Federal Reserve Sees Persisting Labour Market Tightness (Federal Reserve speech 30-11-22)
Overall (US Labour) participation … remains well below pre-pandemic trends.
Commentary by Arijit Chakravarty suggests approx 4 x pre-pandemic immigration levels may be required to make up the shortfall.
Federal Reserve Speech:
Signs of elevated labor market tightness emerged suddenly in mid-2021. The unemployment rate at the time was much higher than the 3.5 percent that had prevailed without major signs of tightness before the pandemic. Employment was still millions below its level on the eve of the pandemic. Looking back, we can see that a significant and persistent labor supply shortfall opened up during the pandemic—a shortfall that appears unlikely to fully close anytime soon.
Overall participation, however, remains well below pre-pandemic trends.
Some of the participation gap reflects workers who are still out of the labor force because they are sick with COVID-19 or continue to suffer lingering symptoms from previous COVID infections (“long COVID”).5 But recent research by Fed economists finds that the participation gap is now mostly due to excess retirements—that is, retirements in excess of what would have been expected from population aging alone.6 These excess retirements might now account for more than 2 million of the 3‑1/2 million shortfall in the labor force.7
Commentary by Arijit Chakravarty 17-12-22:
Approx 4 x pre-pandemic immigration levels are required to make up the shortfall?