Labour shortage poses long-term threat to US GDP – economist

COLORADO SPRINGS (ICIS)–The shortages in labour that emerged after the pandemic are here to stay and represent a long-term threat to the US economy, an economist said on Tuesday.

The nation’s labour market is getting squeezed by increased retirements and lower birth rates, said Marci Rossell, a speaker and former chief economist of the business-news network CNBC. She made her comments during a presentation at the annual meeting of the American Chemistry Council (ACC).

The US chemical industry has long contended with attracting new employees to replace those who are retiring and to increase staff for expansions.

Labour shortages now extend beyond one sector and encompass the economy.

FEWER BIRTHS, MORE RETIREMENTS
One of the causes of the demographics squeeze is the decline in births in the US, Rossell said.  A decade ago, there were 4.8m 18-year-old people entering the labour market every year. Now, there are 400,000 fewer entrants.

The pandemic worsened birth rates in the US, she said. In 2020, births were 300,000 short of expectations, she said.

The other cause of the demographics squeeze is retirements. In 2020, the US had 1.3m excess retirements, Rossell said. People left the job market in part because of the growth in their stock portfolios and home values.

One other factor is restrictions in immigration, she said.

COVID JOB LOSSES
A shorter term reason behind the labour shortages is the coronavirus pandemic.

Unlike most downturns, unemployment peaked at the start of the coronavirus recession, not at the end, Rossell said.

Unemployment typically peaks during the subsequent recovery from a downturn, after production slows down, sales collapse and companies cut costs, Rossell said.

Businesses are loathe to lay off employees, because it is so difficult to find replacements and to train them for new jobs, she said.

The pandemic broke this trend, and cut people’s connections to their employer, occupation and geography in a short time span, Rossell said. Given the scope of the disruptions, it will take time for the labour market to sort itself out.

THE GREAT REARRANGEMENT
The subsequent scarcity of labour has been called the great resignation, but Rossell prefers to call it the great rearrangement.

Many of the people out of the workforce belong to the millennial generation who entered the labour market during the recession of 2008-2009, she said. They could not find jobs that matched their qualifications and aspirations.

Instead, they pursued employment in hotels, travel, hospitality and other service industries that bore the brunt of the coronavirus downturn, she said.

They are now taking time to find new jobs that better fit their goals, Rossell said.

WORKING AROUND SCARCE LABOUR
Rossell said companies have few ways to contend with labour shortages. One is to improve the human capital that they already have. The other is to invest in technology.

The ACC Annual Meeting runs through Wednesday.