By Andrew Moran
The U.S. economy might need to leap over 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 cannot fill these positions. It may not be for a lack of trying either. Businesses, especially in the services sector, are employing a broad array of measures, such as paying applicants to come to interviews, giving the new employees a sign-on bonus, and offering generous benefits and perks.
The U.S. economy remains short between four and six million jobs from before the pandemic, despite a near-record 11 million job openings. Still, labor participation is lethargic as many workers are still not taking advantage of these 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 for this situation to resolve.
“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,” wrote Kelly. “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 due to the pandemic. Be it childcare or worries over long-COVID, the pandemic has disrupted the labor market.
Goldman Sachs noted that 2.5 million people 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 would not reverse at a substantial pace.
Some economists also point to a worrisome new development in the post-pandemic labor market: The anti-work movement among Generation Z workers.
Many young people are adopting a social attitude that—as Liberty Nation Correspondent Keelin Ferris notes—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 approximately $4 trillion in pent-up savings throughout the pandemic, giving some Americans enough time to live off this accumulated wealth until these 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 is 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 also declined to 6 percent. Average hourly wages also ballooned 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 added.
A recent Canadian Federation of Independent Business (CFIB) survey (pdf) discovered that 43 percent of small businesses reported challenges hiring 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 that is 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 up to 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 first infection.
In the end, many economists had anticipated Americans to 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,” opined Gad Levanon, the 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.