Although the jobless rate is at a 53-year low, the labor force is still 3 million workers shy of where it was predicted to be based on population growth. If people kept working at pre-pandemic rates, the labor force should have been around 168 million at the end of 2022, but it actually stood at 165 million when the year closed.
Plus, the labor force participation rate sits about one point lower than it did prior to the pandemic.
Economists give different reasons for this shortage: Some say 2.1 million people retired early; others say 2 million fewer immigrants arrived during the pandemic. Another estimate found that about 1 million people are still out of work due to long COVID-19, while a recent paper discovered many low-wage service workers were displaced during the pandemic and never returned.
“It’s a very confusing picture,” said Anna Wong, chief U.S. economist at Bloomberg Economics. “We don’t even have good facts to work with.”
That lack of clarity could cause trouble for the Federal Reserve as it sets monetary policy — officials need to know if Americans are returning to the workforce or if they’re out for good.
“I don’t have my boxing gloves on, and I won’t say that anyone is wrong,” Michael Stepner, PhD, an assistant economics professor at the University of Toronto, told Bloomberg. “We all want a simple one-line explanation. But I think this is a puzzle that has many pieces.”
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