U.S. employers might have trouble hiring workers fast enough
in coming months to keep up with the projected burst of economic growth.
Consumer spending at restaurants, hotels and salons is
already starting to take off as the grip of the Covid-19 pandemic eases and
more people get vaccinated and draw on their stimulus checks and savings.
But many economists expect economic activity to pick up
faster than payrolls, at least initially, for several reasons, causing
bottlenecks and wage pressures.
This happened last year for many manufacturers that
experienced labor shortages as Americans working from home ordered more
furniture, exercise equipment and other goods than before the pandemic. This
year, it is likely to be the case particularly for providers of services
requiring proximity to people, since they saw the biggest drops in business and
employment during the pandemic and are poised to see the biggest rebound in
demand this year.
Economists surveyed by The Wall Street Journal project U.S.
gross domestic product—the value of all goods and services produced—will grow
6.4% this year, measured from the fourth quarter of last year to the same
period of this year. That would lift output to nearly 4% above its pre-pandemic
level measured in the fourth quarter of 2019.
Meanwhile, the economists expect employers to add 7.1
million jobs in the 12 months ending in December 2021, a gain of 5%. That would
leave employment 1.6% lower than in the fourth quarter of 2019.
Job growth will trail GDP for two key reasons, economists
say. First, many companies will be reluctant to hire workers until they are
convinced the pickup in consumer demand will endure. Second, millions of
workers dropped out of the labor force during the pandemic and might take time
to return.
Economists point to several forces behind employers’
hesitancy to hire. For one, it’s unclear when the pandemic will end. Though
vaccination rates are rising, so too are the daily totals of Covid-19 cases in
many parts of the country as variants of the virus spread and business
restrictions ease
Further, many companies face uncertainties over whether they
will see permanently weaker demand due to the pandemic’s effects. For instance,
business travel might never fully return to its previous levels. A long-lasting
shift to remote work could dampen business at cafes and shops near offices.
“They’re very happy to see this surge as everything reopens,
but they still have tremendous uncertainty over what their revenue stream is
going to look like,” said Steven Blitz, chief U.S. economist at TS Lombard.
Even after an employer posts a job opening, the hiring
process can take weeks or months. Meanwhile, the labor pool changed and shrank
during the pandemic.
The share of Americans ages 25 to 54 who are holding or
seeking jobs–called the prime-age labor-force participation rate–was 81.3% in
March, down from 82.9% in February 2020, a loss of 1.9 million workers. Many of
those people dropped out of the labor force to care for children while schools
are closed. Others have stopped looking for work out of fear of contracting or
spreading the coronavirus. The $1.9 trillion Covid-19 relief bill enacted in
March also sent new stimulus checks to many Americans and extended a
$300-a-week jobless-aid supplement, which could also be deterring some people
from seeking work.
“It’s just a lot of people who need to get back to work, and
it’s not going to happen overnight,” Federal Reserve Chairman Jerome Powell
said at a press conference last month.
The sharp fall in workforce participation shows no signs of
quickly reversing. Even though job openings exceed pre-pandemic levels, Google
Trends data show worker searches for jobs online declining. Daniel Zhao, senior
economist at Glassdoor, said this recent drop “raises concerns that labor-force
participation may not recover quickly even after the pandemic is over.”
Long-term unemployment poses another hurdle. There were 4.2
million Americans in March facing jobless spells of at least 27 weeks, up from
1.1 million in February 2020.
“The longer people remain unemployed, the more those skills
do start to atrophy and then it’s harder for them to get back into the labor
force,” said Jay Bryson, chief economist at Wells Fargo’s Corporate and
Investment Bank.
The result could be bottlenecks that discomfort consumers,
at least temporarily, until labor demand and supply are brought into balance.
For instance, lines at airport security checkpoints this summer could grow long
as workers attempt to serve an influx of travelers. Salons might require
hairdressers to log longer hours so they can serve the many customers who went
a year without a haircut. Restaurants could raise wages to attract workers, and
as a result, pass on the costs through higher menu prices.
“Over the next few months you could see really strong
demand, and you could get some of these pressures…in terms of wages, etc.,”
said Mr. Bryson. But he added, “our sense is it’s not like this is an upward
spiral that’s going to last for years.”
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