Research Briefing | Feb 1, 2022

Five crucial questions on the US labor market

Five crucial questions on the labor market

Following a swift recovery, the US labor market is entering a crucial phase and the answers to five key questions will have a major bearing on wage growth, inflation, and the health of the recovery.

After steep job losses early in the pandemic, the rebound has been unusually rapid – nearly 19 million jobs, or 84% of the 22 million jobs lost, have been recouped and the unemployment rate is now back below 4%. But labor force participation has been slow to recover, leading to a severe labor shortage that is extending into 2022.

This year, a labor supply rebound should act as a relief valve for excessively high wage pressures. It should also ensure the ‘income baton’ is passed from fiscal stimulus to labor market-driven income growth – a keystone of our consumer and broader economic outlook.

The recovery of the labor market will continue in fits and starts. We expect robust business activity and higher labor force participation will help close the 3.6 million jobs shortfall in H2 2022. We also anticipate the unemployment rate falling toward 3.5% by year-end and the participation rate rebounding to 62.5%.

Given the murky path of the pandemic and the fact that some labor force decisions made during the pandemic could take longer to unwind, a slower rebound in labor force participation is a key risk. Not only could this affect the labor market; it would also impact inflation and the broader economic outlook.

Read the report for full answers to the five crucial questions on the US labor market:

  • What impact will Omicron have on the labor market?
  • How tight is the labor market?
  • Will labor force participation rebound?
  • Will wage growth stay hot?
  • How close are we to ‘full employment’?
Back to Resource Hub

Related Research

Tokyo, Japan

Post

BoJ to look through a temporary decline in monetary base

The Bank of Japan (BoJ) left monetary policy unchanged at today's (22nd Sep) meeting, maintaining current short- and long-term interest rates, despite another wave of yen weakening and upward pressures on JGB yields. 

Find Out More

Post

Global: Worried businesses see almost 50% chance of recession

Businesses continue to downgrade their expectations for the global economy, based on our latest survey of risk perceptions. On average, respondents judge there's a 47% probability of a global recession over the next 12 months.

Find Out More

Post

Canadian economy heading for hard landing

Odds of a downturn in Canada have just crossed a tipping point and we now expect a moderate recession starting Q4 2022. The slump is mainly due to the impact of more aggressive rate tightening by the Bank of Canada, higher inflation for longer, and weaker external demand from looming recessions in the US and other advanced economies.

Find Out More