It’s possible the 47% gain in the S&P 500 since its March 2020 low, coupled with a 25% rise in home prices since the pandemic started, has many households feeling flush. That suggests some two-income households have become one-income households because they can afford to, she says. Veronica Clark, economist at Citi, says that despite the labor market hole of about five million, household income is back to prepandemic levels. It is possible that more people than appreciated are working for themselves, meaning the pool of available workers is smaller than assumed and the Fed is waiting in vain for a return to a prepandemic labor force. There’s also the question of whether the government’s business birth-death model, used for the monthly establishment piece of the payrolls report, is accurately counting new businesses.
Economists say counting entrepreneurs is tricky and depends in part how a person answers the Labor Department’s household survey. Monthly applications have since fallen but remain about 50% higher than before the virus took hold. The peak was in July 2020, when close to 600,000 new business applications were filed, up 100% from the year prior. But we have a few theories that may be underappreciated and, if they are right, suggest the labor market is far tighter than it looks, inflation has nowhere to go but up, and the Federal Reserve is even farther behind the curve than investors realize.įirst is the fact that the pandemic prompted a record number of new businesses. So what, then, explains the labor shortage mystery? We don’t know with certainty. “If we still have five million people who used to have a job and now don’t, why is it that wages continue to go up very, very quickly? Why is there a labor shortage? ” - Torsten Sløk, Apollo Global Management’s chief economist Traffic is down across all categories in many states, but often with much more pronounced declines in workplace traffic compared with transit, retail, and other places.
If it’s the fear of Covid preventing a broader return to work, why is public transportation traffic up in states where workplace traffic is down? It stands to reason that a person avoiding work to avoid infection would probably avoid mass transit. Mobility trends in states including Arkansas, Ohio, Oklahoma, and Maine show traffic is rising across all categories-except places of work. Barron’s dug through state-by-state reports, and the data undermine the idea that Delta dashed a mass return to work in September and that temporary issues related to Covid explain the ongoing worker shortfall. Mobility data, which chart movement trends over time by geography and across different categories of places. Commentary: Did the Pandemic Permanently Shrink the Labor Force?īut the pandemic has changed attitudes and priorities around work, shuffled where people choose to live, and unleashed trillions of dollars in fiscal support, meaning that using Covid to explain a labor shortage that is worsening isn’t sufficient and doesn’t fully square with expectations that the worker shortage will resolve itself.How Advisors Are Guiding Clients Through the ‘Great Resignation.’.Why Employers Are Still Having a Hard Time Hiring.Workers Are Tired of Low Pay and Lousy Benefits.
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