It is no secret that COVID-19 has affected the world as we know it. When the pandemic started, the unemployment rate skyrocketed seemingly overnight due to forced closures in order to limit the spread of the virus. The unemployment rate is now 6% but if you walk into any restaurant or retail business a “We’re Hiring” sign seems to always be displayed in the window. Research is difficult since the market is quick to change in these unprecedented times but experts have their theories.
The first one is government aid. Many are quick to blame to government for encouraging people to stay unemployed. Due to unemployment pay and insurance, which included a $300 weekly supplement, there is very little motivation to search for a job when many people are making the same, if not more by staying at home. A study done by Ioana Marinescu, Daphne Skandalis and Daniel Zhao discovered that for every 10% increase in the unemployment benefits a person received, there was a 3% decline in the number of jobs being applied to. However, those federal funds ended on September 6 and unemployed remained mostly unaffected.
Something else to take into consideration is that people are afraid to catch the virus. A direct link was discovered between vaccinations and employment rate. An economist from the University of Minnesota performed a study that showed there was a 10% increase in the population of people who were fully vaccinated correlated to a 1.1% increase in employment. These two factors created an environment in which it is easier for someone to stay out of the work force if they are scared to return to work since they can afford to stay at home.
Another factor that is keeping people out of the work force is that many kids are still doing distance learning, so there is a need to stay home to care for younger children or disabled relatives who might have had other forms of care pre-pandemic. According to the Census Household Pulse survey, there are 6.3 million people who are not able to work because of lack of childcare. Another 2.1 million are caring for an elderly person, which in total accounts for 14% of the adults not working, and that number has only increased since the survey.
No matter the reason, the lack of willing and able workers is affecting the economy. Companies are now having to pay employees more to keep them or to hire them on. It is currently a worker’s market, so companies are having to compete to maintain their workforce. As discussions about inflation and the path forward arise, experts are waiting to see the economic environment created.
Please contact your Henry+Horne advisor with any questions.