Who Is Part Of The Labor Market

Many articles are being written about why there is a “labor shortage”; employers claim they can’t fill jobs. The assumption has been that the pandemic was the culprit. Various theories offered include:

• When unemployment insurance stops, workers will return. So far, that has not been the case.
• Child care is difficult to find so one parent, usually the woman, is staying home.
• Fear of COVID is keeping workers at home.
• Some baby boomers retired early.
• Some households have gone from two-income to one-income.

“It remains a mystery,” said Torsten Slok, Apollo Global Management’s chief economist, “if we still have five million people who used to have a job and now don’t, why is it that wages continue to go up very, very quickly? Why is there a labor shortage?”

Barron’s studied Google mobility data state-by-state. It showed traffic data rising except for work traffic.

According to a Wall Street Journal article, “Where Are All the Missing Workers?” even with employment rebounding from pandemic lows in 2020, it is at a level not seen since the 1970s.

Perhaps the new employment normal

It is possible the reduced participation will be the norm going forward. Scarce labor resources, particularly in industries that have contact with the public are particularly down leading to reduced services offered. How immigration policy plays into the labor force hasn’t been assessed.

Boomers retiring is a trend that started before the pandemic but seems to have accelerated. Those retiring reached 3.6 million between February 2020 and June 2021 – significantly higher than the 1.5 million that would have retired pre-pandemic (Federal Reserve Bank of Kansas City).