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Although the hot pandemic job market is cooling, it is set to remain tight for years. The US economy has been experiencing an unemployment rate under 4% for nearly two years.
It isn’t just a holdover from pandemic bottlenecks when employers let millions of people go and then struggled to find workers when demand roared back, economists and business leaders say. It is a storm that has been brewing for decades. Labor shortages are turning into long-term labor crises that could push wages and turnover higher.
Work experts have warned for years the combination of baby boomer retirements, low birthrates, shifting immigration policies, and changing worker preferences is leaving US employers with too few workers to fill job openings.
“It is a talent supply chain and talent has a choice,” said Teresa Carroll, chief executive of Magnit, a firm that manages temp, contract, and freelance workers for companies. Workers are choosing arrangements such as part-time, flexible, or remote work, prompting employers to adapt to fill roles.
As a general rule, an economy is able to grow about as quickly as its workforce expands, plus any gains in how productive the workforce is. Productivity is difficult to measure. Overall, productivity growth has been mostly lackluster, rising about 1.4% a year over the past decade.
After considering AI tools such as Chat GPT whose technology is still too new, and offshoring US manufacturing, it leaves us with immigration. Immigration has come back strong after falling during the pandemic because of Covid-related policies. However, it remains a divisive issue. Business leaders indicate the lack of a coherent, stable policy is contributing to the labor problem. “If we don’t solve this with a thoughtful immigration program, we’re going to drive wage rates through the roof in the next two to three years because of the systemic shortfall of labor at the end of the day.” John Fish, chairman and CEO of construction contractor Suffolk said.