Tight US job market may persist due to demographics

Significance

Shortages vary by sector and geography. The US workforce will shrink as baby boomers (born between 1946 and 1964) retire and are replaced by the smaller cohort of Generation Z (born between 1997 and 2012). Pre-pandemic, many boomers worked past retirement age, slowing the workforce decline, but the pandemic broke that trend.

Impacts

• The US labour market holds the key to the inflation outlook and thus the timing of the Fed’s tightening of monetary policy.
• Unemployment is set to drop below the so-called ‘natural’ unemployment level, the non-accelerating inflation rate of unemployment (NAIRU).
• Diversity and inclusion policies will accelerate the workforce exit of baby boomers as that generation has the largest share of white men.