Labor market shortages do not appear to be improving and in fact, might be getting worse. Labor force participation, defined as the percentage of the population either working or actively looking for work, is at a 44-year low. Only half of the decline in labor force participation experienced during the 2020 shutdown has been recovered. The labor market situation appeared to be deteriorating at the end of 2021, as well as into 2022.
In a normal economy, approximately 2% of the labor force leaves a job in a given month. This quit rate has increased past this level every month since July 2020. A record 3% of the labor force quit their jobs in November 2021 after a record 3% quit in September. Food service and hotel workers had the highest quit rates in December, when nearly 7% of workers in these industries left their jobs, which is stunning. Over 4% of workers in the retail sector quit in December, as well.
It is not surprising that these are the sectors in which the most workers are quit. Working in these service sectors was grueling before the pandemic and only more so after. Staffs are short-handed, which is leading to employee burnout. Many employers mandate their workers wear masks, even though the customers don’t. It’s not hard to imagine how hard it would be to wear a mask while working in these jobs, as well as dehumanizing. We have all seen the photos of people eating in restaurants or attending events unmasked while the staff is masked. We’ve also seen viral videos of customers screaming at workers because of higher prices or some government-mandated restriction a worker is required to enforce. It is unsurprising that quits are surging in these sectors and consumers should expect the retail experience to further deteriorate.
The childcare industry presents another issue. There are 90,000 fewer childcare workers in the U.S. than before the pandemic, further pushing up prices of an already expensive service. Parents must plan for schools to suddenly announce that they are “going virtual” (as it happened in Genesee County early in January), or that a child’s bus won’t be coming that morning due to a driver shortage, something that has also routinely happened. Schools going virtual and bus routes not running result in parents having to scramble to find childcare in a childcare industry that is severely short of workers. Many parents run the numbers and realize that working is not worth these hassles. This is especially true with 40-year high inflation eroding the purchasing power of wages.
Labor market shortages will not be resolved until all COVID restrictions are lifted, schools stay open permanently and life returns to normal. One would have hoped this would happen with the vaccine; the fact that it hasn’t is shocking. COVID fatalities are not increasing despite cases spiking due to Omicron, giving evidence that the vaccine is working. Life needs to return to normal. The current situation is simply not sustainable.
