(The Center Square) – As the nation celebrates the contributions and achievements of American workers on Labor Day, economists at the Federal Reserve Bank of St. Louis say the job market and the economy are at a crossroads.
William M. Rodgers III, vice president and director of the St. Louis Fed’s Institute for Economic Equity, analyzed in two recent blog posts how unemployment, job vacancies, inflation and the possibility of a recession will affect American workers.
“Even as the economy cools, the labor market remains strong, particularly for vulnerable workers,” Rodgers said wrote. “So far, employment among vulnerable workers has not fallen, but it could be like the number of employment contracts. There are growing fears that the economy is already in recession or moving towards recession.”
As Rodgers looked back on the year since last Labor Day, the job market continued to recover from the COVID-19 recession. However, inflation – at its highest level in 40 years – is reducing wage increases resulting from high job vacancies and low unemployment.
According to Fed research, opens peaked at 11.9 million in March and declined to 11.2 million in July. Rodgers believes fewer job openings could lead to higher unemployment among vulnerable workers.
“As labor market conditions begin to deteriorate, removing structural barriers to job search that have been exacerbated by the pandemic could help,” Rodgers wrote. “Investing in supports that help jobseekers receive and accept offers has the greatest potential to break down these barriers to work. This is particularly important for the full restoration of women’s labor force participation, especially mothers, who have disproportionately left paid work to care for their families during the pandemic.”
Rodgers and Alice L. Kassens, an economics professor at Roanoke College and a research fellow at the Institute for Economic Equity, also examined obstacles prevent some from returning to the labor market.
“Additionally, before the pandemic, there were many structural barriers, including weaker skills, lack of access to affordable, quality childcare, transportation issues, incarceration, addiction and discrimination,” they wrote. “Individually and collectively, they reduce the efficiency of job placement.”
While they determine that an economy is in recession when gross domestic product falls for two consecutive quarters, they also state that the National Bureau of Economic Research’s definition of a recession is based on a variety of indicators. When we are in or entering a recession, economists cannot predict its impact on employment.
“One possible way is that if the job vacancy rate falls, the headline unemployment rate will not increase significantly,” Rodgers and Kassens wrote. “In this scenario, job vacancies could fall from extremely high levels to lower (but still strong) levels over the next few months, with a relatively limited impact on hiring and unemployment.”
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