Jul 2, 2021 - Economy & Business

Recovery surprise: sidelined workers stay put

Data: FRED; Chart: Axios Visuals

It's a recovery quirk few saw coming: Vaccines are flowing and there’s fresh proof wages are rising — but it’s not enough to entice more sidelined workers back into the labor force.

What’s new: The economy added an impressive 850,000 jobs last month.

  • But check out the chart above. The share of workers in the labor force (i.e., they have a job or are looking for one) has barely budged in months.

Why it matters: The slow bounceback is reshaping how economists and policymakers think about how — and when — the job market recovers.

  • Will closing the gaping jobs hole “be more difficult because some people have permanently left the labor force as a result of the pandemic?” PIIE’s Jason Furman wrote today.

Bright spot: Among workers aged 25–54, the labor force participation rate bumped up to 81.7%.

  • It also ticked higher for women in this cohort, a possible sign conditions are improving for one of the harder hit demographics.
  • But all the rates are still well below pre-pandemic times.

What to watch: Economists are banking on a labor force boom in the fall.

  • That's when they say a slew of factors that encourage sidelined workers to stay put — the lingering virus threat, remote schooling, limited child care options, and amped-up unemployment benefits — could all ebb.

But, but, but: As many as 2.5 million people could be gone for good amid a flurry of pandemic-era retirements, ING economist James Knightley wrote.

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