Will inflation push more people back to work? ‘They will be entering a job market that is eager to have them,’ says economist

Labor costs are driving up inflation. But will inflation also send more people back into the workforce?

The annual rate of inflation slowed to 8.3% in April from 8.5% the previous month, helped by a drop in gasoline prices, but consumers still face rapidly rising costs. The March reading was the highest since 1981.

The jobless rate held steady last month at 3.6%, remaining near a 54-year low, while the hourly wage rose in April, putting pressure on the Federal Reserve’s goal of tempering inflation and warding off the US economy from a possible recession.

And while the increase in hourly pay over the past 12 months (a 5.5% increase as employers upped the ante to attract more candidates) was the largest increase since the early 1980s, it was still significantly lower than the annual rate of inflation.

“These higher costs can help us get more people back into the workforce.”

All of rent to food is getting more and more expensive. “These higher costs may help us get more people back into the workforce,” said Ron Hetrick, senior economist at Emsi Burning Glass, a labor market analysis firm.

“They will be entering a job market that is eager to have them,” Hetrick added. “With our historically low unemployment rate, our best hope for solving our jobs crisis hinges on getting people back into the workforce.”

Earlier this week, Minneapolis Fed President Neel Kashkari said no.really buy the Great Resignation”, the nickname used for the alleged mass exodus from the workplace.

Instead, people are moving “from the toughest jobs to the sexiest jobs,” Kashkari said, saying childcare and long-distance truck driving are jobs that are harder to fill.

Nearly 57 million people left their jobs, sometimes more than one job, from January 2021 to February 2022, a 25% increase compared to a similar period before the pandemic, but almost 89 million people were hired in the last 14 months.

“It’s worrying if wages don’t keep up with inflation over a longer period of time, but I think inflation will normalize.”


— Elise Gould, senior economist at the Economic Policy Institute, a progressive think tank

Not everyone agrees that the US workforce is disconnected, and some say the relationship between inflation and the desire to work is complicated. “I understand why a lot of people think people are sitting at home on a bench,” said Ben Wigert, director of research and strategy for Gallup’s workplace management practice.

“They go to restaurants where half the seats are closed due to staffing issues,” he told MarketWatch. “They see ‘now hiring’ signs everywhere, and the media constantly runs stories about record quit rates.”

“Right now, salary is the number one reason people decide to take a job or leave it, and the The importance of salary in accepting a job has increased substantially.Wigert said. His research shows that people are taking higher paying jobs with 25% more money.

Raising rates may get people to find better-paying jobs, he added. “For people struggling to make ends meet, it’s certainly possible that inflation could push unemployed people into the labor market, or cause employed people to look for another job.”

Elise Gould, a senior economist at the Economic Policy Institute, a progressive think tank, sees the return to work as a natural result of the world returning to more normal business hours after the worst days of the pandemic.

“More people are coming back and there are more opportunities for them,” he told MarketWatch. “The labor supply is likely to increase over the next year, and that will continue. We are seeing increases in participation and that will continue.”

“Normally, economists would say that inflation doesn’t have a strong effect on unemployment in the long run because wages adjust with inflation in the long run.”

“It’s worrying if wages don’t keep up with inflation for a longer period of time, but I think inflation is going to normalize,” he added. “The month-to-month volatility is not going to continue to increase.”

Additionally, Gould said, a stronger job market will help lift those who were struggling to find work. “If you go from not having a job to having a job, you’re in a much better position, even if average wages don’t keep up with inflation.”

Wigert agreed. “Economists would generally say that inflation doesn’t have a strong effect on unemployment in the long run because wages adjust with inflation in the long run,” he said. “In this case, wages actually started to rise before the cost of consumer costs, so from my perspective, in many ways, the labor market is already adjusting to higher costs, if not contributing to the inflation”.

“If rising costs cause companies to lower hiring rates and reduce job openings, that would tighten the labor market and potentially curb attrition rates and wage increases,” Wigert added. “Right now, we live in a job seeker market.”

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