WASHINGTON (AP) — As America’s job market rebounds this summer and the need for workers intensifies, employers won’t likely have a chance to relax anytime soon. Worker shortages will likely persist for years after the fast-reopening economy shakes off its growing pains.
Consider that the number of working age people did something last year it had never done in the nation’s history: It shrank.
Estimates from the Census Bureau showed that the U.S. population ages 16 through 64 fell 0.1% in 2020 — a scant drop but the first decline of any kind after decades of steady increases. It reflected a sharp fall in immigration, the retirements of the vast baby boom generation and a slowing birth rate. The size of the 16-64 age group was also diminished last year by thousands of deaths from the coronavirus.
A year earlier, in 2019, the working age population had essentially plateaued.
It’s not entirely clear how population patterns will unfold once the pandemic fully fades. But even if the working age population resumes growing, it will almost certainly do so at an anemic pace. A continuing drop in that population, or even a tepid increase, would pose a problem for the economy. A healthy economic expansion has always depended on robust population growth to fuel consumer spending, justify business expansion and drive corporate earnings. Without a sizable influx of new workers, growth could stagnate.
Still, some economists foresee a silver lining for individuals: Fewer people of working age could compel companies to compete harder to hire and retain employees. And that could mean higher pay, better opportunities and other inducements to keep and attract workers, a trend already evident in the June jobs report the government released Friday. Average hourly pay rose a hefty 3.6% compared with a year ago, faster than the pre-pandemic pace.
“The workers would be doing better than the economy as a whole,” said Manoj Pradhan, the founder of Talking Heads Marco, an economics research firm, and formerly an economist for Morgan Stanley.
If wages were to rise sharply, it could also help narrow the vast inequality that has increasingly divided the most affluent Americans from everyone else and left the lowest-income households struggling to afford rent, food, child care and other essential expenses.
With population growth sluggish, economic expansion would hinge on whether companies could make their workers more productive. An increase in productivity, often made through investments in labor-saving technology, could further raise pay. Living standards would rise even if the economy struggled to grow at what’s normally considered a healthy pace.
Last year, the number of legal and unauthorized immigrants entering the United States fell for a fourth straight year to below 500,000 — less than half the level in 2016 — according to calculations by William Frey, a demographer at the Brookings Institution. The number of deaths jumped 8%, to above 3 million, reflecting largely the impact of the pandemic.
A fundamental long-term drag on the working-age population is the exit of the enormous baby boom generation from the labor force. The number of people ages 65 and over will likely jump 30% over the next decade, Frey said.
“We’ve never really been in this type of situation before,” he said. “There’s just not enough (young adults) to replace people who are leaving.”
The situation has been exacerbated this year by a spate of early retirements. Roughly 2.6 million people who were working before the pandemic now say they’re retired and not searching for a job, according to Federal Reserve Bank of Dallas. Sharp gains in stock prices and home values despite the deep pandemic recession made it easier for many older Americans to leave the workforce early.
One of them is Jeff Ferguson, a physician with Eli Lilly & Co. in Indianapolis, who retired in April at age 59 after 22 years with the company.
Having worked from home during the pandemic, Ferguson said, made the transition smoother. But he was also encouraged by his solid investment gains and by the strengthening of the local housing market despite economic uncertainty.
“I probably retired with a tailwind as opposed to retiring with a headwind,” he said. “If I had perceived a headwind, I might have delayed it.”
The pandemic also lent him a new perspective on life and retirement. Ferguson plans to travel around the country with his wife, a pediatrician, and catch up with relatives.
Gad Levanon, an economist at the Conference Board, said the drop in the working age population will be particularly evident among Americans without college degrees. As aging baby boomers retire, they’re being replaced by younger workers who are likelier to be college graduates. Blue-collar workers — anyone without a four-year degree — will become scarcer. That trend will likely create labor shortages in such industries as manufacturing, construction, retail and restaurants and hotels.
Levanon estimates that the number of college graduates will keep growing about 2% a year, despite the population slowdown, while non-college degree holders will dwindle. This could make it harder for future college grads to find jobs commensurate with their education levels. Companies may also inflate their job requirements, perhaps demanding bachelor’s degrees for jobs that didn’t require them before.
“The number of people who are willing to work in blue collar and manual service jobs is shrinking,” Levanon said.
Pay is already rising faster for lower-wage workers. For the lowest-paid one-quarter of employees, hourly wages rose 4.2% in May compared with a year earlier, according to the Federal Reserve Bank of Atlanta. That’s more than twice the percentage raises that these workers received in the four years after the Great Recession, from 2010 through 2014, and higher than the richest one-quarter of workers.
Scott Seaholm, CEO of Universal Metal Products, a 285-person metal stamping company near Cleveland, is surrounded by an aging population and is trying desperately to interest young people in a manufacturing career. A study found that roughly 59% of the population in Lake County, Ohio, where he’s based, was made up of working age adults in 2015, Seaholm said. That proportion fell to 57% last year and is projected to hit 54% in 2025.
“That’s pretty shocking,” he said. “There’s nobody out there to work. It’s kind of ugly.”
More than half the workers in his three factories are over 55, he said, with fewer than one in five ages 20 to 34. He has one 81-year old employee still working a punch press.
Seaholm’s company belongs to a group that encourages high school students to consider factory jobs. He opens his plants to high school students once a year on “industry day” and tries to get their parents to come, too.
“They want Johnny and Judy to go off to college,” he said. “That’s all locked in their heads.”
Globally, workforces in most other countries are also aging, including in China, which once seemed to offer an inexhaustible supply of workers. Japan’s population has shrunk for a decade.
Pradhan said that trend could potentially benefit American workers. Since the end of the Cold War in the early 1990s, hundreds of millions of people in China, Eastern Europe and India have joined the global workforce, thereby holding down wages for lower-skilled workers and keeping prices in check.
Now, the aging of much of the world could reverse those trends, Pradhan and Charles Goodhart, formerly an economist at the Bank of England, wrote in a book last year titled, “The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival.”
Pradhan notes that in Japan, whose population has declined about 1% year for a decade, economic growth has averaged just 1% annually. But that means growth per person has been 2%.
If the United States could achieve that level of efficiency while its population grows just 0.5% a year, its economy could still expand at a healthy 2.5% annually, Pradhan said.
Still, over time, he and other economists worry that sluggish population growth could mean less consumer spending and a less dynamic economy.
“Workers generate innovation and ideas — they invent things,” said Kasey Buckles, an economics professor at the University of Notre Dame. “When you have a dwindling working-age population, you have fewer people doing that.”
AP Business Writer Anne D’Innocenzio contributed to this report from New York.
Canada's economy shrank for 2nd month in a row in May – CBC.ca
Canada’s gross domestic product shrank by 0.3 per cent in May, the second consecutive monthly contraction as most industries slowed down.
Statistics Canada reported Friday that most industries shrank, especially construction, manufacturing and retail.
Even Canada’s red hot real estate sector shrank for the second month in a row. The real estate and rental and leasing sector was down 0.4 per cent in May after falling by 0.8 per cent in April. That’s the first two-month streak of declines since March and April of 2020.
“As housing sales and construction levels gradually return to more sustainable levels, this area of the economy could be a drag on growth in coming months,” TD Bank economist Sri Thanabalasingam said.
Agriculture and forestry, mining and oil and gas extraction, utilities and the public sector all expanded slightly.
All in all, the total value of all the goods and services produced by Canada’s economy was just shy of $1.98 trillion during the month. That’s still two per cent below the slightly more than $2 trillion that the economy was worth in February 2020.
The numbers for May come at the time when Canada’s economy was on the downslope of the third wave of COVID-19, and much of society was on some sort of lockdown or reduced capacity. But there are signs that a rebound has happened since.
Preliminary data for June suggests the economy grew by 0.7 per cent during the month. And July may have been even better — credit and debit card data suggests that consumers returned to spending on high-contact services including in-person dining, recreation activities and travel that had long been restricted to them, Thanabalasingam said.
June’s uptick means the economy will expand by about 0.6 per cent in the second quarter overall. That’s about a 2.5 per cent annual pace — much slower than the 6.5 per cent pace the U.S. economy clocked in the same period, but much better than the 8.3 per cent contraction seen in countries that use the euro.
Thanabalasingam said the data for May and June show just how up and down the economy may go from here on out.
“It may not be smooth sailing for the rest of the recovery,” he said.
“The delta variant is wreaking havoc around the world, leading to a retightening of restrictions in some countries. Canada has so far avoided the worst of this virus, but cases are rising in some provinces. A fourth wave could lead to another stalling in the recovery, though with relatively high rates of vaccination a full reversal appears less likely.”
After Quickly Expanding, The Economy Is Expected To Slow – NPR
ARI SHAPIRO, HOST:
Today’s discouraging news about the pandemic comes after a spring when the U.S. economy reawakened. Vaccines were widely available, people went out to eat, and they started traveling again. In April, May and June, the U.S. economy grew by a healthy 6.5%. NPR’s David Gura joins us with more. Hi, David.
DAVID GURA, BYLINE: Hey, Ari.
SHAPIRO: So what does this 6.5% number actually tell us?
GURA: Well, it tells us the size of the economy is larger than it was before the pandemic, if you adjust for inflation. And that’s good news. That means the economy is now expanding. I talked to James Sweeney. He’s the chief economist at Credit Suisse. And I asked him how he interprets today’s numbers. Sweeney says it wasn’t as big as he expected it would be, but he’s still happy with it.
JAMES SWEENEY: The economy’s growing strongly, and we’ve got more growth ahead. This is the kind of negative miss (ph) that shouldn’t panic anybody.
GURA: And I’ll note here, it didn’t seem to panic investors on Wall Street. In fact, today the stock market once again hit some new records, Ari.
SHAPIRO: Yeah, what is driving the stock market growth over these last few months?
GURA: Yeah, the growth in the stock market and the economy – it’s been consumer spending, which is a huge part of the economy. The other day, I did some anecdotal research, anecdotal reporting – stopped by maybe a dozen small businesses near me just to see how they’re doing. And Melissa Ocampo (ph) is the manager of a toy store in Brooklyn. She told me things have gotten much better.
MELISSA OCAMPO: People seem to be back and running around and shopping for the kids and birthday parties and balloons.
GURA: Business has been steady, Ocampo (ph) told me, but she hopes it picks up even more. In the second quarter of this year, this transition happened, Ari. People who had been buying stuff – TVs, computers, yes, toys as well – started spending money at restaurants and on trips as vaccines became more widely available. And today’s GDP data reflect that big uptick in spending, which was larger than economists expected.
SHAPIRO: And yet this week there has been such a shift, largely driven by the delta variant – new mask mandates, vaccine mandates. What does the rest of the year look like?
GURA: Yeah, economists I talked to say they expect this growth to continue, but they are seeing potential risks to the recovery. So were small businesses. What worries Melissa Ocampo at my local toy store is the pandemic and the delta variant more specifically. She is afraid of what could happen to the store and to her if sales were to slow down again or if there were another shutdown. After the store closed temporarily last spring, Ari, Ocampo managed to find another job at a supermarket.
OCAMPO: I’m like, am I going to, like – am I not going to be with, like, a job towards the end of the year, or are we in, like, what’s just – it’s just uncertain and scary for sure.
GURA: Now, economists don’t think we’ll see the kind of shutdowns we saw at the beginning of the pandemic. For one thing, almost half the population now in the U.S. is fully vaccinated.
SHAPIRO: What else is keeping small-business owners up at night?
GURA: Well, inflation for one, how prices have gone up, problems with supply chains as well – that’s another issue. It’s gotten harder to get the products people want because of demand, and manufacturers are having trouble getting new materials. The supply chain issues show up in today’s GDP data. It was a big drag on growth in the second quarter. And one other worry among small-business owners is the jobs market.
SHAPIRO: Yeah, tell us more about that specifically.
GURA: Well, employers say it’s gotten harder for them to find workers. Some of them are worried about getting sick. Then there’s the lack of reliable child care. That’s a big issue. Ralph Elia owns a frame shop called KC Arts. He’s been in the business for about four decades. And he told me he’s had trouble hiring workers, which is something he blames on expanded unemployment benefits.
RALPH ELIA: I agree with it in the beginning, if you really needed it. But at some point, they should have slowed it down or cut it off, I’m sorry to say, because we need to hire people. People need to get out and work.
GURA: And that argument is what led about two dozen states to end those expanded benefits early, Ari. They’ll expire for all the remaining states in just a couple months.
SHAPIRO: NPR’s David Gura, thanks for the update.
GURA: Thank you.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
Saskatoon economy recovering but IMF warns of inflation, vaccine inequality – Global News
At least, for now.
The Saskatoon Regional Economic Development Authority (SREDA) calculates the economy of the province’s largest city is 67.8-per cent recovered from the pandemic as of Thursday (though most of the factors it takes into account are from much earlier in the month).
SREDA CEO Alex Fallon told Global News that agricultural exports, the housing market and consumer and retail spending is driving the bulk of the recovery right now. He said the hospitality sector is helping, with people taking staycations in the city, but is still dragging behind.
“The economic recovery in the Saskatoon region is probably a little bit better (than) we expected it to be,” he said.
He added that the rest of the recovery will depend on the continuing performance of the housing market, as well as home renovations and consumer confidence in the economy.
He predicted, albeit cautiously, that Saskatoon will recover fully by the end of the year.
A recent IMF report states any recovery is threatened by unequal vaccine distribution.
The IMF’s July World Economic Outlook predicts a 6 per cent increase in the global economy (which coincidentally matches the Bank of Canada’s most recent prediction for the Canadian economy) – if infections stay low.
“Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalization of activity later this year and those that will still face resurgent infections and rising COVID death tolls,” the report states.
“The recovery, however, is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere,” and so long as segments of the population remain susceptible.
It says a new, extra infectious or deadly variant would disrupt any recovery efforts because it is likely to spread around the planet.
The report also states developing economies are susceptible to advanced economies’ overcorrections targeting inflation.
The combination of both “would severely set back their recovery and drag global growth below this outlook’s baseline.”
The cause of the inflation, it says, are low commodity prices in 2019 and supply issues as the cause of rising prices this year.
It predicts inflation will likely subside by next year, though notes “uncertainty remains high.”
University of Regina economist Jason Childs is a little more assured prices will continue to rise in Canada.
How consumers respond to this momentary inflation “blip” as Canada reopens, he said, “will determine whether or not we get locked into an inflationary spiral.”
So, our reaction to inflation could cause more inflation.
As such, Childs is less optimistic about Saskatoon’s recovery, or any western Canadian city’s recovery.
He said the 67.8-per cent figure broadly represents similar cities east of Ontario.
(He said the pandemic was less of an issue for many smaller population centres that depend on natural resources. Last year the president of the Agricultural Producers of Saskatchewan told Global News the agricultural sector was unaffected by the pandemic.)
Childs told Global News the remainder of the recovery will depend on the hospitality and tourism sectors rebounding, which he said isn’t likely to happen soon.
He said a labour shortage in those sectors, which Fallon also identified as an issue, will further limit gains. And he said the labour shortage could be hard to solve.
“The longer you’re away from the job market and employment, the harder it is for you to transition back into that,” he said.
Overall, he was wary of any predictions.
The pandemic has been a nearly-unprecedented event and the planet has never been more integrated.
Historical examples then may not be as illustrative as policy makers might hope.
“The last time we spent like this – we’ve never spent like this,” Childs said.
© 2021 Global News, a division of Corus Entertainment Inc.
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