The U.S. economy might need to leap a few hurdles in 2022 as many factors could derail the post-pandemic recovery, financial experts warn.
One of these threats could be the country’s intensifying labor shortage.
As companies hang “now hiring” signs on their doors nationwide, employers say they can’t fill these positions, and it may not be for a lack of trying. Businesses, especially in the services sector, are offering an array of enticements, such as paying applicants to come to interviews, giving new employees a sign-on bonus, and offering generous benefits and perks.
The U.S. economy is still running 4 million to 6 million workers short of its pre-pandemic level, despite a near-record 11 million available jobs. Still, labor participation is lethargic as many workers still aren’t taking advantage of the employment opportunities. In November, the labor force participation rate (LFPR) stood at a 43-year low of 61.6 percent.
George Saravelos, the global co-head of FX Research at Deutsche Bank, argues that the U.S. labor market recovery is underperforming other advanced economies.
“This is best seen by comparison to Canada, where labor force participation has fully recovered to its pre-COVID trend and employment is booming,” he said in a research note. “Either the supply side will improve, bringing inflation pressure down; or if it doesn’t, the natural speed limit of the economy is lower than assumed.
JPMorgan chief global strategist David Kelly describes the present situation as the “great worker shortages,” adding that it could take years to resolve the situation.
“Despite a disappointing gain in non-farm payrolls in November, numerous recent data points show an extraordinary excess demand for workers. This excess demand won’t persist forever,” Kelly wrote. “All of these forces should gradually resolve the current excess demand for labor. However, barring a recession, this process could take years.”
But what is driving this trend, anyway?
Citing data from the Bureau of Labor Statistics (BLS), Kelly alluded to 1.2 million Americans not searching for work because of the pandemic. Whether because of child care concerns or long-COVID worries, the pandemic has disrupted the labor market.
Goldman Sachs noted that 2.5 million people have retired during the global public health crisis, and about a third of those were early retirees. Moreover, researchers at the Wall Street giant warned that this won’t reverse at a substantial pace.
Some economists also point to a worrisome new development in the post-pandemic labor market: An anti-work movement among the Generation Z cohort.
Many young people are adopting a social attitude that—as Liberty Nation Correspondent Keelin Ferris notes—consists of a “work-free lifestyle.” Studies such as a recent Deloitte Global 2021 Millennial and Gen Z Survey, have found that a considerable portion of this younger demographic wants more autonomy over their schedules, including not “being forced to work when they don’t want to.”
Americans added about $4 trillion to their savings accounts throughout the pandemic, giving some people enough time to live off the accumulated wealth until the funds have been exhausted or a dream job appears on the horizon.
ING economists Carsten Brzeski, James Knightley, Bert Colijn, and James Smith stated in a research note that there’s no sense of urgency to return to the office.
“The thought of returning to the office and the daily commute may seem unpalatable for many people, and with surging equity markets having boosted 401k pension plans, early retirement may seem a very attractive option,” the economists said.
While these trends are more pronounced in the United States, are the same conditions unfolding in other advanced economies, like Canada?
‘A Tale of Two Pandemics’ in Canada
Economists are ringing alarm bells about a labor shortage worldwide. Border controls, immigration limits, an aging workforce, and demands for better compensation and flexible working conditions are adding to labor pressures.
“The lack of skilled workers is not only just another symptom of post-lockdown economics but also the result of more fundamental developments in the U.S., the euro zone, and the UK,” the ING economists wrote.
But is it sunny days in the Great White North?
In November, Canada added 153,700 jobs, topping market estimates of just 37,500. The unemployment rate declined to 6 percent, while average hourly wages rose at an annualized rate of 3 percent last month, climbing to $31.18 CAD.
Experts noted that the end of pandemic-era support tools fueled the wave of new hiring. This, they purport, has allowed Canada to achieve close to full employment.
However, the jobs situation north of the border is not as rosy as Prime Minister Justin Trudeau and the media make it out to be, says Franco Terrazzano, the federal director at the Canadian Taxpayers Federation.
“We have seen a tale of two pandemics, one full of private sector pain and the other full of government financial gain,” Terrazzano told The Epoch Times. “Even the job recovery continues to be unequal between the government and the private sector.”
Statistics Canada figures highlight that there are now 275,200 more government jobs since the beginning of the COVID-19 public health crisis, but 89,300 fewer jobs outside the government. In addition, of the government employment gains, approximately 40 percent are additional public administration bureaucrats.
“We’ve also seen the government make it harder for private sector businesses to get people back to work because of the massive taxpayer-funded subsidies. It doesn’t take a Ph.D. in economics to know that if you pay people not to work, fewer people will work,” he said.
A recent Canadian Federation of Independent Business (CFIB) survey (pdf) discovered that 43 percent of small businesses reported hiring challenges because some workers “would rather collect EI or other COVID-related benefits.”
Will Long-COVID Decimate Labor Markets?
Experts assert that many factors unfolding might permanently alter the global labor market, from shifting attitudes among labor to disgruntled businesses automating certain operations.
One element being closely monitored is the growing number of people suffering from post-coronavirus symptoms, something that could weigh heavily on the long-term health of the global economy.
Although the data is mixed, researchers at Penn State College of Medicine estimate that half of the individuals diagnosed with COVID-19 endure symptoms for as long as six months after contracting the virus. Numbers posted in the Lancet medical journal suggest that 57 percent of hospitalized patients suffer from post-COVID symptoms, even after months of the infection.
In the end, many economists had anticipated that Americans would head back to work and resolve the country’s labor shortage, especially as enhanced jobless benefits expired and students returned to school.
But without an acceleration in employment, the economic recovery could be in jeopardy.
“Without policymakers, business leaders, and thought leaders more clearly recognizing the current dangers that labor shortages pose, the U.S. risks not being able to fully recover economically from the pandemic for the next couple of years,” said Gad Levanon, head of The Conference Board’s Labor Market Institute.
With the Federal Reserve removing policy support and relief instruments, and the federal and state governments unwinding pandemic-era fiscal measures, Americans may have no other alternative but to return to the workforce.