USA creates more than 460,000 jobs in January 2:45
New York (CNN Business) --
The great turmoil in the US job market is unprecedented.
Last year, a record number of American workers quit their jobs: Of the 68.9 million layoffs that occurred in 2021, 47.4 million jobs were voluntarily abandoned.
A record number of Americans left their jobs in 2021
Despite a record number of job offers, many of the workers who quit never looked for a new job.
Millions of people have dropped out of the labor market altogether to care for their families, retire early, live off their savings, or rethink their lives due to covid-19.
The challenge now is how to recover them.
It will not be easy nor will it happen overnight.
Goldman Sachs economists make the following calculations: About 2.5 million people are missing from the workforce.
Of these, some 800,000 took early retirement, many supported by rising home values and stock portfolios.
That leaves 1.7 million people to lure back into the job market, many of them "prime-of-life" workers with many years ahead of them in the job market.
What stops them?
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"They have Covid-related concerns, have a financial cushion, or their lifestyle has changed," the Goldman economists wrote.
"Some people are likely to come back if the spread of the virus slows or antiviral pills reduce health risks, and others may come back when their savings run out."
Goldman estimates that one million people will re-enter the workforce this year, pushing the labor force participation rate to a healthy but still insufficient 62.6% by the end of the year.
Economists point out that more workers will enter the labor market in the coming years.
"Even so, the low participation rate implies that it will be even harder to find workers than the unemployment rate suggests," the Goldman economists note.
They will be harder to find and will have a new perspective.
There is no question that people are not returning to the jobs, wages and work-life balance they left behind.
In fact, millions of so-called "dropouts" did not drop out of the workforce, but rose through the ranks.
It was Bharat Ramamurti, deputy director of the National Economic Council, who coined the phrase "the Big Update" last month.
Workers are quitting to go take new, better-paying jobs.
It's not the Great Resignation -- it's the Great Upgrade.
And it's exactly the kind of economy @POTUS said he wanted to help build.
pic.twitter.com/7ibPD1THEH
— Bharat Ramamurti (@BharatRamamurti) January 10, 2022
Companies are paying higher wages, offering hiring bonuses and adjusting hours to attract and retain talent.
A growing number of companies are now paying benefits on student debt, hoping to keep good workers from leaving for other employers.
"We're seeing a lot of turmoil in the job market," Nela Richardson, chief economist at payroll processor ADP, told me.
"But one thing we're seeing is that hiring is higher. They're not leaving the job market, they're going to other jobs in the same industry."
The opportunities for American workers have never been greater, and they are being rewarded for leaving their jobs.
"Job openings are at all-time highs. Compensation for switching jobs that we find in our own data is also at all-time highs. Companies are paying a lot for talent," Richardson added.
Companies offer incentives to attract employees 0:58
Friday's employment report showed annual wage growth of 5.7%.
Inflation, of course, affects these wage increases, but it is the largest wage increase in years for an average worker.
However, for many workers, it's not just about the money.
They are not satisfied with their old jobs.
They leave in search of better treatment, better hours and better benefits.
For now, job seekers hold all the cards.
Employers of all sizes are in a free-for-all fight for workers, offering better working conditions and more career development to fill the nearly 11 million jobs that were vacant in December.
With such an imbalance between employers looking to hire and workers looking to upgrade, Richardson believes the era of worker empowerment has its upside.
"The employer is always driving the car. They are the ones who decide the opportunities, the salary, the skills, the job description, the hours," says Richardson.
"But, more than ever, they are listening to the workforce and trying to incorporate it and be sensitive."
Jobs in the United States
