Opinion | A new jobs report is strong, but why is labor participation still low?

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For the most part, the jobs numbers released on Friday were very positive: stronger-than-expected growth, steady unemployment, hiring in most sectors of the economy. None of these things indicate that the economy is in recession, despite the overwhelming opinion among voters that we are already in the same category.

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However, there is one troubling problem. Where did all the workers go?

Labor force participation — the share of adults working or actively looking for work — fell early in the pandemic. Which was not surprising at this point. Many businesses were closed while customers stayed at home; many Americans who were worried about illness decided to avoid offices or other places of work for a while; and child care was shockingly lacking, putting parents out of work.

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The government also provided more money to help Americans continue to pay their bills even when they were out of work, through stimulus checks, more benefits than regular unemployment benefits and other programs.

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But since then, the economy has recovered. Consumer spending, as well as overall economic output, is at pre-covid levels. Federal stimulus checks have stopped, and unemployment benefits have returned to their generous levels. Job opportunities are abundant, and there are many more opportunities than there are unemployed people.

And yet the participation of the workers remains depressed, compared to the days before the epidemic. In fact, the labor force has been declining in recent months. So is the share of the working-age population in employment:

This is not a sign of a healthy labor market. It is no longer necessary to force inflation, because the lack of employment has been causing supply problems and price growth. In a statement earlier this week, Federal Reserve Chairman Jerome H. Powell said today there are 3.5 million fewer workers than the U.S. Budget Office’s forecast for the number of workers.

Powell offered a number of possible reasons for the decline, including the number of people retiring.

Retirees are actually exceeding the numbers that would be expected from population aging alone. This could reflect the continued threat of covid (since the elderly are at risk) and a strong appreciation in the economy. Home prices and market prices have fallen recently, but they are still there until February 2020, providing a nice nest egg for many retirees. Even if you look at the so-called prime working age (aged between 25 and 54, so they have not reached retirement age), the number of workers is decreasing.

Lately, it’s been falling, too.

The question is why. One explanation is that the epidemic is still affecting workers; Many Americans have died, and some who were already sick may be fighting “long covid”. Child care remains in short supply. The industry employs 8 percent more people today than it did in February 2020. Some sectors of the economy, such as nursing homes, are also struggling to find workers, making it difficult for people in some industries to keep working.

Legal immigration groups — including those authorized to work — also suffered a major setback in 2020 and 2021, as Powell said. Visa issuance (to people who have recently received green cards, as well as those in other work-eligible categories) has also increased this year, according to an analysis from the Migration Policy Institute. But the recent increase is not enough to offset the high number of “missing” immigrants who have not arrived in the past two years.

Foreign-born men are also more likely to participate in the labor force than their native-born counterparts.

It is true that temporary, pandemic-related federal welfare programs have largely ceased, with few exceptions. Domestic savings are still high, however, thanks in part to the fact that Americans received and fired in 2020-2021. This may make it easier for some people to work longer than they otherwise would, although the evidence on this remains mixed.

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Also note that many states have recently returned portions of their remaining funds to taxpayers (ie, cutting new checks). This would also allow consumers to increase their spending even if they did not work more hours (or at all).

Finally, there has been much speculation as to whether the pandemic would change the way Americans view work: how they value time with their families, what types of work they are willing to endure, and how many hours (if any. ) they really want to keep punching the clock. Americans in many regions also report high levels of stress.

Therefore, people may be living outside the labor market because they have reassessed their needs.

But on the other hand, they may have been free to change their priorities – that is, they feel they can relax, not suffer too much – because some temporary financial problems made life more dysfunctional. possible. Remember: Their savings have been incredibly high, historically speaking. Job openings remain high, perhaps assuring people that they can return to work quickly and easily whenever they want – so don’t rush.

If there is a recession, the same be next year, all sources of comfort may be gone. Consumers have been cutting back on their savings, and monthly savings in October fell to the second lowest level since 1959.

All of this means that we could see many employees who have been sitting on the sidelines reassessing their decisions in the near future.

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