Supply Isn’t the Issue in the Labor Market

Supply Isn’t the Issue in the Labor Market

While employers continue to complain about workforce shortages, net job creation slowed in the US as of August, according to the Bureau of Labor Statistics. But Regions Bank Chief Economist Richard Moody cautions that “headline” numbers don’t tell the entire story. “That job growth has been decelerating does not come as a total surprise,” Moody says. “After all, following real GDP growth of 2.9 percent in 2018, which matched 2015 as the fastest full-year growth during the current expansion, it was almost universally expected that growth would slow in 2019.” Changes in the workforce participation rate help explain apparent contradictions. “Over the past 34 months an average of 4.55 million people per month have transitioned from being not in the labor force in one month to being employed in the next month, and over the past 12 months the number has been well above that longer-term average,” Moody says. “We have for some time argued that the severe cyclical decline in labor force participation tied to the 2007-09 recession has not been fully reversed, even if the longer-term structural decline has further to run.”

 

Regions Economic Overview, page 3: READ MORE