Labour shortage Threatens U. S. economic recovery

After enhanced unemployment benefits expired and schools re-opened, workers were expected to go back to work and the U. S. labor shortage was also expected to ease significantly by September. But recent data suggest that the shortage is getting more severe.

Though the risk of a severe shortage continuing into 2022 is not the most likely scenario, the chances of shortage to persist are increasing. That means markets could see significantly lower economic growth next year.

The majority of small firms (51%) say that they have job openings they are unable to fill, according to a September survey by the National Federation of Independent Business.

The Conference Board CEO Confidence survey revealed that the percentage of firms citing difficulty attracting qualified labour jumped from 57% in Q2 of 2021 to 74% in the Q3.

The ratio of job openings to hires, a proxy for the average time to fill positions, is at a series high, according to the Bureau of Labor Statistics, as is the rate at which workers voluntarily quit their jobs.

A handful of factors are still limiting the supply of workers. Some people are delaying their return to the labour market because they still fear catching the virus and becoming deathly ill.

The federal mandate for large private employers to require workers to be vaccinated or tested weekly may be a new drag on labor supply, as some workers will not be willing to get the vaccine.
Older Americans’ labour participation rate, which measures the share of a population that is either employed or looking for work, significantly declined during the pandemic.

There are no signs of recovery in this area, either because older workers are at a higher risk of becoming extremely ill from catching the virus, or they feel financially prepared for retirement given the surge in stock and home prices in recent years.