Employment Looking Better But Labor Market Will Remain Tight

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Employment looks much better in the latest jobs report. But the labor market will remain tight for a while, and the long-run trend, driven by demographics, will keep hiring difficult throughout this decade.

Overall, the mismatch hypotheses are not very compelling.

Surveys of workers turn up fear of Covid as reason for not working. This explanation looks strange. Vaccinated people face little risk, and people who have chosen not to get jabbed have little fear. A survey response citing fear of the disease may simply be a face-saving alternative to telling the interviewer the truth: that the person doesn’t want to get up in the morning and go to work.

The generous unemployment insurance payments certainly influenced some people, but others were motivated by long-term views, the personal satisfaction of work and perhaps an old fashioned work ethic. The program has certainly been a factor in slow availability of workers, though it’s not the complete story. Some states have ended their participation in the extra payments, and the program will end nation-wide September 6, 2021. That will help businesses hire entry-level and low-skilled workers.

The best explanation probably combines multiple hypotheses. They mostly point in the direction of better worker availability in the fourth quarter of 2021 than it has been early in the year.

 

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