Don’t Miss This Physical Recession Indicator

Did Burger King Take Their Now Hiring Sign Down?

It seems like we are in the midst of a mild recession, but it depends on who you ask. Anecdotally, our company’s sales are as strong as ever, but if you’re going by the technical economic measurements it does seem like the country is experiencing a mild downturn.

Supply & Demand ECON 101

From where I’m standing as an entrepreneur and an employer, one of the major economic forces preventing a larger, more severe recession is the gap between the supply of available labor and the demand for labor & the products/services that labor produces.

I’m not saying anything groundbreaking here, but since the cerveza sickness began labor supply has drastically lagged behind the demand for labor. We’ve all seen and experienced that one way or another. Whether you’ve tried to hire someone or just get a cup of coffee, there aren’t enough Americans willing to show up for work.

This is one of, if not the primary, driving factor behind the massive rises in wages we’ve seen since March of 2020. Employers are fighting over the small pool of available candidates.

It is simple supply and demand econ 101 forces at work.

The average American service or factory worker has seen more upward wage movement in the last three years than the previous 30. On paper it seems great financially for that particular group but has been possibly catastrophic to employers and American culture in general.

State of the Broken Union

Most of the employers I know have taken their “employee handbook” and chucked it out of the window.

Before it was:

  • If you can fog a mirror you’re hired on the spot.
  • Oh, you only worked at your last job for three months? No problem you’re hired.
  • You’ll only show up three out of every four days you’re scheduled? No problem you’re hired.
  • Do you have a giant face tattoo? Great, please start tomorrow.
  • You were only convicted of a non-violent felony? No problem, here’s $18/hour.

I miss the good old days of having the luxury of sifting through applications and resumes.

This gap between labor supply and demand forced wages up, and it took disciplinary power away from employers. Companies have no authority anymore because if you reprimand someone on your staff they will just quit and have another job tomorrow. Employees can get away with murder and they know it.

This attitude towards work will prove devastating for the American culture and society.

Maybe hard economic times will remind Americans of the lost work ethic and gritty attitude that used to exist in this country.

One Physical Sign Of An Economic Recession

The USA won’t experience a larger recession until the gap between labor supply needed and labor supply available comes back towards an equilibrium of some sort. If there are always more jobs than people willing to work them, it is hard to imagine a prolonged recession. Wages will stay high, and demand won’t sufficiently be met.

If every time you go to Walmart there aren’t enough eggs on the shelf prices aren’t going down any time soon. If the country is constantly trying to keep shelves full of products there won’t be any layoffs and upward wage pressure & price pressure will persist.

How does a country get out of a constrained supply problem without the labor needed to dig out of the hole?

Whether it is due to inflation or some other economic factor, once the demand for products/services falls far enough that it hits an equilibrium or is lower than the supply of labor the metaphorical dam will break, and a more severe recession will occur.

Layoffs will be more common, and wages will stagnate or start to fall slightly. Wages will never see pre-Covid levels, but a large enough recession could bring starting wages some down and raises will come to a halt.

Obvious Recession Sign

To gauge the gap between labor supply and labor demand I am paying attention to the Now Hiring signs sitting outside of restaurants, cafes, and factories. I know it isn’t the most scientific examination of the economy you’ve ever heard of but it’s readily available data that refreshes daily on your commute.

My theory is that when I start seeing fewer and fewer Now Hiring signs sitting outside every coffee shop, restaurant, Jiffy Lube, and factory then that tells me product & service demand has fallen to the point where companies no longer need to hire which is the first domino of a larger recession.

With inflation now somewhat under control (allegedly only now 6.5%) prices are still at a sustained higher level than a few years ago and the average American’s savings account will only last so long. Wages have risen but not as high as prices, so savings accounts are being slowly depleted and credit card debt is increasing.

Americans have had a real wage decrease even though nominally their wages are up.

This is slowly creating a scenario where people are going to have to buy cheaper or fewer items at the grocery, go to restaurants less often, and cancel subscription services, etc.

With less products and services being consumed, there will not be a need for more employees. Worst case scenario we will see employers actually see a demand level so low that they need fewer people than they already have employed.

Now Hiring signs will disappear on your daily drive to the office.

More sophisticated economists and speculators have all kinds of formulas and models gauging economic health, but I am far from sophisticated. I’m just a Hoosier from a town of 8,000 people.

All things considered, I will start to be concerned about my own company’s economic future when the local Burger King is no longer hiring.

For Now, Apply Online or In Person

Thank You,

Scott Kohler