As the monthly job reports continue to show slower and slower job creation and the labor market seems to get tighter and tighter many are wondering what is happening? In fact, the Wall Street Journal reported last week that “More than a year and a half into the pandemic, the U.S. is still missing around 4.3 million workers…” (Wall Street Journal)
So where are those jobs? Some new research by Miguel Faria e Castro at the St. Louis Fed might provide us an answer…(FRBSL)
- Over 5 million missing. The Fed says that by the second quarter of 2021, the participation rate had recovered to 61.6 percent, “but was still 1.6 percentage points below its pre-pandemic level—indicating that as of that quarter, roughly 5.25 million people had left the labor force.”
- Reirement is the biggest factor. As Baby Boomers began retiring, the percentage of retirees in the U.S. population grew to 18.3 percent in February 2020. However, by August 201, that percentage reached 19.3% which means “there were slightly over 3 million excess retirements due to COVID-19, which is more than half of the 5.25 million people who left the labor force…”
- Why have retirements skyrocketed? Two main reasons. 1) …”older people, who are especially vulnerable to COVID-19 and were thus motivated to leave the labor force…” 2) “The large rise in asset valuations during the pandemic suggests that retirement may have become feasible for many people…”
The 3 million doesn’t explain all the 4 million-plus job loss from the economy. But, if you include the 250,000 working-age deaths from COVID along with the child care issues it does get easier to understand why we are facing a tight labor market.