During a morning visit to the gym recently, I couldn’t help but overhear a small group of people talking within earshot about the lingering supply issues plaguing our global economy. I’m always interested to know how others are feeling about current economic issues, so I admittedly began eavesdropping.
The exchange turned to the production troubles of individual suppliers, and a claim by one speaker caught my attention: “No one wants to work anymore.” The others agreed by sharing similar frustrations of their own.
Now, I happen to know these people to be intelligent and well-informed citizens. Which is the exact reason why I feel compelled to write a post correcting the record.
Simply put, people are working. In fact, there are more people working now than during the roaring economic period prior to the pandemic.
The chart below tells the story of our labor force over the past two and a half years. The black line represents the relative size of the workforce in the month prior to pandemic shutdowns.
The blue line above represents the total number of people working in the economy. Notice how this line recently surged above the black line, indicating the number of people working today has recovered and is now greater than it was in February 2020.
The red line shows the situation for a group of people who economists describe as being of “prime working age”, meaning between the ages of 25-54. This group recovered completely to pre-pandemic levels only a year after shutdowns began and has been exceeding that mark ever since.
Interestingly, a study was published earlier this week that estimates 500,000 additional workers would be in the labor force if not for the effects of COVID. This is bad news, obviously, and it shows up in the lagging data about labor participation rates. But while it’s disappointing to consider these lost workers, it’s also a testament to our economy that the workforce has recovered to such an extent in spite of the headwinds holding back further growth.
None of this is meant to discount the experience of businesses or even whole sectors that are having trouble hiring for open roles. But these troubles are largely due to a spike in the number of jobs that businesses are hiring for, leaving employers competing harder over a similar number of workers. People are working already, so available talent is hard to come by. It’s good old-fashioned supply and demand.
Let’s get back to my eavesdropping. During the frustrated exchange about the workforce, another claim was made: “The government just doesn’t understand how to get people back to work.”
My interpretation of this—and I may be mistaken—is that the speaker was under the impression that government unemployment assistance has in some way hurt people’s willingness to work today. Again, I feel compelled to call this line of reasoning into question with data.
The chart below shows the number of people who are receiving ongoing unemployment assistance from the government.
The number of people claiming unemployment support dropped below pre-pandemic lows in March 2022 and has stayed below that level since. This means that there are actually fewer people receiving ongoing unemployment assistance today than during the robust economy of the years prior to the pandemic.
In fact, the number of unemployment recipients was falling fast long before the additional pandemic assistance programs expired in September 2021. And, yes, the bulk of the additional unemployment support programs of the pandemic era have been gone for a full year at this point.
The labor market is strong, and it’s not just an illusion. How long that lasts in the face of high inflation and the Fed’s aggressive interest rate hikes is another question.
Stay tuned, more to come.