2.5 Million U.S. Workers ‘Missing’ in Biden Economy: Goldman Sachs Economists

Americans aren’t coming back to work.

QUICK FACTS:
  • Despite high demand labor, a majority of the roughly 2.5 million Americans who dropped out of the workforce during the pandemic aren’t looking for jobs, Forbes reports.
  • Americans also haven’t been returning to work this year, according to economists at Goldman Sachs, who warn the historically tight job market could intensify the recent surge in consumer prices.
  • Though job openings have reached to record highs because businesses are reopening as COVID winds down, labor supply remains “substantially depressed,” a team of Goldman economists led by Jan Hatzius wrote in a Sunday note to clients, Forbes notes.
  • The economists pointed out how last month’s labor force participation rate of 62.2% remains well below even pre-pandemic levels of 63.4%.
  • Goldman estimates there are roughly 2.5 million “missing” American workers who dropped out of the labor force during the pandemic and still aren’t looking for work.
  • The total includes about 800,000 people who retirees who are unlikely to ever return to the labor force.
  • The economists say about 1 million are 16-to-54-year olds staying home because they’re still concerned about Covid-related health risks or because they’ve been relying on personal savings.
LESS WORKERS MEANS HIGHER WAGES:
  • With the labor force still short about 1.5 million American workers by year-end, employers should continue to increase wages to help attract talent, Goldman notes.
  • Higher labor costs may cause the Federal Reserve to raise interest rates, if annual wage growth remains at current levels of about 6%, given that higher labor costs are often passed on to consumers, Forbes reports.
  • “While Fed officials might downplay spikes in the prices of items like used cars, they cannot ignore unsustainably fast wage growth,” Goldman said Sunday. “If wage growth continues running closer to 6% than to 4%, it would eventually raise the risk of an even more aggressive Fed response.”
BACKGROUND:
  • American Faith reported how U.S. unemployment under Biden rose to 4% in January, compared to 3.9% in December, according to data released by the Labor Department.
  • Data from the Census Bureau’s Household Pulse Survey, published in mid-January, showed 8.8 million people reported not being at work because of coronavirus-related reasons between Dec 29 and Jan 10.