On a recent cross-country trip—I (Paul) drove from California to Illinois and back again. On the drive, I saw a sign I had never seen before: In a McDonald’s window it said $1,000 SIGNING BONUS. That was not a thing when I was a teenager doing minimum-wage jobs. No one paid you $1,000 signing bonuses to work for fast-food restaurants. These bonuses have been around for a few years now, having started during Covid when the U.S. workforce fell into a wormhole and disappeared. But instead of going away, they persist, and bonuses have seemingly gotten even larger. This got us thinking, unsurprisingly. It ties into a theme we have been rolling around, one we’re passionate about. Explaining what is going on, why it is important, and its relevance for investing will require some groundwork, so bear with us for a few paragraphs. There is a persistent structural imbalance in the U.S. workforce: too few people for all the jobs, for the most part. It resists all efforts to reduce it, driven by a host of factors, including demand growth, an aging society, retirements, lower immigration, and skill mismatches, all of which conspire to create an unprecedented shortage of workers. You can see some of this in the participation rate among U.S. workers. It fell sharply during Covid and hasn’t completely recovered since. Participation rates remain a full percentage point below pre-Covid levels, which, in a labor force the size of the U.S., is stark.
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