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Intentions to raise wages are at 'multi-decade highs': Strategist

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Elyse Ausenbaugh, J.P. Morgan Global Market Strategist, joins Yahoo Finance to discuss the state of the labor shortage.

Video Transcript

- And then details of a new survey-- and joining us now is Elyse Ausenbaugh from JPMorgan Global Market Strategist. Elyse, thank you so much for joining us today. So quite literally, where have all of the workers gone? It's not just a case of they're sitting at home, collecting unemployment, although that is part of the story here.

ELYSE AUSENBAUGH: It is part of the story. Yeah, there's something like 7 and 1/2 fewer-- 7 and 1/2 million fewer workers in the labor force now than there were before the pandemic. And our chairman of investment strategy, Michael Cembalest, recently released the paper kind of breaking that down a little bit.

A big portion of those have, to your point, been a result of people, you know, receiving those beefed up unemployment insurance benefits and having incomes higher than what they might have been earning as wages, you know, before they lost their jobs. But adding to that, you had an additional 1 and 1/2 million people retire above and beyond what the historical trend would lead us to expect-- so huge wave of retirements throughout the pandemic. And then you've got these other kind of conflating factors, ranging from, you know, a decrease in the number of work visas that were issued, ongoing COVID fears, as Denitsa pointed out, you know, childcare responsibilities, and so on and so forth.

I think the bottom line is that, although we don't necessarily expect all of these workers to return to the labor force, we do expect a good portion of them to, over the course of the next few months, you know, particularly as the pandemic becomes more endemic and, you know, school normalizes, children are able to get back out of the house, and so on and so forth.

- Elyse, what about what you're seeing in terms of where people are going? If they're not just completely-- if they're not resigning and then completely leaving the workforce, what are they doing? And also, I know there was a huge rise in those who look to self-employ. Are these people who had an entrepreneurial spirit during the pandemic and started their own businesses?

ELYSE AUSENBAUGH: Yeah. I mean, you kind of answered the question, right? So we've seen a lot of people move into self-employment. And some of those might be entrepreneurial endeavors. But you've also seen a shift from some industries, like manufacturing, to example, you know, kind of move into, perhaps, like, more of the gig economy.

But I think the overall trend and what the data is showing us is that, you know, the people who are quitting are really just doing so to seek out those higher wages. And I think the net takeaway is actually a bullish one because, as you were discussing before, you know, these wage increases are happening the most rapidly at the lower income levels. And that's really important to hone in on because people in the bottom 10% of income earners have a much higher propensity to consume than those in the top 10% of income earners.

So, you know, as people leave their jobs seek, out new jobs with higher wages, that's going to have the effect of being able to continue to support the strong demand that we've been seeing going forward, which ultimately is going to be a good thing for corporate revenues. And it's what's going to give us a continuation of this earning strength that's going to help push the market higher.

- And there's a reason why this has been called a "she-cession," right? So what sort of gender differences have you noticed, if any?

ELYSE AUSENBAUGH: Sure. So we've seen more women than men exit the labor force. But a big part of our thesis going forward actually has to do with this idea that the overall productivity of the economy might actually increase in this cycle versus the last. And a lot of that has to do with the way that this work from home revolution has kind of enabled a lot of women who otherwise might have had these responsibilities, like childcare or tending to the home, to have the flexibility so that they can kind of do both, right, work from home and be able to kind of, you know, address those responsibilities that previously might have kept them out of the labor force.

So that's one of the core tenants as to why we think the productivity can be higher over the course of the next-- call it 10 years. But time will tell. We're paying close attention to the detail and-- or to the data and watching all of those details really closely to kind of see what kind of trends emerge as the labor market continues to recover.

- Elyse, what can business owners do, large and small companies, to prevent workers from leaving in droves?

ELYSE AUSENBAUGH: Well, I think raising wages is certainly one thing, right? That's one of the dynamics that we've been really focused on. The company intentions to raise wages are at multi-decade highs right now. But I think the good news for investors is so are the intentions to raise costs in order-- or raise prices in order to pass some of those increased costs onto consumers. And so in the end, that's going to have the effect of, you know, helping insulate the really strong margins that we've been seeing, which, again, is one of the key reasons why we remain really constructive on potential earnings upside going forward.

- And I think employers really need to be nimble, as you say, to make sure that they retain those staff. All right. Elyse Ausenbaugh from JP Morgan Global Market Strategist, thank you so much for your time.