WHERE HAVE ALL THE WORKERS GONE?

By Mark Ukrainskyj in Trusted Advice

You see the signs everywhere, both in person and online. Help Wanted! Now Hiring! The US economy has recovered all of the 22.4 million jobs lost in 2020 due to COVID and the related shutdowns. According to the Bureau of Labor Statistics (BLS), there were 5.7 million people unemployed and looking for a job at the end of July 2022.

With the Job Opening and Labor Turnover Survey (JOLTS) showing 10.7 million job openings in June 2022, why aren’t more people coming back into the labor force? Most should be able to get a job quickly. And with CPI inflation still running at 8.5% year over year, it would make sense to get a job to pay for growing expenses. But instead, the labor force participation rate has dropped from 63.4% to 62.1% since the start of the pandemic.

As with most things in this world, there is no simple answer. But there is no doubt that the pandemic has had some lasting effects on the job market and the economy.

While most recessions drive down asset values and incomes, this one was different. This time the Federal Reserve and the Federal Government both quickly responded to the government forced shutdowns with massive amounts of stimulus (lower interest rates, bond buybacks, Federal unemployment bonuses, COVID loans for businesses, rent and student loan suspensions, etc.). Asset prices (stocks, houses, cars, crypto, etc.) rose and many individual’s net incomes rose either through Federal support or lower expenses due to working from home.

Combined with a global brush with mortality, this large increase in household net assets enabled many to rethink their lifestyle. Some of those nearing retirement realized they could move their plans up a few years and left the workforce causing shortages in many highly paid fields. Others decided to change lifestyles and either started their own firms or went to work for smaller firms. They may not want to go back to their prior corporate jobs.

In many parts of the country, schools were a hybrid of in-person and online learning. And even when in-person, the classroom time was limited to avoid having the children all together at lunch. This greatly complicated childcare matters, causing some parents to stay home. We shall see if this situation changes heading into the Fall. Many daycare providers were also either linked to company specific offices or located to take advantage of multiple employer locations. With hybrid work apparently firmly entrenched, many employees now only go into the office a few days a week. This further complicates childcare matters, thus keeping more parents at home and not looking for new jobs.

The economic recovery and increased job opportunities has also enabled many to increase their income, either by switching jobs or getting promoted to fill sudden vacancies. Combined with higher asset prices and lower expenses, this may keep their partners from needing to go back to work.

In other cases, some of the hiring gap in jobs may be more localized, as some people freed from the need to be in the office moved to suburban and exurban locations with more open space. This migration can cause dislocations as the demand for jobs to support these newcomers can be swift, while the movement of those providing those types of jobs, less so.

Finally, we must remember that the pre-COVID economy was extremely strong, with low unemployment, a high labor participation rate and strong real wage growth. As we get closer to those pre-pandemic levels, it should not be surprising that filling jobs becomes more difficult. Especially, if those on the sidelines know that it would be relatively easy to get a job, should the need arise.