Perplexing jobs report raises concerns about absent workers

The perplexing December jobs report is raising concerns about how many Americans may have permanently left the labor force because of the COVID-19 pandemic.  

The U.S. added 199,000 jobs last month, well below economists’ expectations, but the unemployment rate dropped sharply to 3.9 percent, the Labor Department reported Friday. Wages also rose 0.6 percent last month while labor force participation stayed flat, a sign of growing demand for workers before the omicron variant took off in the U.S.

Employers have struggled for months to hire and retain workers, who have enjoyed new leverage in pandemic-restrained economy.  

There were more than 10 million open jobs posted in November, according to Labor Department data released Tuesday, and more workers voluntarily left their jobs — likely to take new ones at higher pay — than ever before. Jobless claims have also lingered below pre-pandemic levels since mid-November, with businesses desperate to avoid layoffs of scarce workers.

Even so, the intense need for labor has not drawn roughly 1.7 million Americans who left the labor force in 2020 — and thus aren’t counted in the unemployment rate — back into the job hunt.  

“The unemployment rate is now only 0.4 percentage point higher than it was prior to the pandemic. But with 1.7 million fewer people in the labor force than would be expected given the state of the economy, the labor market is less recovered than the unemployment rate would suggest,” wrote Jason FurmanJason FurmanManchin’s ‘intervention’ may have saved the Democratic Party — for now Liberal economists got the memo: Build Back Better couldn’t possibly worsen inflation Biden should signal to the Fed that it’s okay to raise rates next year MORE, a top economic advisor in the Obama White House, and Wilson Powell III of Harvard University, in a Friday analysis.

Meager labor force participation can limit economic growth and productivity while leaving more Americans out of the full benefits of the post-pandemic recovery. Bringing more Americans back to work is also key for reducing pressure on supply chains and consumer prices, which rose in November at the fastest annual pace in four decades.  

Economists expected COVID-19 vaccines, the end of federal pandemic jobless aid, and school reopenings to help draw Americans back to labor force last year. It is not yet clear how the omicron variant will affect the economy, but many economists fear it could keep many of those workers out of the labor market — if they ever planned to come back.

Surging cases have spurred many schools and service-sector businesses to limit or eliminate in-person interaction. And while omicron appears to be less severe for those who are fully vaccinated against COVID-19, health experts say it is still likely to overwhelm hospitals with sick patients.

“These less than stellar numbers were recorded before the omicron variant started to spread significantly in the United States. Hopefully the current wave of the pandemic will lead to limited labor market damage,” explained Nick Bunker, research director at Indeed, in a Friday analysis.

“The labor market is still recovering, but a more sustainable…

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