At a time when special-purpose acquisition companies and cryptocurrencies have minted fortunes, it’s hard not to imagine that this doubt has creeped into into the psyches of U.S. workers across industries. What is company loyalty worth if the new hire at your level is making significantly more money? Will firms raise their pay scales internally to retain employees with institutional knowledge, or will they just accept whatever turnover happens? As the end of the calendar year draws near, these will be crucial decisions for executives who are balancing wage pressures and rising prices, all while attempting to maintain current profit margins.
Either way, employees’ unusual propensity to quit raises the risk of a wage-price inflation spiral—not something the Fed or the Biden administration wants to contemplate with the U.S. consumer price index rising at its fastest pace in three decades. Powell, for his part, sees it as a mismatch between worker supply and demand. “You have people who are held out of the labor market, you know, of their own, they're holding themselves out of the labor market because of caretaking needs or because of fear of Covid or for whatever reason,” he said. To be sure, a return to a normal participation rate is possible.
But it could also be the case that some Americans 55 and older, who are more likely to have sizeable financial assets that have lately soared in value, aren’t particularly interested in returning to work, regardless of any salary boost. As my Bloomberg News colleague Cameron Crise noted, “there has never been a postwar recession where either the employment or participation of older workers has lagged this badly. That’s flashing an amber warning signal that something is different this time around.” On the opposite side of the spectrum, if you believe survey data posted on Twitter last week by Mark Cuban, a portion of the labor force (presumably on the younger side) has quit because of gains from trading crypto.
For policy makers, none of this means it’s time to slam the panic button yet. But, to use Powell’s term, it might be wise to contemplate “risk management.” The central bank is leaning on its vague maximum employment mandate to justify keeping interest rates near zero at least through mid-2022. If something about this labor market is truly different—say, if ultra-accommodative policy is fueling speculative bubbles and discouraging labor-force participation—that could be a mistake. Of course, that kind of knowledge unhelpfully comes only in hindsight.
JPMorgan, with its 265,800-person workforce—the largest in U.S. banking—offers at least a bit of forward guidance. Even with competitive pay and the bank’s prestige, departure rates in many of its businesses are reportedly up at least a few percentage points from pre-pandemic levels. It stands to reason that much of corporate America is dealing with similar issues. After all, if CEO Jamie Dimon isn’t impervious to labor market forces, no one is.
Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.