I am admittedly a numbers geek.  As I detailed here before, my career has been based in large part on data interpretation.  To me, you can’t have an accurate overview of anything–weather, the economy, football games–unless you consider every bit of numerical data you can get your hands on.  It shouldn’t be surprising then that one of my go-to sites for economic data doesn’t use a whole lot of words to describe the current state of the US economy.  It isn’t Forbes or the WSJ; it’s the Institute of Supply Management.

“Wow,” you think.  “Glamorous.” (Insert “/s” here.)  You’re right:  it really isn’t.  It’s like poring over the box score rather than watching the game.  ISM monitors 18 separate industries, regularly polling and interviewing thousands of business people on the status of their enterprises.  It looks at everything from financial growth to incoming orders to inventory levels to supply chain flow.

These numbers point to a US business atmosphere ready to take off, with leaders in the vast majority of industries saying they’re ready to get and fill orders.  They’re confident they have the materials, financial backing and capacity but they’re being held back primarily by two things.  The first is labor; the second is a pervasive angst that the economy is teetering–an angst that doesn’t seem grounded in reality given other data.

At the start of every month, ISM publishes its “Report on Business,” a summary of key indicators along with some representative comments from respondents.  To a data geek like me, it’s ambrosia:  it feeds the need for comprehensive information on the status of the economy, and it breaks it down by industry so I can see if it’s only a single sector being impacted or the overall economy.  It’s also the best summary of economic “feels”–backed by data–available thanks to its excerpts from interviews with respondents.  (If you want a quick snapshot, jump to the “At a Glance” summary chart on the report page.)

June’s ISM Report on Business is nothing if not glowing.  Overall, industry metrics show the US economy is back on a strong footing, with only agriculture and construction showing signs of weakness.  (More on this in a bit.)  The report shows the US economy recovering from some of its previous potholes:  for most industries, inventories are improving and businesses feel more confident that their suppliers will be able to fulfill orders.  And it illustrates how healthy and stable US businesses are after the disaster of Trump’s mismanagement of the pandemic.

The supply chain issues experienced as the pandemic dragged on appear to be easing, with order backlogs dropping for four consecutive months and inventory levels rising for the last two.  Data show businesses getting supplies from vendors faster and with more regularity.  A fun little metric to look at is pallet supply:  when pallets are in demand, it typically means orders are being fulfilled using those pallets to facilitate delivery, a good thing.  Idle pallets signal no manufacturing, no orders, and no customers.

There are still a few areas lagging:  Skilled and unskilled labor for construction is in short supply, which can suppress housing starts; unskilled labor is in short supply overall.  Shortages of electronic components and appliances reflect an ongoing microprocessor deficit, and that in turn creates lower employment and production at manufacturing plants, which then impacts purchases and consumer confidence.

Five million new businesses formed in 2022 (according to the Census Bureau)–a 41% increase from pre-pandemic levels–and the pace for 2023 indicates similar numbers for this coming year.  Two things account for this:  workers want more control over their jobs and employment situations so they’re setting out their own shingles, and companies continue to contract labor rather than hire employees, pushing laid-off workers to incorporate as they get contracts.  

Additionally, the workforce participation rate is nearly back at pre-pandemic levels–though it will likely never get back to the mid-60% range it saw a decade ago because Baby Boomers are retiring in hordes. That’s a pretty impressive statistic for an economy that three years ago had a 14.7% unemployment rate.  

And this points us back to the item discussed above:  worker shortages.  While the labor shortage is hitting a lot of industries–ISM noted eight categories showed negative pressure from a lack of workers–the two industries most impacted by these shortages are agriculture and construction.  What do these two industries have in common?  

The answer:  Migrants.  Foreign-born workers make up to 30% of “hammer-swinging” construction jobs–and those are just the ones reported.  A Pew Research survey found up to 15% of workers on construction sites are undocumented, so the figure is likely much higher.  And we know the US agricultural sector is dependent on foreign workers to harvest crops.  

So if you want to grow the US economy, what makes more sense than to bring in foreign workers to fill the available jobs in industries that need workers now?  Wages can remain static; no need to double or triple hourly wages to entice complacent Americans back into the workforce to haul lumber or pick strawberries (to spotlight a couple of tasks).  

Yes, there are problems that cascade if more migrants come in, with an affordable housing crunch in many areas one of many.  Done properly, however, that resolves itself:  give one of the first sets of work visas to companies pledging to build affordable housing or to restore dilapidated housing in cities.  Create the inventory you need.  More workers equate to more housing, just like it does to more food, and ultimately lower costs and inflation as supplies balance to demand.  

Of course, there’s one major hurdle to all this:  xenophobic Republicans who believe allowing more migrants–because except for a few million Native Americans, we’re all from migrant stock–will lead to the end of the United States, a claim untrue on its face.  Four decades ago, Ronald Reagan acknowledged the importance of migrants to US society, but today’s GOP refuses to follow basic economic principles about supply and demand:  the supply of workers is low, so costs go up.  Increasing labor costs mean increasing consumer costs, something Republicans claim they dislike (although it fattens up the bottom line of the companies they solicit for donations).  

Ever the obstructionists, Republicans’ culture war is standing in the way of American success and economic growth. Instead of finding solutions to the migrant and worker shortage issues, Republicans would prefer to keep the scab open to garner political points and social media upvotes, things the GOP members of Congress value more than their constituents’ prosperity.