by Gary Alexander

November 2, 2021

At the start of this year, some pundits were predicting 7% to 8% GDP growth, the best since 1984 or even 1951. As of April 1, the International Monetary Fund (IMF) was predicting 6.4% growth in the U.S. and 6.0% in the global economy (see table, below). That looked good at mid-year, with 6.5% GDP growth in the first half. Paul Ashworth, chief U.S. economist at Capital Economics, proclaimed last week, “The consensus expectation at the start of the quarter was for a 7.0% gain” for the third quarter.

All through August, the Atlanta Federal Reserve’s GDP model showed 6% or greater annualized growth rates for the third quarter, as they weighed real-time indicators through the middle month of that quarter.

But according to the Bureau of Economic Analysis, the GDP estimate for the second quarter, released last Thursday, October 28, revealed a trick-or-treat reality that the economy grew at just a 2% rate. This low rate marks America’s slowest quarterly gain since the catastrophic Covid-ridden second quarter of 2020.

Economists surveyed by Dow Jones had been looking for a 2.8% gain, but consumer spending rose just 1.6% after shooting up 12% in the second quarter and spending for larger goods fell by 9.2% last quarter.

So what happened to suddenly prick the IMF’s rosy April Fools’ scenario in so short a time span?

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

You can look at supply chain glitches, but there are still plenty of products to buy. After my trip to Tulsa and New Orleans October 18-26, I see the problem better: Too few workers – able-bodied workers are on strike and willing workers are furloughed or fired due to over-zealous regulations about vaccinations.

Workers – Mostly in Service Jobs — Are Quitting in Droves

In August alone, a record 4.3 million workers quit their jobs (chart, below), and in the 12 months ending August 31, a record 43.4 million Americans basically said, “Take this job and shove it.” In order of jobs abandoned in August, services dominated, led by hotel and food service (892,000 quits), then retail trade (721,000), professional and business services (706,000), then health care and social assistance (534,000).

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

I saw this at the New Orleans Investment Conference (October 19-22), where a leading and prestigious hotel chain had no maid service, and my multiple calls for service in other areas went unheeded. I also saw it in high turnover rates at a health care facility in Tulsa, where I was visiting an ailing relative.

Part of the reason for this record quit rate is that higher wages await workers elsewhere. The Atlanta Fed’s Median Wage Growth Tracker revealed that September job switchers saw their wages grow 5.4% year over year, while those who stayed on the job gained only 3.5%. This nearly 2% gap marked the highest edge for job-jumpers since the late 1990s dot-com boom, when the labor market was also hot.

Many workers used COVID as an excuse (or motivation) to retire earlier than expected. Baby Boomers (born 1946 to 1964) are now 57 to 75, so those over 65 retired while many under 65 negotiated an early retirement scheme. Specifically, in the 19 months of Covid exposure (March 1, 2020, through September 30, 2021), the number of seniors in the labor market fell by 366,000 compared to a 132,000 increase in that age group in the previous 19 months. The number of seniors not in the labor force grew by 3 million.

Also, the Federal pandemic relief checks convinced millions to stay at home and avoid the hassle of masking-up at work, facing new pressures there, especially with children at home who need education and home care. Others started a business at home. A record 16.6 million were self-employed as of July 2021 (BLS data). Others, of course, have either contracted Covid or are caring for ailing relatives.

The result is a labor shortage, made all the worse by forced firings of willing non-vaccinated workers – especially nurses and doctors, police and other first responders, airline and highway workers, and other vital personnel. My isolated island offers a microcosm of the insanity of sending good people packing.

A Case in Point – Washington State Ferry Workers

San Juan County Washington has the highest vaccination rate and lowest Covid case incidence of any county in Washington State – by a long shot. We are isolated and very careful to retain that isolation from infection. Our major link to the outside world is our ferry system. Some commute to mainland jobs. Our large elderly population relies on ferries for trips to doctors or hospitals, as we have no hospital here.

Four large boats link us to the mainland, three of which are about 60 years old and often break down. That is bad enough, but as of October 19 (the day AFTER I took off for New Orleans, thankfully), Washington Governor Jay Inslee enforced his decree that all state employees (including educators, healthcare, and ferry workers) be vaccinated or lose their jobs, so 121 Washington State Ferry employees were fired.

As a result, the fleet was reduced, so ferry rides are now sporadic and unpredictable. The reservation system was cancelled. Some employees had valid reasons for rejecting the needle, but there were no exceptions and no accommodations, so we must all get used to long lines and long waits for a ferry ride.

We are not alone, but vaccination requirements in major industries may backfire, engendering lawsuits or strikes or both. American Airlines cancelled 700 flights last weekend, citing weather and staff problems. Earlier in October, Southwest Airlines canceled close to 2,000 flights over the weekend of October 9-10, citing weather, when it was later admitted that the pilots’ union was upset over vaccination requirements.

In 1957, Ayn Rand wrote a long novel, Atlas Shrugged, about entrepreneurs, inventors, and industrial magnates of America going on strike as “the engine of the world stopped.” It won’t happen that way in real life. In the 2020s, it appears that CEOs are working hard to boost earnings via higher productivity with fewer workers, while those in the middle and bottom of the workforce are shrugging off jobs, some by retiring early, others accepting endless government benefits, some by refusing a vaccine, some by strike. Willing workers are barred from working by regulators, while able workers have gone on strike.

With 11 million jobs going begging, America’s Atlases shruggingly ask: “Where did all my workers go?”

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

We won’t grow again until we let willing workers work, and stop rewarding the able-bodied who won’t.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

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About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander