Brice Wallace
A state economist acknowledged recently that some companies might see a recession as a “break” from labor issues.
Speaking at a briefing arranged by the Employer Connection Advisory Board, Mark Knold, chief economist at the Department of Workforce Services, said actions by the Federal Reserve to slow the economy might lead to Utah’s annual job growth dropping from near 4 percent to something between one and a half and 2 percent.
“But that’s not job loss,” Knold said. “It’s still job creation. It might be a reprieve to some, to say, ‘I could really use a break on some of this labor shortage and pressures’ and so on. If you do have labor shortages as the new norm going forward, sometimes recessions will feel like a break. ‘I need a break here for a little bit. I need a breather’ and so on.”
But Knold cautioned that if the Fed is successful in slowing the economy, companies seeing the recession as a short-term situation might not want to let go of their employees.
“If you’re a business that’s saying, ‘I only see this recession as something that’s short-term; I don’t think I want to let my labor go because it’s harder for me to get it back. It might not even be there when I want to get it back. So maybe I’ll just hang on to it even if it is a short-term loss because the short-term loss is cheaper than the cost of me trying to get it back.’”
From a national standpoint, the economy over time will feature workforce issues that “will come in a herky-jerky way,” meaning recessions.
“These labor shortages are the new norm,” he said. “The only reprieve you’ll get going forward from labor shortages are recessions. And when they go away, you’re back to labor shortages, back to tight labor markets.”
The nation’s labor shortage problem was exposed, not caused, by the COVID-19 pandemic, he surmised, but had been six or seven decades in the making with the aging of baby boomers. In 1960, there were about four people under age 14 for every retiree. Now those populations are about equal. In Utah, it’s about 2 young people for every retiree.
“So, we have a positive dynamic in that regard,” he said of Utah, “but understand … we play in that big (national) sandbox.”
Labor shortages at one time meant “we can’t get enough of a certain skill set” but now mean “we can’t get enough bodies.” That is “the new normal,” he stressed.
Of all the options to help the national shortage, the most effective one to cure the problem would be through international in-migration. However, “right now, that’s hot potatoes,” he said. Trying to get retired baby boomers back into the workforce would be “just a Band-Aid,” he added.
Knold foresees the impact of federal policy actions as slowing Utah’s job growth but not causing overall job losses. Still, the state’s economic outlook is brighter than the national one, even if the two are linked.
“We have positive momentum going forward, but, again, the United States system is so big that doesn’t mean that we’re completely immune to it,” he said. “We do kind of live in a bubble, but yet that bubble gets blown around by the winds of the United States economy.”
That could mean Utah’s unemployment rate could rise from “rock-bottom” 2.2 percent.
“You’d have to have some really powerful things hit the economy,” he said. “to get back to 6 percent unemployment going forward, just because labor is so short and dear, so to speak.”