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US workforce continues to shrink, down 400,000 from March after nearly reaching pre-pandemic levels

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The number of workers in the United States continues to decline as businesses struggle to find employees to open stores.

Wells Fargo economist Michael Pugliese said the hope for many to achieve a soft landing is to meet at a midpoint where demand cools and labor supply recovers. It’s about reaching a healthier equilibrium,” he told The Wall Street Journal Sunday. “But if labor supply continues to flatten or decline, demand will need to fall further to slow wage growth.”

The number of US workers has fallen by 400,000 since March, according to Labor Department data, a troubling sign after the number of workers approached pre-pandemic levels earlier this year. The total workforce is now about 600,000 fewer than it was in early 2020, just before widespread COVID-19 restrictions plunged the economy into recession.

Labor shortages say the imbalance between labor supply and demand is the biggest threat to the U.S. economy, so it’s likely that the economy won’t achieve the “soft landing” many hoped for. is raising concerns.

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house construction worker use hammer on site

Construction workers at a new construction site in Silver Spring, Maryland. (REUTERS/Gary Cameron – RTX2FCR6 / Reuters Photos)

The labor force participation rate, which measures the percentage of Americans 16 and older who are working or looking for work, fell to 62.1% in July after rising to 62.4% earlier this year. The figure is far lower than the 63.4% rate recorded before the pandemic, according to the Labor Department.

The shortage has also contributed to nearly 40 years of high inflation, which reached 8.5% in July. Energy shortages and supply chain problems that fueled inflation last year are beginning to subside, but those pressures have been replaced by tighter labor markets, with private sector wages and salaries up 5.7% from last year.

The Federal Reserve is trying to keep inflation in check by raising interest rates, which economists say could cool labor demand. Meanwhile, workers currently in the labor market are playing an expanding role as companies struggle to fill gaps within their organisations.

Workers lift steel frame at construction site

Workers building a building under construction in Philadelphia. (AP)

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“Wages are rising, but they may not be rising enough to compensate for the fact that everyone is understaffed,” Peter Berezin, chief global strategist at BCA Research, told Wall Street. said. journal. “Employers may need to raise wages significantly. [inflation-adjusted] It would make life more difficult for the Fed. ”