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“They will enter the labor market that wants to have them”: will record high inflation encourage more people to return to work?

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The cost of labor contributes to rising inflation. But will inflation lead more people to the workforce?

Annual inflation rate in April slowed to 8.3%. with 8.5% in the previous month, which contributed to the fall in gasoline prices, but consumers are still facing rapid growth in costs. March readings were the highest since 1981.

Unemployment remained stable last month at 3.6%, remaining around a 54-year low, while hourly wages rose in April, putting pressure on the Federal Reserve to curb inflation and divert the U.S. economy from a potential recession.

And while the increase in hourly wages over the past 12 months – an increase of 5.5% while employers have increased rates to attract more job candidates – has been the biggest increase since the early 1980s, it was still much smaller for annual inflation.

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

Everything from rent food is getting more expensive. “These increased costs can help us get more people back into the workforce,” said Ron Hetick, senior economist at Emsi Burning Glass, a labor market research firm.

“They will be entering a job market that wants to have them,” Hatrick added. “With our historically low unemployment rates, our greatest hope for resolving the labor crisis depends on getting people back into the workforce.”

Earlier this week, Minneapolis Federal Reserve President Neil Kashkari said no.really buy Big resignation”, A nickname used for the alleged mass exit from the workplace.

Instead, people are moving “from the hardest jobs to the more attractive ones,” Kashkari said, saying caring for children and driving trucks over long distances are jobs that are harder to fill.

Nearly 57 million people quit their jobs – sometimes more than one – from January 2021 to February 2022, 25% more than in the same period before the pandemic, but almost 89 million people have been hired in the last 14 months.

«“It’s worrying if wages don’t keep up with inflation for a longer period of time, but I believe inflation is normalizing.”


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

Not everyone agrees that the U.S. workforce is not busy, and some say the relationship between inflation and the desire to work is complex. “I understand why a lot of people think people are sitting at home on the bench,” said Ben Wiegert, Gallup’s director of research and strategy at workplace management.

“They go to restaurants where half the seats are closed due to staffing problems,” he told MarketWatch. “Everywhere you look today, the tide of protectionist sentiment is flowing.

“Now pay is the main reason why people decide to get a job or leave a job, and significantly increased the value of payment when hiringSaid Wiegert. His research shows that people take better paid jobs with 25% more money.

Raising rates could force people to find better paid jobs, he added. “For people who are struggling to make ends meet, of course, it is possible that inflation could push the unemployed into the labor market or force the employed to find another job.”

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

“More people are coming back, and there are more opportunities for them,” she told MarketWatch. “The labor supply is likely to increase next year and it will continue. We see an increase in participation, and it will continue. “

«“Typically, economists would say that inflation does not have a strong effect on long-term unemployment, because wages in the long run are adjusted for inflation.”

“It is worrying if wages do not keep up with inflation for a longer period of time, but I believe that inflation is normalizing,” she added. “Volatility from month to month will not continue to grow.”

What’s more, Gould said, a stronger job market will help lift people who are struggling to find work. “When you go from lack of work to work, you’re in a much better position, even if the average wage doesn’t keep up with inflation.”

Wiegert agreed. “As a rule, economists say that inflation does not have a strong impact on long-term unemployment, because wages in the long run are adjusted for inflation,” he said. “In this case, wages began to rise earlier than the cost of consumer spending, so in my view, in many ways, the employment market is already adjusting to higher costs if not conducive to inflation.”

“If increased costs force companies to slow down job rates and cut vacancies, it will tighten the labor market and potentially cut layoff rates and raise wages,” Wiegert added. “Now we live in a market where people are looking for work.”

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