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Where Have All the Workers Gone?

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Marcus is excited to share some research and insights about continuing worker shortages from our friends at Goldman Sachs Global Investment Research. You can read their original article here

You may have noticed that a new sign has replaced the usual “Please wait to be seated” at your favorite restaurants. It probably reads something like “We’re sorry but we’re very understaffed and appreciate your patience.”

Restaurants aren’t the only places scrambling to fill positions right now. Factories are having trouble finding labor. Hospitals are searching high and low for nurses. This past October, half of all workers said their companies were understaffed, according to a survey by CNBC/Momentive. 

If you’re noticing slower service or emptier shelves at businesses near you, you may be wondering where all the workers have gone. Our friends at Goldman Sachs Global Investment Research (GIR) have some insights on that.

An unusual job market – lots of jobs, not enough workers

Today, the job market is unbalanced in a way we aren’t used to, especially at the end of a recession. 

Job growth is great. In fact, employers posted record numbers of job openings during the last half of 2021. According to the official January 2022 jobs report, unemployment is back down close to pre-Covid levels (4.0% in January 2022, compared to 3.5% in February 2020 and 14.8% in April 2020). Those looking for jobs are finding them. 

However, we have fewer people working or looking for spots on the payroll. The labor participation rate, which plummeted when Covid hit, is still 1.2% below its pre-pandemic rate.  

That 1.2% is a lot more significant than it might sound. Subtracting the 0.2% caused by natural population aging, the remaining 1% equals 2.5 million missing workers!

More jobs…fewer workers? Labor shortage.

Why so many missing workers?

Millions of people left the workforce earlier in the pandemic mainly due to layoffs, lack of childcare, health fears and a safety net of government benefits. But two years later, why were so many workers still on the sidelines? The answer seems to vary by age.

Retirement has appeal for those over 55

Early retirements surged during the pandemic – about 800,000 workers decided to retire early. Many were empowered to do so by rapidly rising values in homes, equities and retirement portfolios.

While improvements in Covid vaccinations and new antiviral drugs could convince some of these older adults to return to work, retirement tends to be “sticky.” Even when people retire earlier than planned, taking the plunge back in is a hard sell, especially if they can afford to stay out. 

Are younger workers looking for change?

After factoring in early retirees, that still leaves about 1.7 million absent workers who are more likely to return. However, the majority (1 million) still say they don’t want a job right now. Why not? They give three main reasons:

1. Covid-related concerns

In addition to workers who remain worried about getting Covid or spreading it to family or co-workers, some academic research suggests that long Covid symptoms may be depriving us of over a million workers. 

2. Financial cushion 

Many people were able to save money during the pandemic because they were spending a lot less on things like eating out, movies and vacations. They also might have houses or investment accounts that gained value and/or received government income support (stimulus checks, enhanced unemployment, expanded child tax credit). A financial cushion gives people the ability to stay home longer.

3. Changes in lifestyle and preferences

The pandemic has been a time of reflection and experimentation for many. According to studies by several media sources, including Time and PR Daily, younger workers are taking time to re-consider what they want; maybe that’s a job with higher wages, more flexibility or balance, a greater feeling of purpose or more chances for advancement. Or perhaps it’s a whole new career or definition of work. 

Will they ever come back?

Covid issues, financial cushions and periods of reflection are not likely to last forever. And the good news is that most prime-age workers who have left the workforce say they plan on coming back.  

Our friends in GIR believe that about a million people will return to the workforce this year and that more will come back in later years. But will that completely fill the gap we’re feeling? Maybe not. We may be missing those Baby Boomers and early retirees for a while. And frankly, the experts are split on whether or not we’ll ever get all the way back to pre-pandemic labor participation levels.

If we don’t get all the workers back, does it mean doing without the services and goods we want forever? Probably not. We might have to trim expectations for a while. However, new research on productivity gains during the Covid era shines a light on how businesses may be innovating their practices to do more with less and making work more satisfying at the same time.  

The pandemic has changed the workplace and the job market. Stay tuned for what’s to come

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.