Indicators in Focus examines measures of business and economic activity that will help tell the story of 2022.
The economy has grown faster in 2021 than many experts predicted after the onset of pandemic, but some economists say labor shortages threaten long-term economic potential.
In the second quarter of 2021, real Gross Domestic Product exceeded its pre-pandemic level. But companies are still facing labor shortages that are disrupting the supply chain, pushing up prices and increasing wait times.
The number of job openings is outpacing the number of hires, showing that the demand for labor is greater than the supply. Job openings increased by 431,000 to 11 million nationally at the end of October — the second-highest monthly total in the more than two decades that has been tracked. While job openings increased, hires remained relatively flat at 6.5 million.
Hear more: Part 1 of a look at key 2022 indicators from the Market Dives podcast
Frank Lenk, director of research services at the Mid-America Regional Council, a non-profit association of city and county governments in Kansas City, said the labor shortage actually initiated before the pandemic — from baby boomers retiring.
“We’ve had a labor shortage building for a very long time, and the pandemic has just made it a lot worse,” Lenk said at a Greater Kansas City Chamber of Commerce event. “But that difference between the openings and hires creates incentive for folks to quit.”
However, in 2019, monthly job openings exceeded hires. In 2019, the average for monthly job openings was about 7.2 million; the mean for monthly hires was 5.8 million.
Chris Kuehl, managing director of Kansas City strategy and consulting firm Armada Corporate Intelligence, said at the chamber event that companies may need older employees to delay retirement if the dynamic doesn’t change.
“We either have to find people to come into the workforce to replace those,” Kuehl said, “or everybody in this room is going to have to get used to the fact that we’re going to be working at age 100.”
The U.S. labor force participation rate steadily increased from the 1970s to 2000 as more women entered the workforce. However, labor force participation has decreased significantly since, from over 67% in 2000 to about 62% through 11 months of 2021. Even before the pandemic shook up labor markets, monthly participation in 2019 averaged just over 63%.
The pandemic has brought a reduction in labor force participation from women, with some leaving the workforce due to increasing demand for childcare responsibilities.
“These women, a lot of them are single mothers, they literally can’t afford to do it emotionally, financially,” Lenk said. “You lose them in the workforce.”