Understanding America's Labor Shortage

Source: "Understanding America’s Labor Shortage: The Most Impacted Industries" by the U.S. Chamber of Commerce, published November 22, 2024.

Labor shortage by industry (Image source: US Chamber of Commerce report)

Main Themes:

• The Great Reshuffle: The COVID-19 pandemic caused a major labor market disruption, with millions quitting their jobs in 2021 and 2022. This is better described as a "reshuffle" than a "resignation" as workers transition to jobs offering better work-life balance, compensation, and company culture.

• Industry-Specific Impacts: Certain industries are more impacted by labor shortages than others. While professional and business services consistently face high job openings, food service and hospitality struggle with high quit rates.

• Labor Force Participation: Despite an increase in workforce participation, the rate remains below pre-pandemic levels, resulting in a shortage of approximately two million workers across all industries.

• Unemployment Amidst Shortages: Although the national unemployment rate is healthy (3.9% as of February 2024), industries with lower-than-average unemployment rates face heightened competition for talent.

• The Future of Work: Remote work remains prevalent despite a decline from pandemic highs, indicating its long-term impact. However, some industries necessitate in-person work. The aging workforce and evolving job market necessitate proactive solutions from employers.

Key Facts and Ideas:

• Quit Rates vs. Hiring Rates: While quit rates remain high, hiring rates continue to outpace them. For example, the leisure and hospitality industry, despite losing 781,000 workers in January 2024, hired 1.05 million. ("Across all industries, hiring rates have continuously outpaced quit rates.")

• Job Openings by Industry: Professional and business services consistently show the highest number of job openings, while the construction industry faces a labor surplus. ("When taking a look at the labor shortage across different industries, the education and health services sector, and the professional and business services sector, consistently exhibit the highest number of job openings.")

• Manufacturing Recovery: The manufacturing industry is recovering from pandemic job losses and actively addressing vacancies. ("Since then, the industry has made significant strides toward recovery, making a concerted effort to address job vacancies.")

• Remote Work Prevalence: Remote work, while down from pandemic highs, remains significantly higher than pre-pandemic levels, indicating its lasting impact. ("This year, just a quarter of all employees work remote part of the time. While this is a small number compared to the pandemic high, it towers over the pre-pandemic norm, indicating the permeance of some remote work in the years to come.")

Solutions for Businesses:

• Remove Barriers to Entry: Businesses are encouraged to expand childcare access, offer innovative benefits, participate in second-chance hiring, and provide upskilling/reskilling opportunities. ("Businesses can increase their hiring pools by removing barriers to entering the workforce, such as expanding childcare access, offering innovative benefits, participating in second-chance hiring, and providing opportunities for new and existing staff to be upskilled and reskilled on the job.")

• Adapt to Future Workforce Trends: The report highlights the importance of understanding and addressing the evolving workforce landscape, including the aging population and emerging job roles. ("The labor market challenges facing businesses are anticipated to continue into the next few decades as our nation’s workforce ages and employers create new jobs.")

Call to Action:

The U.S. Chamber of Commerce urges businesses to actively participate in shaping solutions for labor market challenges through initiatives like the America Works Initiative.

Overall, this report offers a comprehensive overview of the current labor shortage in the United States, highlighting its impact on various industries, the role of the "Great Reshuffle," and the importance of proactive solutions for businesses.