Even Jerome Powell does not know when the shortage of labor will cease

  • Federal Reserve Chairman Jerome Powell said it is “unclear” how long labor shortages will last.
  • He also said in a press release that “we do not have a strong recovery in the workforce yet.”
  • It’s the latest data point showing how shortages can persist for a while while the pandemic drags on.

If you are wondering when labor shortages will subside, you are in good company.

Even though

Federal Reserve

President Jerome Powell has no answer.

“How long the labor shortage will last is unclear, especially if further waves of the virus occur,” Powell said at a news conference Wednesday. He pointed to factors such as care and concerns about the virus as things that keep workers at home. There are still about 2.4 million workers “missing” from the workforce compared to the February 2020 workforce level.

Powell’s comments signal the shift in how experts are reconsidering labor shortages and the structural changes it may leave as it continues. In June, however, Powell said the country was heading for a “strong labor market” and downplayed concerns that labor shortages could be a permanent impediment to recovery.

Of course, these comments came at a time when America seemed to be ready when it came to the pandemic: Post-vaccine and pre-Delta. Now another variant is trickling its way through the country, and as the country is forced to live through an ongoing pandemic, labor shortages may also persist.

“I had certainly thought that last fall, when unemployment insurance ran out, as vaccinations rose, as schools reopened, we would see a significant increase, if you will, or at least an increase in labor force participation,” Powell said. . “We are starting to see some improvements.”

There was a welcome improvement in November, Powell said, but it will take longer to increase labor force participation, which measures people who work or are actively seeking work.

“We do not have a strong recovery in the workforce yet, and we may not have it for some time,” Powell said.

A recent survey by the U.S. Chamber of Commerce suggests that labor shortages may be permanent, with 8% of currently unemployed respondents saying they “never plan to return to work.” In November, economists surveyed by Bloomberg predicted the country would add 550,000 jobs; instead, it added just 210,000.

One rate that has remained robust: The number of Americans quitting. In October, 4.2 million Americans quit their jobs – another nearly record-breaking seven months in a row in which Americans left en masse.

“People quit because they feel they can get a better job,” Powell said. “There are historically high levels of it going on, which in turn suggests you have a very tight labor market.”

That is not to say that there will be no movement in the labor market. In October, there were 6.5 million jobs, and in November, unemployment fell to 4.2%. The Fed now predicts that unemployment will fall to 3.5% in 2022 and will remain there through 2024. This is better than the previous projection in September, when the Fed predicted an unemployment rate of 3.8% in 2022.

“The job market is, by so many goals, hotter than it has ever run in the last expansion, if you think about it,” Powell said. What is unclear is when the workers can return. While they are sitting on the sidelines due to virus fears or waiting for wages to continue to creep up after decades of stagnation – which presumably constitutes a wage shortage – it may not be exactly tentative.

The comments followed an update on the Fed’s political stance. The Fed said on Wednesday it would double the pace at which it shrinks its purchases of government bonds and mortgage-backed securities. The move signals that emergency purchases will end in March and that the central bank will raise interest rates more aggressively to fight inflation in 2022. Projections published at the same time as the announcement show that Fed officials expect three rate hikes next year, and another three in 2023.

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