Where Are the Workers?

Talk of the Great Resignation began months ago when businesses started reopening and calling employees back to work only to find that the workers were not there. They had plenty of customers but no one to serve them. Forced to run on skeleton crews to meet increasing demand, business owners couldn’t help but wonder what was happening to the labor pool.

Of course, some people took advantage of 2021’s surging stock prices and home values. They cashed in and used the funds to retire early. NCBC reported that over 2.5 million boomers said they were leaving the workforce as a result of COVID. Others traded long hours for a more flexible schedule. Some found a way to turn their side hustles into a full-time gig during the pandemic shutdowns. But, this doesn’t explain why so many companies are struggling to find workers even after they increase wages (but don’t worry – inflation is ‘transitory’!).

Whether you’re a business owner or an employee, this affects you. Demand hasn’t slowed, and the public is ready to get out and start spending all the cash they saved up during the pandemic. As a result, you may be stepping in to take care of tasks and perform functions that aren’t normally part of your job description just to keep customers happy and your business moving.

Falling Unemployment?

At the height of the pandemic, 23 million Americans were out of work. Since then, unemployment has fallen—as expected—as businesses reopened and people returned to work. Notably, some of the sectors hit hardest by the pandemic—leisure and hospitality and retail—saw employment gains as high as 21% in June.

Yet, a record number of jobs—more than 10 million in August—are still available in the U.S. Even more concerning is the number of companies worried about labor shortages even after the economy emerges from the grip of the pandemic. So, what gives? Are we really witnessing the Great Resignation as Americans reevaluate their careers and pursue work that gives them more work/life balance?

Let’s start with three key terms: labor pool, labor participation rate, and unemployment.

• Labor pool: The total number of people between the ages of 16 and 64 who are working or actively looking for work.
• Labor participation rate: The percentage of adults—minus those incarcerated, disabled, or members of the military—who are part of the labor pool.
• Unemployment rate: The percentage of people in the labor pool who do not have a job.

We typically look to the unemployment rate to gauge the health of the economy. After all, a low unemployment rate means business is booming and people are earning money. If people are making money, they are spending money across different sectors. Profits go up! Everything is great! But (and you knew this was coming) it may not be the best indicator of what is happening in the economy.

One drawback is that it does not take into consideration the type of work people have. Individuals who are working part-time because full-time employment is not available are considered employed and do not count in the unemployment rate. A workforce comprised of part-time workers may not be as stable or healthy as one that includes full-time workers with benefits. And two part-time jobs may not provide the same tangible benefits of a single full-time job.

While unemployment is still low in the U.S., the labor participation rate has recently been at its lowest in the last 40 years. Even though we have a record number of jobs available, we don’t have enough workers actively seeking those jobs. The bigger question may be: why these jobs aren’t attracting interest from the labor pool?

Does Anyone Want to Work?

Employers have serious concerns about labor shortages across several sectors. They need workers and cannot find them – and it seems that wages are not the answer. It’s easy to blame extended unemployment benefits for the low labor participation rates, and it may be a contributing factor in some parts of the country. However, that only tells part of the story. A closer look at the reasons workers choose not to return to work reveals a more complex situation.

Americans were able to save money at an unprecedented rate during the pandemic. With entertainment facilities and travel shut down, they were able to slash their budgets, pay down debt, and build their savings. This cushion has given them more options. They may not need to return to work just yet and still have time to consider career changes or wait for the right opportunity. The Kansas City Federal Reserve (Babson, 2021) studied the increase in savings rate and found Americans were saving 7% of disposable income pre-COVID, but over 30% in April 2020. This is an astonishing increase which translates to saving $30 for every $100 of disposable income. The savings rate has slowed to 14% (Babson) since the height of COVID but this data suggests US consumers have excess savings which can be used to support a job or career change.

When schools switched to a virtual learning model and senior care facilities closed, families had to find other options for their loved ones. If the local school district isn’t open for in-person learning, or if the parents have concerns about vaccine and mask requirements, they may still be at home caring for children. The same is true for those taking care of elderly parents who have a greater risk of developing complications from a COVID-19 infection.

As vaccine distribution ramped up, the public believed the end of the pandemic was near. Then the Delta variant showed up, dashing their dreams of going back to normal. Concerns about vaccination decisions and mask requirements have kept some workers out of the job market and forced others out.

Going back to work hasn’t been easy for some workers. In some cases, their employers are offering them a reduced number of hours that may not be enough to cover their bills. For others, the lack of available employees means they’re forced to work extra shifts that they may not want or need. This can send them looking for employment elsewhere.

Workers’ Skills May Not Be In Demand

The pandemic allowed some businesses to experiment with or increase their plans for automation through features like QR code menus, self-checkout registers, and other automated systems. This means some workers found that their jobs had been eliminated. Others discovered their skills are not in demand like before the pandemic as companies found more efficient ways to complete tasks.

So far, we’ve considered factors directly linked to the COVID pandemic. It’s also important to acknowledge that Baby Boomers are retiring and taking themselves out of the labor pool. The youngest members of this generation turned 57 in 2021 and in some cases, they may have skills which are not ideally suited for a technology driven economy. This may push them out of the labor force early as they decide to not pursue new work training. As they retire, they’re taking along their skill-sets and ideas about work that the following generations may not share.

But I Have a Job…

Labor participation is one indicator of the economy’s health. A higher labor participation rate spurs economic growth and lowers the dependency ratio across the nation. People who aren’t working don’t contribute to the production of goods and services or support social programs like Social Security and Medicare. This leaves more people competing for a share of dwindling returns.

A country with a low labor participation rate not only sees a loss in production and greater dependence on social and charity programs; it also tends to have higher tax rates. The government still needs funding, and it has a smaller base of people contributing revenue to support public programs. Over time, this can lead to lower business profits and job losses.

In addition to the job market, economists have their eyes on inflation, consumer spending, and The Fed. U.S. home sales and rents are still up, and there’s no reason to believe they will drop. This means wages will also need to increase to keep up with the cost of shelter. The Fed also appears ready to start slowing bond buying and increasing interest rates, which could slow the housing market enough for supply to catch up.

The housing market isn’t the only sector of the economy struggling to keep up with demand. Americans have had plenty of extra money on hand from stimulus payments, slashed budgets, and profits from property or stock sales.
As supply chain blockages clear, the supply of goods should start flowing again and help level out the surging demand for goods.

For investors, the current situation is a great reminder to recession-proof your finances. We often focus on paying down high-cost debt and prioritizing saving. As investors we want to see full employment because it generally leads to better long-term economic growth as well as generally benefiting our neighbors. And as the economy continues to grow and expand, we will continue to find ways to participate with that growth.


Cox, J. (2021, August 7). There are about 1 million more job openings than people looking for work. CNBC. https://www.cnbc.com/2021/08/07/there-are-about-1-million-more-job-openings-than-people-looking-for-work.html

Where Is Everybody? The Shrinking Labor Force Participation Rate. (n.d.). Retrieved November 1, 2021, from https://www.philadelphiafed.org/the-economy/macroeconomics/where-is-everybody-the-shrinking-labor-force-participation-rate

Thomson-DeVeaux, A. (2020, July 2). The Unemployment Rate Is Falling, But More People Are Losing Their Jobs Permanently.

FiveThirtyEight. https://fivethirtyeight.com/features/the-unemployment-rate-is-falling-but-more-people-are-losing-their-jobs-permanently/

Job Openings and Labor Turnover Summary. (n.d.). Retrieved November 1, 2021, from https://www.bls.gov/news.release/jolts.nr0.htm

U.S. Bureau of Labor Statistics (2021) The Employment Situation September 2021. https://www.bls.gov/news.release/pdf/empsit.pdf

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