Will the US Have a "Job-Full" Recession?

Most recessions in US history have been accompanied by severe job losses and high unemployment rates. This time may be different. The ongoing labor shortage may be the key to protecting vulnerable workers.

Currently, there are 11.3 million job vacancies in the US. Most of these openings are in in-person services industries, including healthcare, hotels and restaurants, transportation and warehousing, retail, and low-end professional services. If the US descends into recession later this year, then businesses will likely rescind most help-wanted ads. However, instead of drastically cutting workers as in previous recessions, businesses may choose to hold onto their best talent.

The potential US economic downturn notwithstanding, labor shortages are here to stay as Baby Boomers retire, and there are insufficient numbers of younger workers to replace them. Additionally, some people are staying out of the workforce due to child- and adult-care challenges, and lingering fears or illness linked to COVID-19. Strict immigration laws also make it difficult to source workers from abroad.

Consequently, The Conference Board anticipates only a slight increase in the unemployment rate over the next 18 months to a peak of 3.7 percent, given the base case of recession starting later in 2022. This contrasts with the prior forecast of a decline in the unemployment rate to 3 percent by the end of 2023, when a recession was not the base case. (See The Conference Board Economic Forecast for the US Economy.)