- Millions of people who left the labor force last year did not plan to return to work, shop or eat out.
- Women, who do not have college degrees, and those from low-wage areas are less likely to return.
- A worker shortage will put more pressure on wages and prices, despite the Fed increasing rates.
Millions of Americans who left the workforce last year plan to stay away indefinitely, indicating a trend of “long social distancing” that is likely to affect the White House and
federal Reserve
Policy.
The number of people who have dropped out of the workforce and personally stopped working, shopping or eating out is estimated to be around three million.
According to research by Nicolas Bloom of Stanford University, Jose Maria Barrero of the Instituto Tecnológico Autonomo de México, and Steven J. Davis of the University of Chicago, his stance is partly due to persistent fears around the pandemic.
The researchers said the dropouts were most likely to be women, those lacking college degrees and those working in low-paying fields. A quarter of those wishing to return to pre-pandemic activities cited pandemic fears as a primary or secondary factor.
The study, which surveyed the opinions of 5,000 people over 12 months, consistently found that at least 10% of respondents had no intention of returning to the labor force, especially if doing so in person, or through other pre-pandemic activities. is needed.
“Our proof is that the labor force will not magically bounce back,” Bloom told The Wall Street Journal.
He added: “We still see no change in these ‘long social distance’ numbers, which suggests that this decline in labor-force participation could be quite permanent.”
Suggestions that millions are exiting the in-person economy as COVID-19 restrictions ease could put more pressure on the labor market and accelerate US plans to meet demand.
Inflation hit a four-decade high of 8.5 per cent in March. Even if some inflationary pressures ease, Workers may demand wage increases to cope with rising costs, potentially invoking a wage-price spiral that could endemic higher price increases.
The Federal Reserve Monetary Committee has indicated six rate hikes this year, in addition to the two already delivered, driven by fears of an overheating economy.
An additional 431,000 jobs were being added last month, giving cause for optimism that hiring was picking up after US unemployment topped 23 million during the pandemic. It was recently close to pre-pandemic levels, below 6 million.
But these findings suggest that the labor market will remain tight, with increased pressure on wages and prices despite an increase in interest rates. The team behind the study estimates that the US workforce is still “missing” about 3.5 million workers—that is, the number of people who make up the labor force if the economy continues to expand at its pre-pandemic pace.
Joe Biden’s COVID-19 preparedness plan, released last month, said the US president was working with lawmakers to pay those who had to take time off after contracting the virus. Its objective is to provide economic security to the workers currently working in the labor force.
