For the past 3 years, the job market has sent the United States workforce on a wild roller
coaster ride. Though many people lost their jobs in the spring of 2020 when Covid-19 hit with a
vengeance, a year later companies were begging for workers. And the twists and turns of this
haphazard ride will not be over anytime soon.
With hope in the future and endurance on its side, the labor market in the United States added
more jobs than previously expected in November. But overall, though it seems hard to believe,
the job force is shrinking.
According to Labor Department data released last week, “The number of people who either are
working or looking for a job declined by 186,000 in November, marking the third straight monthly
drop.” The other statistic of note is that the labor force participation rate fell. This refers to the
percentage of working-age adults who have a job. It was 62.1% last month for a .3-percentage
point drop since August. Although not statistically significant, this is a big change from the
63.4% labor force participation rate from before the pandemic.
The U.S. economy is on the brink of something big, and the American people are waiting on
pins and needles to see which way the pendulum will swing. With available jobs growing but the
available pool of workers shrinking, the tension is mounting. The Federal Reserve, of course,
wants to cool the labor market, while companies continue to beg for workers.
So why are workers so hard to come by at the end of 2022? There are several major reasons.
First, some workers continue to battle sicknesses, either from long Covid or other maladies.
Others continue to battle childcare issues, which makes it difficult for them to keep up with a job.
This fall workers have been hit especially hard by a trifecta of illnesses: the flu, COVID-19, and
RSV, a virus called respiratory syncytial virus. “Sickness is still holding people back,” said Julia
Pollak, chief economist at ZipRecruiter. “In November, 1.6 million people were employed but out
of work due to their own illness, 261,000 more people than last month, and 83,000 more people
than at the same time last year.”
Additionally, with the Baby Boomers getting to retirement age, many of them decided to retire
early to avoid the health risks and hassles of the pandemic. In order to avoid the dangers of the
pandemic, boomers accelerated their retirements in 2020, the year the pandemic hit, with
retirements jumping 13% that year, according to Pew Research. “Almost 29 million baby
boomers were retired in the fall of 2020, or about 4 in 10 people of that generation.”
Finally, other workers that were laid off or working from home realized that they liked the
work/life balance that the pandemic created for them and decided to think outside of the box
rather than go back into the rat race of full–time work. They are working part–time or letting their
spouse work instead.
According to Sania Khan, chief economist at Eightfold AI, this decline in the available pool of
workers is certainly “a cause for concern” and “one of the main reasons for this persistently tight
“As a result, employers are boosting wages to attract workers, pushing up average pay 5.1% in
November over the last 12 months — or twice as high as economists had expected,” according
to Pollak. Unfortunately, this move is boosting inflation. Without a large pool of applicants,
employers are forced to raise wages, which then causes the Federal Reserve to keep their rates
According to Adnan Zai, Advisor to Berkeley Capital, “If more people could jump back into the
workforce to balance the inflation, the Federal Reserve wouldn’t have to push inflation so hard.
This would help all of us.”
The carefully constructed balance of the workforce vs the labor needs of companies is still
askew, and hopefully 2023 will be a time to re–balance the scales.