

2) Very little evidence that enhanced unemployment insurance benefits created a sectoral labor shortage. For one, the disappointing April job growth number was held down by a large uptick in people being laid off or otherwise separated from a job or leaving the labor force.

Women (as a whole) accounted for more than 100% of all transitions out of employment in April. Relatedly, labor force participation actually grew quite strongly in April, but more than 100% of the gain in the labor force was accounted for by men.

These last two data points are consistent with caregiving responsibilities—which still fall far more heavily on women—being a key bottleneck for labor supply.

3) Further, millions of Americans continue to cite health concerns as a reason for reluctance to return to work—as further evidence of this, vaccination rates correlate positively with increased employment across states.

4) Cutting pandemic UI benefits now, as some states have done or are considering, will not just hurt workers who are depending on federal benefits while they cannot find work or are unable to work, it will also drag on the economy, as those benefits are supporting spending.

5) If economic growth is constrained because workers make voluntary decisions to not accept jobs at the going rate, this is far less damaging to human welfare than economic growth that is constrained because workers eager to work at today’s wage can’t find a job offer.

The goal of economic policy shouldn’t be to chase as many adults into paid work as possible, it should be to provide good options and economic security for all. Current policies are far better than reeling back on relief and recovery measures.