| The November jobs report will come out on Friday. Most people will be watching the overall jobs created figure, which is expected to be 200,000 jobs added to the economy. But our main labor market problem is not job creation. It’s a lack of workers to fill open jobs.
Why it matters: In our current environment, it’s more constructive to look at the labor force numbers to determine if more people are coming back into the workforce.
By the numbers: There are three key labor force data points to look at:
- Labor Force Level: The number of workers in the labor force right now. That figure is about the same as it was pre-COVID. It has recovered substantially from an enormous decline during the height of the pandemic. But had COVID never occurred, it would be significantly higher than it is now.
- Labor Force Participation Rate: The ratio of active labor force participants compared to the size of the population. The participation rate is lagging badly. As of October, it is 62.2%. In February 2020, it was 63.4%. A 1.2 percentage point difference may not seem large, but it is enormous. It works out to millions of workers missing from the labor force.
- Missing Workers: The number of workers that would be in the labor force if the participation rate was the same as pre-COVID. As of October, it was over 3 million missing workers.
Bottom line: The job market will remain tight and continue exerting upward pressure on inflation until more workers enter the labor force. Look to these data points to see if we made progress last month. |
