The labor market continues to be one of the big riddles of the postpandemic era, find chair of insights and ecosystems and chair of McKinsey Global Institute Sven Smit and colleagues. A drop in labor force participation by roughly 1.6 million explains some of the US labor market tightness, but it doesn’t account for a 3.7 million spike in monthly job openings (compared with the earlier days of the pandemic). Contributing factors include an aging population, a jobs–skills mismatch, and more workers reevaluating what they want from a job—and from life.
Image description:
A waterfall graph in divided in two parts, showing in the top half the changes in total working population in the US from 2020 to 2022, in millions of people. It displays both the additions to the workforce by age group and the shift within those age groups, from those participating in the workforce to those no longer participating. Although the total working age population grew, the population entering retirement more than negated the positive gain, for an expected drop in labor participation of 1.6 million people. The bottom half of the chart contains two circles, showing a comparison of monthly job openings. This figure has grown by more than double what might have been expected, given the overall decline in available workforce, with 3.7 million more job vacancies in October 2022 than there were in February 2020.
Footnote 1: Calculated using Feb 2021 labor participation rates.
Source: US Bureau of Labor Statistics, based on the civilian noninstitutional population; McKinsey analysis
End of image description.
To read the article, see “2023, a testing year: Will the macro-scenario range widen or narrow?,” January 16, 2023.