American workforce continues to shrink, falls 400k since March after nearly hitting prepandemic levels
The labor-force participation rate has fallen to 62.1% after reaching 62.4% in March
Economist: The Fed still has a lot of work left to do
Satori Fund founder and portfolio manager Dan Biles provides his assessment of the state of the economy amid the S&P 500 and NASDAQ logging their longest weekly winning streak since November on 'Maria Bartiromo's Wall Street.'
The number of workers in the U.S. has continued to shrink as businesses struggle to find employees for their openings.
"The hope for many to achieve a soft landing is that you meet in the middle, with demand cooling off and labor supply picking up, and we reach a much healthier equilibrium between the two," Michael Pugliese, an economist at Wells Fargo, told the Wall Street Journal Sunday. "But if labor supply flatlines or keeps falling, you need to bring demand down even more in order to cool off wage growth."
According to Labor Department data, the number of workers in the U.S. has fallen 400,000 since March, a troubling sign after the number of workers approached prepandemic levels earlier this year. The total labor force is now about 600,000 smaller than it was in early 2020, right before widespread COVID-19 restrictions plunged the economy into a recession.
The labor shortage has raised fears that the economy will not achieve the "soft landing" many hoped for as restrictions have been lifted, with some economists saying the imbalance between labor supply and demand represents the largest threat to the U.S. economy.
US ROBOT ORDERS SURGE 40% AS LABOR SHORTAGES, INFLATION PERSIST
Construction workers are seen at a new building site in Silver Spring, Maryland. (REUTERS/Gary Cameron - RTX2FCR6 / Reuters Photos)
The labor-force participation rate, which counts the percentage of Americans 16-years-old and above that are working or seeking work, ticked down to 62.1% in July after being up to 62.4% earlier this year. The number is also much lower than the 63.4% rate that was recorded before the pandemic, according to the Labor Department.
The shortage has also contributed to nearly four-decade high inflation, which stood at 8.5% in July. While energy shortages and supply chain issues that fueled inflation last year have begun to subside, those pressures have been replaced by a tight labor market that has seen private-sector wages and salaries grow by 5.7% since last year.
The Fed has tried to slow inflation by raising interest rates, something economists say could also cool demand for labor. Meanwhile, workers currently participating in the labor market are seeing their roles expand as businesses struggle to fill gaps in their organizations.
Workers erect a building under construction in Philadelphia. (AP)
GET FOX BUSINESS ON THE GO BY CLICKING HERE
"While wages have risen, maybe they haven’t risen enough to compensate for the fact that when everyone’s short-staffed, it means you have to do extra work," Peter Berezin, the chief global strategist at BCA Research, told the Wall Street Journal. "Employers may have to raise wages significantly in [inflation-adjusted] terms, which would make the Fed’s life more difficult."