The US labor market continues to recover as worker absences due to illness or injury decrease by almost 25% in December compared to the previous year. This decline can be attributed to the reduction in COVID-19 cases as the nation gradually recovers from the pandemic. The Centers for Disease Control and Prevention (CDC) reported a decrease in the weekly average of COVID-19 cases, which aligns with the improved worker attendance. The US added 216,000 jobs in December, indicating a broader recovery in the labor market. However, the labor force participation rate has yet to fully bounce back to pre-pandemic levels. The Federal Reserve is closely monitoring labor market conditions as it considers interest rate adjustments to combat inflation. Some sectors, like leisure and hospitality, are still facing workforce challenges, while others, like healthcare and professional services, are experiencing growth. The demand for workers and employers' readiness to raise pay are likely to reinforce Federal Reserve policymakers' resolve to keep rates elevated until they see further evidence of cooling price increases throughout the economy. The labor market is still restrained by factors such as child care obligations, health concerns, and a lack of job opportunities in fields devastated by the pandemic. Lower-paid and lower-educated workers, as well as women, particularly young women, are experiencing a slower recovery, as indicated by the labor force participation rate. Federal Reserve Chair Jerome Powell noted that the nation's real unemployment rate hovers closer to 10 percent, highlighting the ongoing challenges in the labor market.
The labor shortage in the United States remains a significant issue, with 1.7 million fewer Americans in the workforce compared to February 2020. Currently, there are 9.5 million job openings but only 6.5 million unemployed workers. The decline in labor force participation is a long-standing issue, with the overall share of the population participating in the labor force dropping over the years. Several factors contribute to the labor shortage, including early retirements, an aging workforce, low net international migration, lack of access to childcare, and increased savings due to enhanced unemployment benefits. The Great Reshuffle, where many Americans are quitting their jobs in search of better opportunities, has also contributed to the labor shortage. The U.S. Chamber of Commerce is working on solutions to attract and retain new workers, recognizing the need to address the underlying factors causing the shortage.
Despite the ongoing labor shortage, the US labor market continues to show signs of recovery, with job additions and decreased worker absences. The Federal Reserve's monitoring of labor market conditions and potential interest rate adjustments reflects the importance of a balanced recovery. While some sectors face workforce challenges, others are experiencing growth. The labor market's recovery is still hindered by factors such as child care obligations, health concerns, and limited job opportunities in certain fields. The ongoing challenges in the labor market, particularly for lower-paid and lower-educated workers, highlight the need for continued efforts to address the labor shortage and ensure an inclusive recovery.
U.S. workers, especially low-wage workers, experienced exceptional wage growth over the past couple of years, reducing wage inequality. Different measures of wage growth show gradually declining rates that remain elevated compared to pre-pandemic levels. Wage growth has become somewhat less egalitarian but remains more equitable than before the pandemic. The stability of the labor market and declining job openings and quit rates suggest slower wage growth. The relationship between wage growth and productivity growth is normalizing. Current labor market fundamentals are in line with those seen in 2019, and sustaining this labor market should be a primary goal of policymakers. High interest rates are already hurting poorer workers and families, and a policy-induced recession would worsen the situation.
A shortage of women in the workforce continues to cause long-term economic challenges for the US. The labor force participation rate has been declining over the last twenty years, and the COVID-19 pandemic further exacerbated this decline. Women represent 47% of all US employees, but inequities remain. The overall share of women participating in the labor force lags compared to pre-pandemic levels. Men have returned to work at a higher rate than women. Factors contributing to a lower labor force participation rate for women include childcare responsibilities, the prohibitive cost of childcare, lower wages compared to men, lack of workplace flexibility, and women being overrepresented in lower-paying jobs. The business community is implementing solutions to address these obstacles, such as flexible work arrangements and investing in childcare solutions. The US Chamber of Commerce Foundation is calling for investments in childcare and helping employers navigate additional childcare support for working parents. [bc4e1c2e]
Labour force participation tells us how many people are active in the labour market and how many have dropped out of it. The labour force participation rate measures everyone of working age who has a job or is looking for one as a percentage of the total working age population. Labour force participation in Canada is relatively high, with about two-thirds of people of working age being part of the labour force. This is influenced by factors such as more women working than ever before, high levels of immigration, and the state of the overall labour market. Labour force participation is an essential piece of the puzzle in understanding the labour market and the economy overall. [fd75dfa3]