The Labor Shortage Isn’t Going Away

So far, most businesses are holding on to their employees, and there are still a lot of people missing from the labor force.

Good morning!

Here are today’s highlights:

• Gene Marks thinks California’s new fast food regulations are worth a try.

• The lines between business travel and leisure travel are blurring.

• New York is banning the sale of cats, dogs, and rabbits in pet stores.

• In Silicon Valley, Elon Musk is still very much a hero.

OUR PUBLISHING SCHEDULE

And that’s a wrap, folks: This is the last regular edition of the Morning Report for 2022. We will return to your in-box in two weeks, on Monday, January 2, 2023. Here’s wishing us all a safe and joyous holiday.

HUMAN RESOURCES

Businesses are holding on to their employees: “U.S. unemployment filings declined last week to the lowest level since late September, a sign the labor market remains historically tight. Initial jobless claims, a proxy for layoffs, fell by 20,000 to a seasonally adjusted 211,000 last week, the Labor Department said Thursday. Claims are up from lows this spring, but remain at levels that suggest many employers are holding tight to workers. Last week’s claims count was below the 2019 weekly average of 218,000, when the labor market was also strong. The four-week moving average of weekly claims, which smooths out volatility, decreased by 3,000 to a seasonally adjusted 227,250.” READ MORE

Gee, where did all of the immigrants go? “A shortfall of immigrants is worsening widespread labor shortages and hobbling the U.S. economy at a time when more than 10 million jobs remain unfilled, particularly in low-paying and physically demanding industries such as hospitality, agriculture, construction and health care. While the slowdown in legal immigration began well before the pandemic, the Covid-19 crisis intensified the process as the Trump administration effectively halted the flow of foreign-born workers into the United States. Although immigration has rebounded somewhat since then, particularly in the last six months, major shortages remain, rippling through the economy at a time when the labor force is also missing workers from early retirements, ongoing health problems, and caregiving challenges.”

• “By one estimate, the United States is shy of about 1.7 million legal immigrants based on pre-pandemic migration trends, according to Giovanni Peri, director of the Global Migration Center at the University of California at Davis.”

• “Even though immigration rates have picked up in recent months, Peri says it could be another four years before the country makes up for current shortfalls. Even then, it won’t be enough to catch up to the rapidly aging workforce that is projected to leave millions more positions unfilled.”

• “Early in the pandemic, Mariama Lowe lost nearly three-quarters of the employees at her home health-care business in Alexandria, Va., to Covid illnesses, career changes, and early retirements. She’s since gone from 100 nurses and personal care aides — almost all of them immigrants — to 27.”

• “‘We’re in a very difficult position, because there is nobody to hire anymore,’ Lowe said. ‘Tech companies can go recruit from anywhere; they have all of these avenues available to them. But a home health agency like me? I don’t have that opportunity. I just have to go with whoever’s here and whoever’s available. And right now, it’s not a lot.’” READ MORE

Of course, some companies are laying off workers. But does it have to happen around the holidays? “Historical data shows December often ranks as the second-highest month for layoffs and discharges, going back to 2000, according to the Bureau of Labor Statistics. But the month when companies consistently cut the most workers is coming soon—January. Layoffs around the holidays are a relatively recent phenomenon. In the 1970s and 1980s, companies were more cognizant of the optics of putting people out of work during the most wonderful time of the year, says Andy Challenger, a senior vice president with Challenger, Gray & Christmas, a career services and executive-coaching firm.”

• “That sentiment has passed, he says. ‘Today we tend to see companies making the cuts when they feel like they need to.’”

• “Jonathan Reynolds, chief executive of Titus Talent Strategies, a recruiting agency, says he advises firms to wait until after the holidays if they need to terminate a large group of employees, especially if they made a poor business decision by over-hiring in the first place. They might end up having a hard time hiring talent back.” READ MORE

REGULATION

California is creating a council to regulate the fast food industry, and Gene Marks thinks it’s a good idea: “Why? Because the law, which takes effect on Jan. 1, will require fast food restaurants (which include many independent restauranteurs, franchise owners and other small businesses) to answer to a newly formed committee that will ‘set minimum standards for workers in the industry, including for wages, conditions related to health and safety, security in the workplace, the right to take time off from work for protected purposes and protection from discrimination and harassment.’ I realize that statements like this can cause any businessperson to shudder.”

• “As you can imagine, the fast food industry is up in arms. McDonald’s U.S. president says the bill could ‘raise minimum wages to $22 per hour’ and ‘hurt everyone.’”

• “In fact, maybe an increase in wages and an improvement in working conditions will help those companies attract more talent and reduce turnover. At the very least, it may help reduce the number of hairs I routinely find in my chicken nuggets.”

• “In this model, the government is essentially punting its oversight on an industry to a better, more experienced group of people and saying, ‘Hey, whatever you guys decide, we’ll go with.’ As opposed to politicians who have an interest in just getting elected, that group – both workers and owners – have a mutual interest in their industry succeeding.”

• “Yes, it’s different. But it’s worth a shot.” READ MORE

New York will ban the sale of dogs, cats and rabbits in pet stores: “The ban will take effect in 2024, according to Gov. Kathy Hochul, a Democrat who signed the legislation Thursday. ‘Dogs, cats and rabbits across New York deserve loving homes and humane treatment,’ she said. Democrats have majorities in the state Legislature but the bill passed with bipartisan support earlier this year. The new law will still allow people to adopt animals from shelters, which pushed for the law, and to buy purebred animals directly from breeders. And it doesn’t outlaw residents from buying pets in other states and bringing them back to New York.”

• “New York joins California, Illinois, Maryland, Maine and Washington in restricting retail sales of pets, according to the industry group Pet Advocacy Network. Officials in Dallas and Las Vegas have passed similar legislation, and lawmakers are working on statewide bans in Texas, Massachusetts and New Jersey.”

• “Scores of pet stores in New York had pushed Ms. Hochul to veto the bill, arguing it would force around 1,500 people out of work. Pet stores provide a convenient way for consumers in urban areas to acquire purebred animals that might not be available at shelters, said Emilio Ortiz, the general manager of Citipups in Manhattan.”

• “‘You’re going to put people out of work and make it harder for people to get a dog, all while not improving the quality of life for the breeding of dogs that this bill claims to target,’ Mr. Ortiz said.” READ MORE

TRAVEL

Bleisure travel is saving the airlines: “Some airline executives say hybrid work and other post-pandemic changes have cracked open demand from travelers willing to spend more for extra legroom and other perks, helping offset revenue from once-crucial corporate bookings that still haven’t fully returned. Workers no longer tethered to desks have more freedom to extend a long weekend, tack a personal trip onto a business one, or hop on a plane midweek rather than rushing to be back in the office Monday morning—a phenomenon some airlines say they see reflected in increased bookings on Tuesdays and Wednesdays.”

• “‘There’s a blurring of the lines that you see between business and leisure,’ said Steve Sear, executive vice president of global sales and distribution at Delta Air Lines. That’s why some in the industry dub them ‘bleisure’ travelers.”

• “American Airlines Group said nearly half its revenue is coming from people in some way combining business and pleasure travel and those customers are spending nearly as much as what corporate travelers once shelled out.”

• “The shift is encouraging airlines to rethink schedules, prices, and in some cases the layout of the planes themselves, including with additional ‘premium economy’ seats that offer more space. The goal, airline executives have said, is to offer attainable luxuries that more customers can afford to pay for themselves.” READ MORE

SILICON VALLEY

Elon Musk’s reign of Twitter is making him an even bigger hero among bosses in Silicon Valley: “It’s not, by almost any measure, going well for him. And yet, one group is still firmly in Mr. Musk’s corner: Bosses. In recent weeks, many tech executives, founders and investors have expressed their admiration for Mr. Musk, even as the billionaire has flailed at Twitter. Reed Hastings, the chief executive of Netflix, praised Mr. Musk at a New York Times DealBook conference late last month, calling him ‘the bravest, most creative person on the planet.’ Gavin Baker, a private equity investor, recently claimed that a lot of venture-funded chief executives were ‘inspired by Elon.’ And several partners at Andreessen Horowitz, the influential venture capital firm, have tweeted similar encomia to Mr. Musk’s management style.”

• “Mr. Musk’s defenders point out that Twitter hasn’t collapsed or gone offline despite losing thousands of employees, as some critics predicted it would. They see his harsh management style as a necessary corrective, and they believe he will ultimately be rewarded for cutting costs and laying down the law.”

• “They view him as the standard-bearer of an emergent worldview they hope catches on more broadly in Silicon Valley. The writer John Ganz has called this worldview ‘bossism’ — a belief that the people who build and run important tech companies have ceded too much power to the entitled, lazy, overly woke people who work for them and need to start clawing it back.”

• “These bossists believe that for the past decade or so, a booming tech industry and a talent shortage forced many C.E.O.s to make unreasonable concessions. They spoiled workers with perks like lavish meals and kombucha on tap.”

• “They bent over backward to give in to worker demands — D.E.I. workshops, flexible remote work policies, company wellness days — to keep them happy and prevent them from jumping ship to a competitor.” READ MORE

OBITUARY

Don Christopher, the man who made Gilroy, Calif., the garlic capital of the world: “In 1956, given a gift of acreage, he founded the Christopher Ranch company. He planted lima beans, sugar beets, and just 10 acres of garlic. But the stinking rose became his future. Christopher Ranch grew to be the nation’s largest garlic company and remains the largest private employer in Gilroy. The journey wasn’t without its challenges. Christopher battled cheap imported garlic from China for years and saw the cost of farmland skyrocket. So did the popularity of garlic.”

• “In 1979, well into the legacy, a handful of volunteers — including Rudy Melone, Val Filice and Christopher — decided to hold a modest festival celebrating garlic to raise money for charity.”

• “They figured about 5,000 people from the surrounding communities would show up to taste garlic-infused dishes. They vastly underestimated the appeal. Some 15,000 people descended on the first Gilroy Garlic Festival.”

• “While Christopher Ranch now grows garlic throughout California — 100 million pounds annually — the bulbs all find their way to Gilroy for processing. The company remains a family operation, in the hands of the next two generations after Don.” READ MORE

THE 21 HATS PODCAST

Jay Goltz’s 12-Step Business Check-Up: This week, in episode 136, Shawn Busse, Jay Goltz, and Sarah Segal talk about what they hope to accomplish in 2023. Sarah’s moving into new offices, aiming for 20-percent growth, and hoping to land a chocolate company as a client. Shawn’s looking for new space, too, and attempting to reposition his business to shake the corrosive effects of the pandemic. And Jay’s employing a methodical 12-step process to assess how his business is performing: Hiring? Check. Pricing? Needs work. Inventory levels? Way out of line. And then there are his ongoing efforts to mentor his two sons in the business and prepare for the inevitable. These days, Jay tells us, he’s especially careful when getting in front of buses.

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren