Worker Shortage Weighing on Economic Recovery

The surge in COVID-19 cases has created new headwinds for the economy. Persistent supply chain problems and a shortage of talent are only adding to the problem. Let’s take a closer look.

January 27, 2022 – The Labor Department reported that 260,000 Americans have filed new claims for state unemployment benefits, a decrease of 30,000 from the previous week’s revised level. The previous week’s level was revised up by 4,000 from 286,000 to 290,000. The four-week moving average was 247,000, an increase of 15,000 from the previous week’s revised average. The previous week’s average was revised up by 1,000 from 231,000 to 232,000.

The advance seasonally adjusted insured unemployment rate was 1.2 percent for the week, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week was 1,675,000, an increase of 51,000 from the previous week’s revised level. The previous week’s level was revised down by 11,000 from 1,635,000 to 1,624,000. The four-week moving average was 1,651,750, a decrease of 10,750 from the previous week’s revised average. This is the lowest level for this average since August 18, 1973 when it was 1,646,750. The previous week’s average was revised down by 1,750 from 1,664,250 to 1,662,500.

“The surge in COVID cases has created new headwinds for the economy even as tailwinds, including the federal government’s fiscal boosts, are waning,” Bankrate senior economic analyst Mark Hamrick said in a note. “The detrimental combination of supply chain constraints and the shortage, or lack of availability, of workers amid the Omicron surge is weighing on the nation’s economic recovery.”

Despite the recent ebb in labor market recovery, the Conference Board’s recent assessment of consumer sentiment indicated respondents remained optimistic about the labor market recovery in the recent period, but less so about conditions in the year ahead. Of participants in the survey responding to the component of the study that tracks perceptions about labor market conditions, 22.7 percent said they expect more jobs going forward, down from 24.2 percent in December. Meanwhile, 15.7 percent expect fewer jobs six months out, up from 14.7 percent.

“Even as a surge in Omicron cases is temporarily shuttering businesses, consumers’ views about the labor market remain positive, likely reflecting optimism that the effects of the variant will be temporary,” wrote High Frequency Economics chief U.S. Economist Rubeela Farooqi in a note.

There were 10,130 continued weeks claimed filed by former Federal civilian employees, a decrease of 531 from the previous week. Newly discharged veterans claiming benefits totaled 5,046, an increase of 281 from the prior week. The highest insured unemployment rates in the week were in Alaska (3.1), New Jersey (2.7), California (2.6), Minnesota (2.6), Illinois (2.5), Rhode Island (2.5), New York (2.4), Kentucky (2.3), Massachusetts (2.3), Connecticut (2.1), and Puerto Rico (2.1). The largest increases in initial claims for the week were in California (+805), Kentucky (+527), Puerto Rico (+473), Rhode Island (+464), and Virginia (+406), while the largest decreases were in New York (-13,854), Missouri (-7,098), Washington (-6,016), Michigan (-5,555), and Texas (-4,773).

Looking Forward

Employers in 32 percent of U.S. businesses surveyed expect an increase in payrolls during the next three months, while three percent expect to trim payrolls and 63 percent anticipate no change, according to the latest “Employment Outlook Survey,” released by ManpowerGroup.

“Employers are ready to bring their workers back as restrictions lift and America gets ready to work,” said Becky Frankiewicz ManpowerGroup president, North America. “Yet childcare challenges, health concerns and competition mean demand still outstrips supply which is dampening the ‘big return’ of the American workforce. It’s a worker’s market and employees are acting like consumers in how they are consuming work – seeking flexibility, competitive pay and fast decisions.” Now is the time for employers to get creative to attract talent, she said, “and to hold onto the workers they have with both hands.”

According to the study, payroll gains were expected in all 12 U.S. industry sectors: leisure and hospitality (+41 percent), wholesale and retail trade (+29 percent), education and health services (+27 percent), transportation & utilities (+26 percent), durable goods manufacturing (+25 percent), nondurable goods manufacturing (+25 percent), professional and business services (+21 percent), construction (+19 percent), information (+18 percent), other services (+16 percent), financial activities (+15 percent) and government (+15 percent).

Related: Major Paradigm Shifts Coming Out of the Coronavirus Crisis

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media

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