- Federal Reserve Chair Jerome Powell said it's "unclear" how long labor shortages will linger.
- He also said in a presser that "we don't have a strong labor force participation recovery yet."
- It's the latest data point showing how shortages may stick around for a while as the pandemic drags on.
If you're wondering when labor shortages will abate, you're in good company.
Even Federal Reserve Chair Jerome Powell doesn't have an answer.
"How long the labor shortages will persist is unclear, particularly if additional waves of the virus occur," Powell said in a Wednesday press conference. He pointed to factors like caregiving and concerns over the virus as things keeping workers at home. There's still about 2.4 million workers "missing" from the labor force compared to February 2020 labor force levels.
Powell's comments signal the shift in how experts are rethinking the labor shortage's longevity, and the structural changes it could leave behind as it persists. In June, by contrast, Powell said the country was on the path to a "strong labor market," downplaying concerns that worker shortages could be a permanent drag on recovery.
Of course, those comments came in the period where America seemed in the clear when it came to the pandemic: Post-vaccine and pre-Delta. Now, yet another variant is rippling its way through the country, and as the country is forced to live through an ongoing pandemic, labor shortages might stick around, too.
"I had certainly thought that last fall, as unemployment insurance ran off, as vaccinations increased, as schools reopened, that we would see a significant surge, if you will, or at least a surge in labor force participation," Powell said. "We've begun to see some improvement."
There was a welcome improvement in November, Powell said, but it will take longer to increase labor force participation, which measures people working or actively looking for work.
"We don't have a strong labor force participation recovery yet, and we may not have it for some time," Powell said.
A recent survey from the US Chamber of Commerce suggests that labor shortages may be permanent, with 8% of currently unemployed respondents saying they "never plan to return to work." In November, economists surveyed by Bloomberg forecast that the country would add 550,000 jobs; instead, it added just 210,000.
One rate that has remained robust: The number of Americans quitting. In October, 4.2 million Americans quit their jobs — another near-record that topped off seven straight months of Americans leaving en masse.
"People quit because they feel they can get a better job," Powell said. "There's historically high levels of that going on, suggesting, again, you've got a very tight labor market."
That's not to say there won't be any movement in the labor market. In October, there were 6.5 million hires, and November saw the unemployment rate drop to 4.2%. The Fed is now forecasting that the unemployment rate will drop to 3.5% in 2022, and will stay there through 2024. That's better than the previous projection in September, when the Fed forecast a 3.8% unemployment rate in 2022.
"The labor market is, by so many measures, hotter than it ever ran in the last expansion, if you think about it," Powell said. What's unclear, then, is when workers might return. As they sit on the sidelines over virus fears, or wait for wages to continue to creep up after decades of stagnation — arguably constituting a wage shortage — it might not be anytime soon.
The comments followed an update on the Fed's policy stance. The Fed said Wednesday it will double the pace at which it shrinks its purchases of Treasurys and mortgage-backed securities. The move signals the emergency purchases will end in March, and that the central bank will more aggressively hike interest rates to fight inflation in 2022. Projections published at the same time as the announcement show Fed officials expecting three interest-rate increases next year, and another three in 2023.