A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.
The US economy is roaring back to life after a long period of hibernation, sending companies scrambling to find workers that can help them meet a surge of demand. In many cases, they’re coming up short.
What’s happening: A growing number of sectors are reporting problems with worker shortages. Uber (UBER) and Lyft (LYFT) are offering incentives to get drivers back on the road. Chipotle (CMG) has said it’s playing “catch up” on staffing. And America’s factories are staring at half a million job openings.
The US economy added a paltry 266,000 jobs in April and the unemployment rate ticked up to 6.1%, one year after Covid-19 destroyed more than 20 million jobs in a single month. The disappointing number of jobs could be partly attributed to employers not being able to find the workers they’re looking for.
Part of the problem stems from ongoing concerns about safety or childcare during the pandemic, while the coronavirus may have encouraged others to opt for early retirement. Some business leaders also point to stimulus checks and unemployment benefits, which they say are discouraging some people from seeking employment.
“Some of it’s certainly being driven by the stimulus and the opportunity for people to stay at home and make comparable wages to what they would make if they were at work in our restaurants — not quite as much, but certainly close,” Daniel Halpern, the CEO of Jackmont Hospitality, which runs 50 TGI Friday’s and other restaurants, told CNN’s Ana Cabrera last week.
Employers expect labor shortages will ease as Covid-19 cases continue to drop.
“As pandemic conditions continue to improve and health [and] safety concerns abate, we see more drivers feeling more comfortable getting back behind the wheel,” Lyft co-founder John Zimmer told analysts. “As the vaccine rollout continues, driver availability should naturally improve.”
But they’re concerned enough to be weighing creative handouts to get people back to work. In April, Chipotle expanded its program covering tuition for college degrees, which is available to workers after just 120 days on the job.
Big picture: The worker shortage could weigh on the economic recovery by preventing businesses from operating at full capacity as customers return. Bank of America has estimated that 4.6 million workers that would have been in the labor force before the pandemic are staying on the sidelines.
The labor force participation rate — the percentage of the adult population either working or looking for a job — rose to 61.7% in April, the highest level in 13 months. But if you rewind to before the pandemic, it’s the weakest rate since 1977, when a far lower percentage of women were in the labor force to begin with.
Some issues won’t be fully solved when life returns to normal. Factories, for example, have for years struggled with a dearth of skilled workers for specialized roles such as welders and machinists — a problem that would require significant investment and training to solve. Pandemic-era changes to the makeup of the workforce will also resonate for some time.
“Over the next several years, the recent surge in retirements and long run demographic trends will … [make] it difficult for the labor force participation rate to return to pre-pandemic levels,” Michelle Meyer, head of US economics at Bank of America, said in a recent note to clients.
Why steel prices could be heading for a crash
A bubble could be brewing in steel stocks.
The pandemic brought the American steel industry to its knees last spring, forcing manufacturers to shut down production as they struggled to survive the imploding economy. But as the recovery got underway, mills were slow to resume production, and that created a massive steel shortage.
Now, the reopening of the economy is driving a steel boom so strong that some are convinced it will end in tears, my CNN Business colleague Matt Egan reports.
“This is going to be short-lived,” Bank of America analyst Timna Tanners told CNN Business. “It’s very appropriate to call this a bubble.”
After bottoming out around $460 last year, US benchmark hot-rolled coil steel prices are now sitting at around $1,500 a ton, a record high that is nearly triple the 20-year average.
That’s supercharging steel stocks. US Steel (X), which crashed to a record low last March amid bankruptcy fears, has skyrocketed 200% in just 12 months. Nucor (NUE) has spiked 76% this year alone.
While “scarcity and panic” are lifting steel prices and stocks today, Tanners predicted a painful reversal as supply catches up with what she described as unimpressive demand.
Phil Gibbs, director of metals equity research at KeyBanc Capital Markets, agreed that steel prices are at unsustainable levels.
“This would be like $170-a-barrel oil. At some point, people will say, ‘F this, I’m not going to drive, I will take the bus,’” Gibbs told CNN Business. “The correction will be very intense. It’s just a matter of when and how it happens.”
Remember: Steel is just the latest shortage to hit the US economy as it recovers from a pandemic that scrambled supply chains and set off sharp shifts in demand. Everything from computer chips and lumber to chlorine are in short supply, roiling markets and sending prices higher.
The rise of the dollar store
Three dollar store chains will make up almost half of all the new stores opening up in the United States this year, my CNN Business colleague Nathaniel Meyersohn reports.
About 45% of the 3,597 store openings that large retail chains have announced so far this year are from Dollar General (DG), Dollar Tree (DLTR) and Family Dollar, according to the figures from Coresight Research.
Step back: Dollar stores were experiencing rapid growth even before Covid-19 hit, growing their clout as other chains closed shops or stopped building new ones. Economists and retail analysts have pointed to growing wealth inequality and the hollowing out of the middle class as a key factor.
“While the wealthy have done well and continue to do well since the Great Recession, there’s certainly a lot of the population that has not done as well,” said Ken Fenyo, president and head of advisory and research at Coresight. “The dollar stores appeal strongly to that segment of the population.”
Economic pain triggered by the pandemic has only increased the dollar store’s dominance. The format is also better insulated from the rise of online shopping, encouraging customers to hunt for deals on essentials in person.
Investor insight: Wall Street isn’t going all in, though. Dollar General’s stock is up just 4% year-to-date after jumping 35% in 2020. Dollar Tree shares have risen 7% in 2021 on top of 15% gains in 2020. The S&P 500, meanwhile, has climbed almost 12% this year.
Cinemark (CNK), DraftKings, MSG Entertainment (MSG) and Nikola report results before US markets open.
Also today: The US jobs report for April posts at 8:30 a.m. ET.
Coming this weekend: Tesla (TSLA) CEO Elon Musk hosts Saturday Night Live. Who’s tuning in?