To the surprise of everyone, the labor market has been more stagnant in the last few months than the stock market itself. When it comes to the data, it feels that one month it looked great and the next month it looked horrendous. Now that we are further into the economic recovery, it’s clear that the labor market is a major problem, and its effects on the economy are far too grand to ignore.
Looking back at pre-pandemic levels, the US is still missing nearly 4.3 million workers from the workforce, which is a problem as the amount of job openings add up to roughly 10 million. Economists see this as a lasting effect of the pandemic, which led to many retirements, and when they were surveyed about it, a decent plurality said that it would never return to pre-pandemic levels. With the high demand from consumers for products and services, a lack of workers leaves little supply and messes up the supply chain, which is causing an uptick in inflation as these goods are more expensive now. One major talking point is the enhanced unemployment benefits in some states, which is something that the Republican Party wants to get rid of. With unemployment benefits, some workers are incentivized to disregard finding a job and instead are saving and living off government pay checks, which is a fair point. Some economists don’t believe that this is a problem, though, as unemployment benefits have already expired in nearly half of the United States. Second is the wage battle as companies are raising their wages to attract more workers. This has a sizable impact on balance sheets, and some industries are falling behind as workers are flocking or waiting for high paying jobs. A whopping 4.3 million people quit their jobs in August, which creates a major conundrum that no one knows how exactly to solve. What do you think about the labor shortage?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.