3 reasons the labor shortage might stick around for years, according to JPMorgan
- Labor shortages have persisted for months, as employers complain they can't find workers.
- JPMorgan says that shifting demographics, the pandemic itself, and demand for goods are all driving shortages.
- But as workers re-examine, and these factors slowly ease, shortages could stick around for years.
Now, shortages look like they'll stretch into the new year, and perhaps even indefinitely . In a note, JPMorgan chief global strategist David Kelly broke down three reasons that we've ended up in a "great worker shortage" — and why it means it could take years for shortages to resolve.
More people are retiring, shrinking the workforce
Kelly points to Baby Boomers continuing to age out of working. The number of Americans over the age of 65 is outpacing the number of the Americans over 16 — making the number of Americans ages 16-64 actually drop.
Early retirement might also play a role: Goldman Sachs researchers found that 2.5 million people retired during the pandemic, and 1 million of those were early retirements. Even those early retirees "likely won't reverse," per Goldman, although some are " unretiring ."
Another overlooked demographic factor, per Kelly: Immigration has declined to far below the Census Bureau's projections of one million new immigrants per year. Kelly writes that the number of immigrants dropped to below 300,000 for the year that came to a close in June 2021. Insider's Jason Lalljee and Andy Kiersz estimated that two million of the three million workers missing in the labor shortages are immigrants who never came to the US because of Trump-era immigration policy.
The pandemic, and pandemic-era policy
The pandemic itself has remained a huge driver for people to not return to work. As Kelly notes, the latest data release from the Bureau of Labor Statistics shows that in November 1.2 million didn't look for work due to the pandemic — a number "little changed from October."
That could be due to everything from childcare or other care needs or, as Kelly notes, people still contending with long-Covid symptoms . The pandemic has also disrupted the jobs that need workers and the ones who are available, resulting in what economists call a skills mismatch .
And some workers may be biding their time and living off savings from various stimulus aid, like enhanced unemployment benefits. While research continually showed that ending enhanced unemployment had little to no impact on employment, the government aid did help some workers realize how they wanted to change their working situations, and what it's like to have higher wages.
People really want to buy stuff
Insider's Hillary Hoffower and Andy Kiersz found that, as of October 2021, Americans were spending more on goods than ever before. Kelly said that savings from various aid programs also upped demand for services and goods, with Americans eager to spend money on services after nearly two years. Notably, CNBC reported that Americans did add about $4 trillion to their savings throughout the pandemic — but 70% of those savings went to the top 20%.
Even so, that higher demand is "likely making the labor shortage even more extreme."
Kelly said that factors like higher productivity, immigration reform, and higher wages will eventually help ease the shortages — all things that are already seeing some pick-up. But that doesn't mean the problem will solve itself anytime soon.
"All of these forces should gradually resolve the current excess demand for labor," Kelly writes. "However, barring a recession, this process could take years."Read the original article on Business Insider