Employers are still having difficulty finding enough workers even though economists have been predicting a recession for some months. The overall labour supply is close to the pre-pandemic levels, but positions filled and open positions have both increased by 3 million. This excess demand equates to about 3% of all employed persons, resulting in large nominal wage gains. GDP growth which may be a recession can help to bring these figures back into balance. It is complicated to pinpoint why the labour market is so tight, however labour-force participation rate of prime-age workers and foreign-born workforce have both nearly recovered to pre-pandemic levels.
The population of the US is getting older, with the percentage of those aged at least 65 increasing from less than 16% in 2019 to nearly 17%. This has caused a decrease in the labour force participation (LFP) rate among older Americans, from 20.7% in early 2020 to 19.3%. The ageing of the population is responsible for the loss of 1.9 million workers, while the overall drop in LFP, mainly among the old, is responsible for a further 0.5 million. Additionally, a trend of "quiet quitting" among younger people, scaling back their working intensity, may have caused the labour market to tighten. This is supported by research from Washington University in St Louis which reveals a clear reduction in hours worked by those in jobs. However, the greatest labour shortages remain in basic service jobs. This may be attributed to illness, with an average of 1.6 million Americans missing at least one week of work per month to recuperate in 2022, up from 1 million before the onset of Covid-19.
Little by little, Americans will get back to better health. Unfortunately for employers, baby boomers are unlikely to come out of retirement.