The holiday season of hustle and bustle is upon us. Families are making plans with loved ones, weighing the risks of travel and celebration during the (frustratingly) still present pandemic. Interestingly though, it seems like more folks than you might expect are not worried about getting time off from work for the holidays. The COVID-19 pandemic has fueled the largest labor shortage in decades. What’s going on? Why can’t we find enough workers to keep our restaurants open? Fill our prescriptions? Unload our shipping containers? Deliver our packages? Doesn’t anybody want to work anymore?
The U.S. Bureau of Labor Statistics reported a record 4.4 million people left their jobs in September. This represents 2.9% of the entire workforce; the highest voluntary rate since the tech bubble burst in late 2000.1 In September, there were more than 10 million job vacancies. Across the country, widespread and persistent labor shortages have hindered a multitude of industries, most notably the service sector. From restaurants and hotels to construction and manufacturing, it seems as if many who lost or quit their jobs during the pandemic have yet to return to work, leaving many employers desperate to hire. While economists and commentators alike look for answers, I thought I’d take a look at a few of the issues that appear to be impacting the labor market.
With over 785,000 reported U.S. COVID related deaths, the emergence of the delta variant and breakthrough infections, virus anxiety is understandably prevalent amongst much of the workforce. In August, the U.S. Census Bureau reported that nearly 3.2 million Americans were not seeking work due to fear of contracting or spreading the coronavirus, a 30% increase from July.2 Even if not fear-driven, COVID still impacts people’s ability to start new work. Take for example a working parent who attempts to start a new job, only to have their child’s school close for 10-14 days due to an exposure at school. Asking for 2 weeks off at your new job is difficult, to say the least. All of this suggests that the US labor market recovery may be closely linked with gaining control of the virus.
Extended unemployment benefits
Many economists assumed that once the enhanced unemployment benefits ended, job seekers would return to the workforce. That didn’t happen. In fact, half of U.S. states ended enhanced unemployment prior to the nationwide cessation on Labor Day. But data indicates the timing of benefit termination did not significantly impact the levels of employment as measured by nonfarm payrolls, which is the monthly measurement of workers employed in the US in manufacturing, construction and goods companies.
Savings & Demographics
Many shifts taking place in the labor market are being attributed to changing demographics. Large numbers of baby boomers, flush with cash reserves and stock market profits are choosing to take early retirement, leading to a permanent loss of workers. According to the Dallas Fed, 2.6 million workers retired between February 2020 and April 2021, much higher levels than in previous recession recoveries.3
Many workers are indicating they are no longer willing to accept the historical balance between work and lifestyle. As job openings currently outnumber the unemployed, workers are revaluating their options. In the last eighteen months, workers have been increasingly empowered to demand not only higher wages and improved benefits, but a more fulfilling and balanced work/leisure lifestyle. This is clearly manifested in the explosion of gig workers. According to a recent Gallup poll, there are more than 57 million Americans working in gig economy jobs. That’s a whopping 36% of US workers and growing! Rideshare companies Uber and Lyft reportedly have over two million drivers worldwide. Airbnb is active in over 200 countries and 81,000 cities. Peer to peer car sharing company Turo has a community of 14 million people with over 450,000 vehicles listed. These companies allow people to work on their own terms with the opportunity to determine their schedules and their financial future.
In sizeable part due to the significant fiscal support from the federal government, our economy continues to heal. As of this writing, the number of Americans applying for unemployment benefits dropped to a fresh pandemic low at the end of October to 269,000 versus a massive 900,000 at the beginning of the year. Weekly applications have continued to fall and are nearing pre-pandemic levels of around 220,000 per week. Unemployment claims have fallen from 7.1 million to 2.1 million most recently and continue to decline. Nonfarm payrolls increased to 531,000 for the month of October, handily beating the expected 450,000, and private sector payrolls rose 604,000 with the largest increases in hotels and restaurants. Job postings on Indeed continue to climb for both in-person and work-from-home sectors and are at least 25% above the pre-pandemic baseline in all large metros. And economists are optimistic that most of the approximately 3 million workers who lost their jobs and stopped looking for work during the pandemic will once again return to the workforce as COVID wanes.
As the labor shortage looms large over this holiday season, take a moment to say thank you and show kindness to those workers who are doing their best to serve us in a difficult job market. And don’t forget to take some time to reflect on the unexpected gifts of the last eighteen months.