Economic Tidbits

Where are the workers? . . .

Where have the workers gone? This question has been repeatedly posed in recent months. The question concerns the current shortage of workers and the number of jobs going unfilled. Presumably, people filled the jobs pre-COVID. The question is where have these people gone?

The economy was not flush with workers prior to COVID, but the labor shortages have magnified dramatically since the onset of COVID. According to the U.S. Bureau of Labor Statistics, the labor force participation rate was 63.4 percent in February 2020, prior to COVID. In December, it was only 61.9 percent, a 1.5 percent drop. The labor force participation rate is the percentage of the population 16 years and older working or actively looking for work. An economist at the St. Louis Federal Reserve Bank estimated that as of August of last year, 4.2 million people had left the labor force.

Nebraska is not immune. Nebraska’s labor force participation rate was 70.3 percent in February 2020 and stood at 68.5 percent in December (Figure 3). The number of Nebraskans employed in December remained less than pre-COVID levels—1,008,493 persons verses 1,012,002 pre-COVID (Figure 4). Nebraska’s unemployment rate is 1.7 percent. Businesses are hiring and have job openings, but more and more people are choosing not to work.

Figure 3. Nebraska Labor Force Participation Rate

Source: U.S. Bureau of Labor Statistics

Figure 4. Nebraska Employment Numbers

Source: U.S. Bureau of Labor Statistics

There isn’t a “silver bullet” to explain why more people are choosing not to work now compared to prior to COVID. The Economist magazine categorized people who have left the work force into three broad groups: people in prime working years who have left; older people who have sped up retirement; and immigrants. Several different types of persons make up the first group including ones who were once employed in the hospitality industry, were laid off, during the first wave of COVID and have chosen not to return due to the stress and lack of flexibility; parents not returning to the workforce due to lack of daycare; people who do not want to return due to health concerns; and people who have simply decided not to work.

The next group are those people who decided to retire early. Sometimes referred to as the “great retirement,” these early-retirement persons decided to leave their job because the pandemic made them realize life is too short to stay in a job, they are not passionate about. The economist at the Federal Reserve Bank in St. Louis estimated that as of August 2021 there were slightly over 2.4 million excess retirements due to COVID. Finally, slowing immigration due to COVID border restrictions has contributed to the labor shortage. The construction, fruit and vegetable, processing, and hospitality industries have been especially affected by the reduced number of immigrants.

How can the labor shortages most impact agriculture? The processing sector, particularly meat processing, is probably the most vulnerable due to high turnover, slowing immigration, and COVID-related health issues. Transportation of agricultural goods and inputs for agriculture are also at risk. A shortage of truck drivers and port workers has slowed the movement of goods. Finally, farmers, cooperatives, and other agricultural-related businesses are vulnerable simply due to the declines in people wanting to work in agriculture-related industries. The pandemic related factors have only exacerbated an already tight labor market in these areas.

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