WASHINGTON—The July jobs report showed a decline in the labor force, which remains millions of workers below pre-pandemic levels. While there are still 1.8 jobs available for every unemployed worker, the decline in GDP in the first half of 2022 along with a 13.5% drop in investment in the 2nd quarter suggests that employers may be slowing their demand for workers.
Rachel Greszler, Heritage Foundation research fellow in economics, budget, and entitlements, released the following statement Friday:
“While the Biden administration has touted the strong labor market, they’ve ignored the troubling fact that millions of people have not returned to the labor force. If the employment-to-population ratio were the same as it was prior to the pandemic, in February 2020, 3.3 million more people would be working today. Moreover, economists estimate that a decline in the desired hours of work has roughly doubled the magnitude of the labor force decline.
“Most disturbing is the 2.6% decline in employment among young workers, ages 20-24, even as their college enrollment is down by over 9%.
“Out-of-control inflation has cut the average worker’s paycheck by $3,400 since President Biden took office. Imposing more than $300 billion in new taxes on entrepreneurs and small businesses will leave employers with less money to pay their workers and invest in things that would help cause real wage growth and increase output.”
BACKGROUND: The National Federation of Independent Businesses’ optimism index reached an all-time low in June, with the report attributing business owners’ sour expectations to “inflation and worker shortages,” and “policy talks that [have] shifted to tax increases and more regulations.
The American economy now faces two key components of stagflation: high inflation and low or negative economic growth. Despite this, liberal politicians are poised to make things even worse. The Democrats so-called “Inflation Reduction Act” does the opposite—raising taxes on businesses and increasing government spending immediately (net spending reductions don’t accumulate until the out years when the government pays less for health care because price controls reduce the creation of life-improving and life-saving drugs).
Government policies to spend more, tax more, regulate more, and produce less will lead to stagflation while cutting government spending, minimizing taxes, eliminating unnecessary regulations, and removing government-imposed barriers to work will help increase output, reduce inflation, and help workers achieve real income gains.