According to a brand new analysis from Goldman’s economists, the US is on pace to experience a permanent loss of about 1.2 million workers from early retirement and reduced immigration. That’s the bad news; the good news – according to Goldman – is that younger workers who have been reluctant to return to the workforce are still likely to do so once temporary disincentives to work disappear (most later this year). As a result, Goldman is looking for the labor force participation rate to rise by 100bps over the next year-plus to 62.6% (if still 0.8% below the 63.4% pre-pandemic rate).
Why does this matter? Because while the labor market currently is a total shitshow due to Democrat policies that pay potential workers more to do nothing than to work, leading to a record 9.3 million job openings…
… and as a result there is a historic labor shortage, this is expected to change in September when extended unemployment benefits run out. That’s why, consensus generally expects that the recovery in labor force participation will accelerate in the coming months as generous unemployment insurance benefits expire and other pandemic-related labor supply disincentives like school closures and health risk exposure fade away.
But looking beyond the near term – 6 or so months from now – should we expect a full recovery in the labor supply? That’s what Goldman tries to answer in its latest economic note.
The vampire squid starts off by reminding us that in December, it warned about a surge in early retirements that was likely to be a lingering drag on the labor force participation rate (LFPR). Since then, the number of excess retirees – defined as the difference between the actual number of retirees and the number of retirees implied by the age-specific retirement rates observed in 2019 – has soared to 1.2 million, a 0.5% hit to the labor force participation rate in addition to the roughly 0.2% structural drag from population aging since the pandemic began.- READ MORE
Listen to the insightful Thomas Paine Podcast Below --