Breaking down the big US labor shortage: Crunch could partly ease this fall but much of it could take years to fix

Around this Labor Day, the nation faces an overriding question.

Where is the labor?

And when is it coming back?

The most severe worker shortages on record largely were expected to ease this month with the reopening of schools and expiration of enhanced unemployment benefits on Monday.

Those milestones theoretically would allow millions of parents caring for their remote-learning kids to return to work and prod millions of unemployed people to more fervently hunt for jobs and accept offers.

It’s proving not so simple.

School reopenings and the benefits cutoff should help coax some Americans back to work this fall, economists say.

But experts are at odds over whether, and to what extent, unemployment insurance actually has discouraged people from working. And the recent surge in COVID-19 infections, driven by the delta variant, is disrupting some schools’ reopening plans and dissuading some idled workers from renewing their job searches.    

Meanwhile, myriad factors are keeping people out of the labor force and those will take longer to resolve, experts say.

They include the large share of workers who decided to switch careers during the pandemic or retire early after a layoff and the daunting logistics of matching millions of jobless people with millions of openings.

“The labor shortages will start to abate in September and this fall, but it’s not going to be an immediate fix,” says economist Dante DeAntonio of Moody’s Analytics. “This could well play out over two, three years.”

That means interminable waits for a restaurant table, snaking lines at store cash registers and monthslong delays for home renovations could be partly alleviated in coming months but are likely to stick around in some form for the longer term.

COVID-19 fears persist to hurt employers 

In June, there were a record 10.1 million job openings and 9.5 million unemployed people – the latter figure fell to 8.4 million in August – leaving fewer than one jobless worker for each vacancy. The COVID surge is also curtailing customer demand and led to a disappointing 235,000 job gains last month, the Labor Department said Friday, but worker shortages were a factor as well. 

In July, 49% of small business owners said they had job openings they couldn’t fill –  the most on record – according to the National Federation of Independent Business.

Here’s a simple way to think about the shortages: The U.S. has recovered 17 million, or 76%, of the 22.4 million jobs lost last spring as states shuttered businesses to contain the COVID-19 outbreak, leaving payrolls 5.3 million jobs below their pre-pandemic level.

About half of those nearly 6 million missing workers are unemployed, meaning they’re looking for a job but can’t find one or are being very selective. Some of the roughly 11 million people receiving unemployment benefits are likely in that group. Since they’re already in the hunt, they could find positions relatively quickly, says Nick Bunker, economic research director for job site Indeed.

The other half of the 6 million missing workers are out of the labor force.

In other words, they haven’t even been looking because of COVID-19 fears, child care duties, or other reasons. It could take them many weeks or even months to get back in the game.

Are unemployment checks to blame?

The most immediate remedy for the worker shortages could come from Americans who on Monday will lose federal jobless benefits provided during the pandemic.

That includes about 7.5 million people receiving payments they normally wouldn’t qualify for because they’re gig workers, for example, or they've exhausted their 26 weeks of state benefits, according to the Century Foundation, a progressive think tank.

Most of those workers also have been receiving a $300 federal weekly bonus on top of their regular state benefits, according to Oxford Economics.

Another 3 million people will lose just the $300 federal weekly bonus on Monday, the Century Foundation says.

Several studies found the enhanced benefits have had little effect on whether recipients look harder for jobs or accept offers.

JPMorgan Chase says the 26 states that cut off the benefits early, over the summer, didn't notch any stronger job growth in July than the other states.

The most rigorous study of those 26 states– by researchers at Harvard and Columbia, among other universities – said their experience shows that the end of federal benefits would likely lead to about 500,000 additional workers taking jobs in September and October, but it also would result in an $8 billion drop in spending because only a portion of those losing benefits would land jobs. That would temper the job gains by crimping economic activity and hiring. 

A survey by Indeed found that about 20% of unemployed people who casually job-hunted in July cited an employed spouse or a financial cushion as a reason for their lack of urgency while 23% pointed to COVID-19 fears and 18%, family care duties.

Only 9.5% cited the unemployment checks. “It’s not the biggest issue,” Bunker says. 

Most workers would rather land a permanent job than rely on short-lived benefits, says Heidi Shierholz, an economist at the liberal Economic Policy Institute and former chief economist at the Department of Labor. Noting the economy added nearly a million jobs in both June and July, she suggests the labor shortage "is working itself out."

Other reports argue the payments have contributed more noticeably to the worker gaps. Goldman Sachs, comparing household surveys of workers in states that kept and dropped the benefits, said early cutoffs increased the probability a worker would find a job in July from 21% to 27%, with the effect much larger for low-paid restaurant and hotel workers.

Goldman estimates the end of federal benefits will boost job growth by about 1.5 million through December.

And a Morning Consult survey in late June found that 13% of benefit recipients, or about 1.8 million people, turned down job offers because of the benefits and a similar number likely would accept offers by the end of the year.

“It’s definitely a factor,” says Morning Consult Chief Economist John Leer.

COVID-19 fears, child care

Even if 1.5 million to 1.8 million more jobs are filled the rest of the year because of expiring jobless benefits, that would still leave the nation about 4 million jobs shy of its pre-pandemic mark.

Many of those missing workers aren’t even looking because of COVID-19 worries or child care duties.

Those issues were largely expected to be resolved this fall as the pandemic faded and schools reopened. But while 63.4% of the adult population has been vaccinated, that share has fallen short of projections and new daily COVID-19 cases have increased tenfold since June, according to the Centers for Disease Control and Prevention.

The surge has prompted many reopening schools to temporarily close, offer a hybrid of in-person and online classes, or accommodate families that prefer to continue virtual learning.  

I thought 'COVID was going away'

Matt Parker, 35, a live entertainment promoter, was furloughed by his company early last year and then declined to return to work in October because of concerns he might contract COVID-19 and infect his daughter, a toddler.

Parker, his wife, Francine, a scientist who is working remotely, and their daughter moved from New York City to Simpsonville, South Carolina, where they can live comfortably off Francine’s salary. 

Although Matt has looked for jobs, he says he won’t accept one until his daughter can get vaccinated, he can work remotely full time – a rarity in live entertainment – or the pandemic eases significantly. He reckons he might go back to work early next year.

“I do feel insecurity” about being out of work for so long, he says.

But, he adds, “It’s not like I’m choosing to be lazy. I’m taking care of my child, and I know it’s the right thing to do.”

Crystal Burdge, 35, of Fredericksburg, Virginia, also decided not to resume her job as a nursing assistant after giving birth to her daughter in April 2020 because she fears getting COVID-19 and infecting her. 

Burdge, who was denied unemployment benefits, would like to get retrained as a specialist in medical billing and coding so she can work remotely, but she can’t afford the classes.

Also keeping her from rejoining the workforce: Her 13-year-old son’s school, which was set to resume in-person classes this fall, but abruptly reverted to online instruction. 

Burdge's fiancé works 16 hours a day at two jobs, but the couple still has fallen behind on their rent and utility bills. What's worse: Burdge, her fiancée and son all contracted COVID-19 over the summer.

“It’s very stressful,” she says. “I thought things were getting better and COVID was going away.”

Remote work and job-hopping

An unprecedented game of musical chairs also is roiling the labor market.

While most businesses want workers to return to the office at least some of the time after the pandemic wanes, about 40% of workers want to work from home full time, according to a Harris Poll survey for USA TODAY in May. 

Many employees, in turn, are quitting jobs that require them to work in offices, says Jim McCoy, senior vice president of talent solutions at ManpowerGroup, a staffing firm.  

Others are leaving jobs to take advantage of the abundance of openings and higher wages. A near-record 3.9 million workers quit jobs in June. Yet finding new positions takes time, McCoy says, prolonging the worker shortages.

Alex Berg, CEO of Cratos Equipment, of Pompano Beach, Florida, has been trying to fill a marketing director job for months. The previous director at the company, which distributes construction equipment, left to take a remote job for a 35% raise.

“Finding people that want to work in an office has become increasingly difficult,” Berg says.

As more employers allow new hires to work remotely, the competition for employees has intensified, prompting workers to extend their searches, McCoy says.

“We’re now competing with employers from around the country,” says Eric Griffin, co-founder of Philadelphia-based Mobile Outfitters, which makes a protective film for cellphones.

Career changes

The pandemic led many restaurant employees and other workers to reconsider their career paths.

About 57% of job switches recorded by LinkedIn from May through July were from one industry to another. Such shifts are likely to take even longer as workers transition to new careers, which may require retraining, says DeAntonio of Moody's.  

Parker says he may jump from being a promoter to a marketing specialist for small businesses, which would involve less travel and health risk, and better align with his interests. But it could take more time to launch his own firm.

“I discovered during this crisis that my primary passion is for growing business through marketing regardless of the industry,” Parker says.

Early retirements

More than 3 million Americans retired last year compared to an average of about 2 million since 2011, according to a study by Pew Research Center.

That suggests about 1.1 million baby boomers retired early because of the pandemic. Yet only about 270,000 early retirees intend to resume working within the next year, according to the Morning Consult survey.

The effect of the early retirements should fade in a couple of years when most of those boomers would have called it quits anyway, DeAntonio says.

Bottom line

DeAntonio expects the economy, which already has added 4.3 million jobs this year, to tack on another 2.2 million by year’s end. That would still leave the nation 3.5 million jobs short of its pre-pandemic level – a gap that DeAntonio estimates will be closed by the middle of next year.

But creating and filling all the jobs that would have existed if the pandemic had not occurred will likely take until the end of 2023, DeAntonio says.

That’s about when the worker shortages should truly be over, he says.