Welcome to the Letter from the Chief Economist.
Over the past several months, the Demographic Drought research series from Lightcast has become the market leader in understanding and explaining how aging populations and new kinds of demand for workers have affected the labor market. Since our first discussion of declining labor force participation and how to re-engage workers, those topics have dominated conversations about what comes next for US employers and employees.
But of course, the labor market is bigger than the United States. Our newest entry in the series is called Workers Wanted, Worldwide: Strategies to Succeed in the Global Demographic Drought. The report came out this week and is free to download here.
One thing I especially appreciate about the report is how it doesn’t just identify the challenges facing countries and regions around the world; it also lays out solutions specific to those challenges. For example, countries with an aging population and a high degree of tech-readiness (such as those in East Asia and Western Europe) are good places to invest in greater automation. On the other hand, developing nations with growing working-age populations but gaps in their innovation capacity, like many in Central America and the Middle East, may be better off investing in training and development initiatives that create the kind of workforce employers need.
Just like our past Demographic Drought research, I’m looking forward to seeing how this report leads to greater insight and understanding about where the global labor market is and where it’s heading. It’s a job well done by author Elizabeth Crofoot and everyone else who’s had a hand in the project. Be sure to download your copy here.
Economic News
All eyes were on the Federal Reserve this week for its regular meeting, and as widely expected, it raised interest rates by 0.75%, setting the new target range for the federal funds rate to between 3% and 3.25%. Since interest rates were near zero as late as March of this year, this has been the steepest increase since the 1980s.
But as important as this decision was, it wasn’t a surprise at all. The Fed’s main goal is to bring inflation back down to about 2%, but (as I discussed last week), the Consumer Price Index is up 8.3% over the past year. In a statement, Federal Reserve Chair Jerome Powell cited several factors continuing to put upward pressure on inflation—including that “the labor market continues to be out of balance, with demand for workers substantially exceeding the supply of available workers.”
By raising rates with the goal of decreasing demand throughout the economy, the Fed is aiming for a return to normal—but “normal” in this job market would mean a higher unemployment rate and a less robust labor market. So while the world of work has been experiencing unique obstacles over the past few years, especially for employers looking for workers, this could mean a shift to a new set of challenges. As Powell said in the press conference following the meeting, “We’ve got to get inflation behind us. I wish there were a painless way to do that. There isn't.”
In my mind, the biggest question is whether these steep rate hikes continue at this pace, or whether they start to taper down. It will take time for any changes to make their presence felt in the economy, so barring any huge surprises, I’d expect an increase of 0.5% at their next meeting—at least.
In The Papers
One of the biggest themes of all three Demographic Drought reports has been the impact of an aging workforce, and what will happen when more and more of a country’s population retires and exits the labor market.
But for many of these older individuals, retirement isn’t on the horizon. Whether by choice or necessity, they’re still holding down jobs. And that raises the question: which jobs have changed to accommodate older workers, and how can we expect to see those changes affect the rest of the workforce?
That’s what Daron Acemoglu, Nicolaj Søndergaard Mühlbach, and Andrew J. Scott set out to answer in “The Rise of Age-Friendly Jobs,” out this month. By using Natural Language Processing and creating an index of age-friendly jobs that shows how accessible occupations are for older workers, they found that three-quarters of jobs have improved their age-friendliness between 1990 and 2020, and that the number of age-friendly jobs has risen by about 49 million.
But while older workers benefited from this, they weren’t the biggest winners: the biggest gains went to younger women and college graduates. The data suggest that making a job more accessible to one group can also make it more accessible to others. It’s an interesting look at how work has changed over the past decades, and at a time when populations are aging quickly around the world, the global workforce will need to continue to adapt.
Until next week,
Bledi Taska
Lightcast Chief Economist