Why a Skilled Worker Shortage is Keeping Positions Vacant
Despite all the recent headlines about layoffs and strong job growth, “a really large number of jobs in the United States” are still waiting to be filled, said Nick Eberstadt, an economist and demographer at the American Enterprise Institute.
“It’s really unusual what’s happening now,” Eberstadt told Yahoo Finance. “We have men and women who are on the fringes of the economy and don’t apply for these jobs.”
The problem, according to Eberstadt, is “the male component of the job market in the prime of life”, i.e. men who have retired and are not looking for work. The trend, which he describes in his recently updated book Men without Work, has now lasted for two generations.”
“We have this remarkable paradox where we have a very large number of prime-aged men who are neither working nor looking for work, while at the same time we have an unprecedented peacetime labor shortage where we have over 10 million vacancies in the economy” , said Eberstadt.
The economist estimates that around 7 million men between the ages of 25 and 54 sit on the sidelines, not looking for work. These people are not included in the unemployment rate, which fell to 3.4% last month.
“Excessive Retirements”
A surge in stock market and house prices during the pandemic may have given older workers the opportunity to retire earlier than expected, sparking what Fed Chair Jerome Powell has called “excessive retirements.”
“Demand for labor is significantly exceeding the supply of available labor, and the labor force participation rate is little changed from a year ago,” Powell said after last week’s two-day meeting of the Federal Open Market Committee. He described the labor market as “extremely tight”.
The drop in stock prices over the past year and the slowdown in the housing market may have brought some of these retirees back into the workforce, but not to the extent economists would hope.
“Had we maintained pre-COVID trends, roughly speaking, we would have about 4 million more men and women in the workforce today than we do,” Eberstadt said.
“Immigration must play a role”
Immigration is another demographic factor. “Looking in that rear-view mirror it looks like there was a precipitous drop in 2021 and 2020 and that could account for a million of the 4 million gap,” he said.
Eberstadt added: “Over the past half-century, immigration has been a fairly important factor in labor force growth. And knowing that the US is currently well below the replacement birth pattern, immigration has to play a role there if the US is to have a stable or growing workforce.”
The demographic development is not only an issue for the labor market, but for the economy as a whole. Older people consume less and pay less tax than the younger cohort of taxpayers.
“So the problem for the United States is that while there is modest population growth in the 25-64 age group, the population growth in the over-65 age group is such that more people will move out of their age group with the highest spending and into the years with the lowest income and consumption,” wrote Eric Basmajian, founder of EPB Research, in a recent note titled “Deep Dive Into Global Demographics”.
Will layoffs solve the problem?
It’s clear that some companies have hired too many employees during the pandemic to keep up with digital demand for goods and services. Now many of them are announcing layoffs, but only a fraction of their total workforce. As severance packages expire and the economy slows, more people are expected to re-enter the workforce.
“With the economic slowdown, the enormous imbalance in the number of vacancies will decrease somewhat,” said Eberstadt. “But will it go down by 6 million? Will it drop by 7 million? Will it return to the low vacancy rate that we saw in 2009, 2010?”
That, he added, “would take quite a bit of work.”
Ines is Senior Business Reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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