No Labor Cavalry Coming to the Rescue

Reuters (12/08/22) Schneider, Howard

The movement of people into and out of the U.S. labor force has shifted against the U.S. Federal Reserve’s wish that an increasing supply of workers will help tame inflation. The coronavirus pandemic resulted in a huge dislocation in the job market, with tens of millions at least temporarily unemployed. Fed policymakers initially expected those distortions would wane over time and the share of the population that is either employed or looking for a job would recover. However, 2022 instead has turned into a lost year. November’s labor force participation rate of 62.1% was almost exactly where it was in January and remains 1.3 percentage points below where it was prior to the pandemic, representing approximately 3.4 million people.

Fed economists say in a new paper that about two million “excess retirements”—those that would not have happened apart from the pandemic—pushed the labor force participation rate even lower than it would have been given the downward pressure it is already under due to the population aging. “We view it as unlikely…that the retired share will fall substantially towards its prepandemic trend and that those who retired early will return to the labor force in large numbers,” the researchers wrote. “It may take some years for retirement behavior to normalize.”

This article originally appeared on Use this link to see the full article and report: No labor cavalry coming to Fed’s rescue, as data moves the other way