The Labor Supply Rebound from the Pandemic
April 17 , 2023
Introduction:
(The White House) Recent data provide encouraging news about a key economic variable: labor supply, specifically, the share of Americans participating in the job market. Labor demand—as proxied by job creation, nominal wage growth, and job vacancies—has been unusually strong in the post-pandemic recovery. But analysts have repeatedly raised concerns about the supply of labor, specifically regarding the extent to which labor force participation would recover.
Recent trends, however, reveal that most of the “missing workers” are back in the labor market. Overall labor force participation is back to its pre-pandemic forecasted level, and the closely-watched prime-age (25-54) labor force participation rate is now a tick above pre-pandemic levels (see Figure 1). Immigration flows, depressed during the pandemic, have also rebounded. Job openings are also moderating somewhat, signaling that labor demand and supply are becoming better aligned, a necessary condition for achieving a path to stable and steady growth.
Most of the “missing workers” are back
Throughout the economic recovery from the pandemic, there was much speculation about the “missing workers” who had not yet returned to the labor market. Numerous theories were offered to explain this apparent shortfall of workers. Analysts speculated that an epidemic of long Covid was keeping workers on the sidelines, that individuals were sitting out the labor market due to excess savings built up during the pandemic, that a “Great Resignation” was occurring as workers reassessed work/life balance or that the country had experienced a collective loss of work ethic.
Yet despite the enormous disruptions of the pandemic, these “missing workers” are now largely back in the labor market. The prime-age labor force participation rate, which had taken more than a decade to recover to pre-Great Recession levels, has now returned to those very high levels (see Figure 1). That labor force participation took only three years to recover to these highs is actually quite remarkable—and should reframe our thinking about the labor market in the aftermath of the pandemic.
Further Extract:
The baby boom generation is aging out of the labor force, and the cohort of younger workers coming up to replace them is much smaller. This could pose a real challenge for industries with older workforces. Policies targeting barriers to labor supply, such as public investment in accessible, affordable childcare, and increasing immigration pathways are therefore warranted…
Immigration flows have largely recovered from the pandemic
Immigration bans and restrictive policies of the prior Administration decreased the flow of foreign-born workers who were critical for many industries, particularly food services and agriculture. Due in part to the Biden Administration’s efforts to reduce unnecessary barriers and accelerate visa processing, immigration flows have rebounded from the pandemic. As can be seen in Figure 3, the foreign-born labor force has now largely returned to 2012-2018 trends. This rebound in immigration flows has helped to ease labor supply pressures.
Read more here:
https://www.whitehouse.gov/cea/written ... pandemic/
Note: This is from a government source, therefore length restrictions due to copyright considerations do not need to apply.
Don't mourn, organize.
-Joe Hill