By many measures, the labor market has significantly tightened since 2009-2010. Some of the persistent problems in the U.S. economy over the past decade including growing inequality, lack of wage growth, and companies choosing to invest in stock buybacks rather than investing in their own operations which would lead to more hiring.
When the labor market is tight, workers have more options when it comes to choosing a job. Companies are forced to increase wages in order to attract and keep workers. Companies are also more likely to invest in their own workers and upgrade their skills due to the difficulty and expense of finding replacement labor.
Although the labor market has significantly tightened and wage growth has perked higher, it still hasn't reached previous levels nor come close to undoing the years when wage growth underwhelmed. Two contemporary stories which exemplify this trend are the struggles of gig-powered startups and recent gains for labor unions.
For stocks investors, this trend is worth watching. At some point, a tight labor market can lead to slimmer margins especially if the company can't easily raise prices.
Early Part of the Decade
As noted, the early part of the decade's economy was marked by high unemployment and underemployment. Many startups were able to take advantage of this pool of labor, creating sort of a "gig-based"economy, where people could find work according to their schedule.
Examples of these types of startups include Uber
Another complicating factor is that Uber had large amounts of venture funding, and its business strategy was to subsidize each ride in order to win market share. Now that the company has gone public, this strategy is exhausted and the company has to become profitable on its own. Therefore, it's likely to expect Uber to raise prices, as it must become responsive to public investors and the pool of available drivers declines. This story is playing out across other startups in that space like PostMates, DoorDash, Seamless, and GrubHub
Latter Part of the Decade
According to the BLS, there were 442,700 workers on strike as of September, 2019. This is the highest level since the late 90s which was the last period of significant labor market tightness. Some of the most high-profile strikes include teachers' strikes all across the country and the UAW striking at the General Motors
In a sense, any economic growth has largely benefited the owners of assets over the past decade. Loose monetary policy ensured that the economy would not fall into deflation or negative growth, but it also led to massive gains in asset prices. Low interest rates allowed large companies to borrow money for cheap and buy back their own shares. A more guaranteed way to lift a company's EPS without the risk of increasing production or business activities. The increasing number of striking workers increases confidence in the labor market that they have the leverage to get increased pay and benefits.