Saturday, May 22, 2021

Economic Growth Is Set to Surge. Hiring Might Not Keep Up.

U.S. economy could face bottlenecks, wage and price pressures as labor demand outpaces supply

By Sarah Chaney Cambo of The WSJ. Excerpts:

"U.S. employers might have trouble hiring workers fast enough in coming months to keep up with the projected burst of economic growth.

Consumer spending at restaurants, hotels and salons is already starting to take off as the grip of the Covid-19 pandemic eases and more people get vaccinated and draw on their stimulus checks and savings.

But many economists expect economic activity to pick up faster than payrolls, at least initially, for several reasons, causing bottlenecks and wage pressures.

This happened last year for many manufacturers that experienced labor shortages as Americans working from home ordered more furniture, exercise equipment and other goods than before the pandemic. This year, it is likely to be the case particularly for providers of services requiring proximity to people, since they saw the biggest drops in business and employment during the pandemic and are poised to see the biggest rebound in demand this year."
"Job growth will trail GDP for two key reasons, economists say. First, many companies will be reluctant to hire workers until they are convinced the pickup in consumer demand will endure. Second, millions of workers dropped out of the labor force during the pandemic and might take time to return.
Economists point to several forces behind employers’ hesitancy to hire. For one, it’s unclear when the pandemic will end. Though vaccination rates are rising, so too are the daily totals of Covid-19 cases in many parts of the country as variants of the virus spread and business restrictions ease.
Further, many companies face uncertainties over whether they will see permanently weaker demand due to the pandemic’s effects. For instance, business travel might never fully return to its previous levels. A long-lasting shift to remote work could dampen business at cafes and shops near offices."
"Even after an employer posts a job opening, the hiring process can take weeks or months. Meanwhile, the labor pool changed and shrank during the pandemic.
The share of Americans ages 25 to 54 who are holding or seeking jobs–called the prime-age labor-force participation rate–was 81.3% in March, down from 82.9% in February 2020, a loss of 1.9 million workers. Many of those people dropped out of the labor force to care for children while schools are closed. Others have stopped looking for work out of fear of contracting or spreading the coronavirus. The $1.9 trillion Covid-19 relief bill enacted in March also sent new stimulus checks to many Americans and extended a $300-a-week jobless-aid supplement, which could also be deterring some people from seeking work."
"Even though job openings exceed pre-pandemic levels, Google Trends data show worker searches for jobs online declining."
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