US workforce continues to shrink, falling 400,000 since March after nearly reaching pre-pandemic levels

The number of workers in the United States has continued to decline as companies struggle to find employees for their openings.

“The hope for many of achieving a soft landing is that you meet in the middle, with demand cooling and labor supply increasing, and we achieve a much healthier balance between both,” said Wells Fargo economist Michael Pugliese. the Wall Street Journal on Sunday. “But if the supply of labor stagnates or continues to decline, you need to drive down demand even further in order to slow wage growth.”

According to data from the Labor Department, the number of workers in the United States has fallen by 400,000 since March, a worrying sign after the number of workers approached pre-pandemic levels earlier this year. The total labor force is now about 600,000 people lower than it was at the start of 2020, just before widespread COVID-19 restrictions plunged the economy into a recession.

Labor shortages have raised fears the economy will not achieve the ‘soft landing’ many hoped for as restrictions were lifted, with some economists saying the imbalance between supply and demand labor poses the greatest threat to the US economy.

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Construction workers are seen at a new construction site in Silver Spring, Maryland. (REUTERS/Gary Cameron – RTX2FCR6/Reuters Photos)

The labor force participation rate, which counts the percentage of Americans 16 and older who are working or looking for work, fell to 62.1% in July after hitting 62.4% earlier this year. The number is also well below the 63.4% rate recorded before the pandemic, according to the Labor Department.

The shortage has also contributed to nearly four decades of high inflation, which stood at 8.5% in July. As the energy shortages and supply chain issues that fueled inflation last year have begun to ease, those pressures have been replaced by a tight labor market that has seen wages and salaries of the private sector to increase by 5.7% since last year.

The Fed has tried to slow inflation by raising interest rates, which economists say could also dampen demand for labour. Meanwhile, workers currently participating in the labor market are seeing their roles expand as companies struggle to fill the gaps in their organizations.

Workers lift steel beams at construction site

Workers erect a building under construction in Philadelphia. (AP)

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“While salaries have increased, they may not have increased enough to compensate for the fact that when everyone is understaffed, it means you have to do extra work,” said Peter Berezin, global strategist in chief at BCA Research, on Wall Street. Log. “Employers may have to increase salaries considerably in [inflation-adjusted] terms, which would make the Fed’s life more difficult.”

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