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1 1 (October 5, 2021)

handle is hein.crs/goveepq0001 and id is 1 raw text is: S Congressional____ a Research Service Labor Market Tightness and the Economic Recovery, Part 2 October 5, 2021 Recently, many businesses have reportedly complained of labor market tightness-workforce shortages and difficulties in hiring to reduce them. This is surprising to many economists because employment is still low. If long-lasting, these shortages could hold back the economic recovery and potentially contribute to inflationary pressures. This Insight, which concludes a previous CRS Insight (Part 1) that analyzes evidence of potential labor market tightenness, discusses potential causes and the policy implications of those findings. Potential Causes Labor market tightness is likely being caused by a number of factors. As discussed in Part 1, the Coronavirus Disease 2019 (COVID-19) pandemic caused many people to initially leave the labor force, and for some, their reasons for leaving remain. Census Bureau data reveal that 3% of adults who were not working in early September 2021 did so because they were concerned about getting or spreading the coronavirus. Workers who are unwilling to return to their jobs because of health fears are often concentrated in industries where social distancing is hardest, increasing tightness in those industries. Another 4% of survey respondents were not working because they were caring for someone or sick myself with coronavirus symptoms (although someone on temporary leave is still part of the labor force). The unavailability of child or other dependent care or paid caregiving leave caused some parents of young children and others to be unable to continue working, and the Federal Reserve estimated that nonparticipation in the labor force associated with caregiving has increased 0.7 percentage point. Individuals who leave the labor force can re-enter at any time, but some types of exits, such as retirements, are more likely to be permanent. The pandemic led to a wave of extra retirements, which the Federal Reserve estimated account for more than one-half of the 1.7 percentage point decline in the aggregate labor force participation rate (LFPR) over this period. The LFPR for workers ages 55 and over, which rose during the previous two recessions, is the lowest this year since 2007. Unemployment insurance was temporarily enhanced during the pandemic in terms of eligibility, length, and size of benefits. Recipients received an additional $600 benefit weekly through July 2020, which resulted in roughly two-thirds of recipients receiving a larger benefit than their previous wages, and Congressional Research Service https://crsreports.congress.gov IN11771 CRS INSIGHT Prepared for Members and Committees of Congress

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