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Pandemic could worsen trend of weak U.S. labor supply

Howard Schneider and Ann Saphir

Jackson, Wyoming. (Reuters) – The U.S. labor market is more constrained than the current 3.5 percent unemployment rate suggests, according to a new economic study. The pandemic has exacerbated a decline in the number of hours employees want to work, and will continue to decline.

The study, released Friday at the Kansas City Fed’s annual Jackson Hole Research Symposium in Wyoming and Wyoming, will shift the focus from how many people are working, to how many hours they put in or want to put in.

In more economically developed countries, this trend has been declining for decades, according to research presented at the workshop, by Nicola Fuchs-Schundeln of Goethe University Frankfurt, Vanderbilt University Adam Blandin and Alexander Bick of the Federal Reserve Bank of St. Louis.

They suggest the emergence of more flexible work arrangements and work-from-home emic during the COVID-19 epidemic may reinforce a trend that the number of people in the workforce continues to increase, but every The average working hours of individuals fell.

The overall labor force is “working hard,” in other words, growing faster than employment—meaning there is less labor slack in the economy than would be implied from the number of jobs alone. When measuring wage and inflation trends, central banks try to estimate whether an economy is below, equal to or above employment rates that could create price pressures, and mistakes can lead to policy errors.

Research suggests that changing labor preferences “may also affect the labor force’s response to business cycle shocks, monetary policy shocks, and tax policy shocks”.

Labor supply constraints

This is just the latest in a series of studies showing how the pandemic has changed the labor market.

It may be difficult to draw firm conclusions in the short term, and the situation may change over time. For example, the current high inflation rate may prompt people to want to work more, or even return to work from an expected permanent retirement.

Still, Fed policymakers and other officials have been surprised that hiring has remained strong in recent months, with only a slight change in the number of job openings even as the economy appears to be slowing . They are equally disappointed that labor force participation has not rebounded to pre-pandemic levels and that the total number of people working or looking for work has not changed this year.

The outcome — wages growing faster than productivity — could fuel the high inflation the Fed is trying to control.

A recent Federal Reserve discussion paper noted surveys of large numbers of adults reporting chronic COVID-19 symptoms, including cognitive problems, and concluded that “there is growing evidence that chronic COVID-19 Labor supply may be constrained.”

A recent paper by Chicago Fed economist Jason Faberman suggests that weak labor supply could lead to

special Yes, retirees, stay-at-home parents, or others out of the workforce seem to be less willing now than in the past to work odd or part-time jobs.

This trend was documented through a survey administered by the Federal Reserve Bank of New York, which Faberman helped design.

Faberman wrote: “Our findings suggest that an overall decline in willingness to work leads to a contraction in labor supply.”

Tight US labor market



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