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Data: BLS; Chart: Kavya Beheraj/Axios

The shortage of workers in the U.S. has become a flywheel of doom, messing up our lives and society writ large. And many of the underlying problems that led to this breakdown are bigger than the pandemic.

The big picture: Millions of immigrants, older workers and mothers are missing from the labor force. Those labor shortages create problems like supply chain woes, school closures, and skyrocketing child care costs — and some of those problems further exacerbate the worker shortages.

  • U.S. CEOs say labor shortages are the top threat to their businesses this year, in a survey released by the Conference Board yesterday.

State of play: The labor market problems are broadly about COVID, but with root causes that predate the pandemic:

Lost immigrants: There are about 2 million fewer working-age immigrants in the U.S. because of Covid immigration restrictions, according to calculations of census data from two economists at University of California, Davis.

  • About 1 million are higher-educated working age adults.
  • The immigration slow down began during the Trump administration.

The Great Retirement: Covid spiked retirement rates. Flush with cash from the booming stock market and fearful for their health in a pandemic, many more older workers left the workforce.

  • There are 3.3 million more retirees as of October 2021, than January 2020 (aka the before time), according to estimates from economists at the St. Louis Fed. The number exceeded pre-pandemic demographic expectations.

Beleaguered moms: About 1.5 million fewer mothers of school-age kids are actively working compared with pre-pandemic times, according to Misty L. Heggeness, a principal economist at the Census Bureau.

  • Lack of social policy support for parents, particularly mothers — a key issue during the pandemic — has long depressed labor force participation rates for women in the U.S.

What's next: Economists are hopeful that when it becomes safer to return to work, more Americans will in fact go to work.

  • "The most obvious solutions are public health solutions," says Aaron Sojourner, a labor economist at he University of Minnesota's Carlson School of Management. If people are healthy, and risks are low they'll be more willing to get back to work. "It's a win win."

But, but, but: Unless there is policy intervention, there will still be a shortage of immigrant workers, which holds back other parts of the economy.

  • "We have lost two years of immigration and there is nothing in our system that allows us to catchup," says Giovanni Peri, an economist at University of California, Davis, who calculated the 2 million number with a colleague.
  • Immigrants workers could help alleviate shortages in a range of industries, including child care.
  • More child care workers would have downstream effect on working mothers and older women, who've stepped out of work to help with grandchildren's child care.

Go deeper

D.C. launches $900 monthly cash pilot for moms

Illustration: Shoshana Gordon/Axios

Over 100 new and expectant mothers in D.C.’s poorest wards will receive $900 a month in cash under a new city-funded pilot program to help families raise children.

Why it matters: The $1.5 million year-long program is one of the few of its kind in the nation, and it stands out for having no restrictions on how mothers can spend the funds to support their babies.

D.C. nurses call on feds to tackle staffing shortages

Illustration: Shoshana Gordon/Axios

A group of about thirty unionized nurses and labor rights activists gathered yesterday outside the Howard University Hospital, toting signs calling for action to address nationwide staffing shortages — which they say pre-date the pandemic and have since only gotten worse.

Why it matters: Health care workers across the country are burnt out as the pandemic wears on, exacerbating staffing shortages as those workers, including nurses, quit due to overwork and stress.

What Biden's Fed nominations mean for policy

Sarah Bloom Raskin at a 2013 hearing. Photo: Andrew Harrer/Getty Images

Now that President Biden's long-awaited nominations for vacant seats on the Federal Reserve Board of Governors have dropped, the big question is how Sarah Bloom Raskin, Lisa Cook, and Philip Jefferson, if confirmed, might shift policy.

  • The answer: Don't expect any big changes to the central bank's policy direction overnight — but do expect it to prioritize a healthy labor market more in the years ahead.

Why it matters: The Fed's actions shape the economy in ways that outlast the presidents who appoint them — and the Biden-appointed Fed looks to be a more explicitly pro-worker central bank than we've seen in modern times.

The big picture: With inflation running hot, the Fed is in the midst of a pivot to more hawkish monetary policy — possibly including raising interest rates in March.

  • Raskin, Cook, and Jefferson are unlikely to stand in the way of that pivot, and not just because the slow-moving Senate confirmation process means it will likely be well underway before they are confirmed for their new jobs.
  • The Fed is a consensus-driven institution, and the consensus has swung decisively in a hawkish direction in the last three months. Even normally-dovish officials like San Francisco Fed President Mary Daly and Chicago Fed president Charles Evans on board with the policy shift.

But over time, the new additions to the Board of Governors — who have a permanent vote on monetary policy, unlike regional Fed presidents who rotate — have emphasized the importance of running a hot labor market in order to achieve gains for workers and greater racial equality.

  • That implies the three new governors would resist continuing to push interest rates higher once inflation moderates.

What they're saying: "Inflation is so high and political pressures on the Fed are so strong (including from Democrats), that we doubt they will push hard against the will of the committee," wrote Roberto Perli and Benson Durham of Cornerstone Macro, in a client note.

  • But, they add, "Because all of them have expressed views in favor of broader expansion of the labor market, … we can expect them to resist substantial tightening in the future."

Regulatory policy is a different matter. If confirmed as vice chair for supervision — and Republican Senators will try to stop that from happening — Raskin would have more explicit power over a wide range of regulatory policy, and look to rein in the deregulatory impulses of her predecessor, Trump appointee Randal Quarles.

The bottom line: As the Biden Fed takes shape, it will include more voices focused on workers than in modern memory. But the course of policy depends on whether inflation trends allow them to act on those instincts.