OVERVIEW
Health Care Job Openings have been a useful indicator for the Health Care Sector for some time, measuring the marginal ebb and flow of patient demand over time. It's a simple relationship to understand, since it is aggregate hours of all the nurses, doctors, technicians, and various licensed professionals that rise and fall as patient visits increase and decrease. There are emerging Artificial Intelligence (AI) and other technologies that are trying to automate these in-person roles into self-service medical care. It's badly needed innovation especially now as Health Care has become less productive over recent years - perhaps as the result of another technology, the electronic medical records and related clinical workflows that added a time consuming administrative layer of tasks.
JOB OPENINGS AND LABOR DEMAND ALL-TIME HIGH
September 2021 Job Openings in Health Care of 1.7M unfilled jobs is the highest level on record and 3 standard deviations above the pre-pandemic average. The combination of Hires and Openings, which we think does a better job representing total labor demand, is at an all time high of 2.5M and rose 745K year-over-year, the second highest year-over-year change ever. The only period with a higher YoY change came in April 2021 against the depths of the initial weeks of the pandemic and health care capacity shut downs (vs. April 2020).
One of the prevailing narratives of the current Health Care labor shortage is the growing number of Health Care workers willing to quit their position. Quits, both in absolute and rate terms, are at all time highs and also 3 standard deviations above pre-pandemic averages. What's driving quits and lower participation is less quantified but includes burnout, child care demands, vaccine mandates, and the strong labor demand environment itself (willingness to do travel nursing, for example).
+8% AVERAGE HOURLY WAGE GROWTH
We don't expect the readings on labor demand to ease soon which means the related increase in average hourly wages to persist and possibly worsen from here. We think current labor shortages are at least in part being driven by pent-up demand, which continues to emerge as the pandemic continues to ease. The magnitude of the deferrals appears large enough to last well into 2022 and perhaps longer although it is hard to quantify the number of patients who don't show up. We've seen more than a few media reports that frame the magnitude of the deferral pool as the absence of certain diagnosis like cancer, or the advanced illness of patients being cared for. We've measured it as the difference in aggregate weekly hours between the the actual readings and the extended pre-pandemic trend which sums to 2 billion hours, or 50 million work weeks, or 1 million FTEs.
Facility-based providers with largely fixed reimbursement contracts for both commercial and government payors look particularly vulnerable to the current labor dynamics and wage readings. As of September average hourly earnings for the Health Care Sector and the August reading for General Medical and Surgical Hospitals, the largest health care spending category, are at 8.7% and 9.4%, respectively. Typically, a 3 STDEV move should be the peak, but from here, the magnitude of the demand and retracing back to "normal" looks like a very long road. We'll continue to measure the impact on our existing names, but we're also looking for additional names on both the long and short sides of this trend.
