149 The Financial Implications Of Americans Not Returning To Work After The Pandemic

Millions of lost positions have yet to return to the job market but there are near-record job openings and job growth has been slower than expected in recent months. Enhanced unemployment benefits ended nationwide on Labor Day, and even sooner in many states. So far, evidence suggests benefits didn’t play a big role in sidelining workers.

Other factors are at play, according to economists. They include Covid health risks, early retirements, care duties, built-up savings, and other frictions. On the surface, conditions may seem ripe for a boom in the U.S. labor market.

There are still 5 million fewer jobs than before the pandemic but job openings are near record highs. And hourly pay has risen, in some sectors by more than 10% in a year. Meanwhile, enhanced federal unemployment benefits ended on Labor Day (or sooner) and kids are largely back in the classroom. Both enhanced jobless pay and distance learning, it was thought, had been roadblocks keeping people from returning to work.

However, that boom hasn’t materialized in recent months — at least, not at the rate, many expected. Job growth slowed in September after surging in the spring and early summer, and the labor force shrank.

Covid

Health risks associated with the ongoing Covid pandemic have clearly played a role in recent months, according to economists.

Job growth slowed in August and September when caseloads were spiking due to the delta variant. (There were 366,000 and 194,000 new payrolls added those months, respectively, compared to 1.1 million in July and 962,000 in June.)  

Early retirements

Early retirements have also reduced the pool of available workers. Older adults are at higher risk of severe illness and death from Covid. They may have opted to start drawing Social Security and live off their nest egg instead of taking a risk at work, economists said. Grandparents may have also offered to watch their grandkids and ease childcare duties for working parents.

Care responsibilities

Care responsibilities have made it tough for some workers — especially those who can’t work from home — to come off the sidelines. For example, many schools reopened for in-person learning for the new academic year, helping ease childcare constraints for parents. But Covid outbreaks have led to sporadic quarantine periods that may stress parents’ ability to hold or commit to a steady job.

Savings

Households across the income scale have been able to amass higher savings relative to pre-pandemic levels. Cash balances were up 50% for the typical household in July 2021 relative to two years earlier, according to the JPMorgan Chase Institute.

“People might feel with a little extra buffer on hand, that they have a little more time to wait,” said Fiona Greig, co-president of the institute. “They don’t have to find a job this moment.”

Wages

There may be near-record job openings — but that doesn’t necessarily mean businesses are paying a wage workers will accept.

ages have risen more than $1 an hour, or 4.5%, in the past year across all private-sector jobs, according to the Bureau of Labor Statistics. Some sectors are up more — leisure and hospitality pay is up 11%, to $18.95 an hour, for example. The Bureau attributes the upward pressure on earnings to a rising demand for labor. 

It will take time

It will also take a while to work out some of the frictions that have built up in the labor market in the past year and a half, economists said.

Jobless workers have had ample time during the pandemic to reassess their working lives and what they want from a job. Some may opt to switch careers. The available jobs may also not be in a worker’s prior occupational field or in their geographical area.

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