The labor shortage is weighing down potential economic growth, according to a report from ING ING.
Labour supply isn't returning quickly enough and for companies desperate to hire this is a huge problem, according to the report. It constrains growth and pay is higher, with costs that are likely passed onto consumers. The report examined last month's job report and placed some of its numbers in a larger context. Payrolls rose by 210,000, well under the 550,000 consensus estimate. The U.S. employment is still $3.9 million less than pre-COVID levels, according to the report. The main problem with the economy, as indicated by today s payrolls number, is that demand for workers continues to surpass supply by a wide margin, ING explained. There are more than 10 million job vacancies in the US, according to the National Federation of Independent Businesses NFIB yesterday, a net 48% of small businesses have job openings they can't fill. There is absolutely no problem with demand. The labour participation rate is low at 61.8% and there is a lack of workers to hire. The report, compiled by ING Chief International Economist James Knightley, identified the emerging Omicron coronaviruses variant and inflation as two of the top economic concerns for investors for the near future.
The report said that with inflation set to push close to 7% next week, we need to be looking for a $30 billion monthly reduction in QE asset purchases from January and the realistic possibility of three rate hikes in 2022 Omicron permitting.
Despite employers pressing need for workers, almost 40% of working-age people are not engaged in the labour market in any meaningful way, according to the reports.
Growth is not as good as anticipated, due to the fact that this is holding back the productive capacity of the US economy. It boosts inflation pressures as companies compete for staff and bid wages higher. Because of the environment of decent corporate pricing power, these higher costs can be passed onto customers, which shows up in the CPI. The Consumer Price Index report is due to be released on Friday. Markets will be watching to find out the extent to which high inflation persists after October's rate of 6.2% was the highest inflation in over 30 years.
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