Four years ago, Littler Workplace Policy Institute (WPI) issued its first Labor Day Report, analyzing the state of the U.S. workforce, the regulatory and logistical hurdles employers faced, and the challenges that lay ahead. At the time, the country was nearly two years into a new presidential administration, the U.S. labor market enjoyed a historically low unemployment rate yet a relatively low labor market participation rate, and the growing skills gap was becoming more apparent. Four years, a new administration, and a global pandemic later, the issues confronting employers and the U.S. economy are both familiar yet markedly different.

As inflation rises, national and global unrest grows, and the threat of a recession looms, the economy has become more turbulent than ever. Moreover, while many employers and employees continue to recover from the devastating effects of COVID-19, the rate and extent of recovery varies significantly by industry, level of education, and worker demographics. In certain sectors, a sizable gap persists between the number of job openings and the level of unemployment.

This Labor Day Report examines the various reasons for this disparity, how the Biden administration and state and local legislatures have shaped employment policy, the challenges presented by the evolving nature of work, and the urgent need for federal policy reforms.

Key points include:

• The U.S. jobs level has finally recovered from the hit it took from the pandemic, although the hospitality and service industries are lagging in their recovery. The leisure and hospitality industry is down over 1.2 million jobs since February 2020, even though the economy added over 96,000 jobs in this sector in July 2022.
• The labor force participation rate is 1.3 percentage points below the pre-pandemic level. Had the labor force participation rate remained at the February 2020 level, there would be 3.4 million more workers in the labor force at this time.
• There are approximately 5.2 million more job openings than unemployed workers.
• Workers are putting in more hours, yet output is falling. The decrease in productivity combined with an increase in hourly compensation has resulted in a 10.8% increase in unit labor costs.
• The Democrats’ slim majority in Congress over the past two years has largely prevented either side of the aisle from advancing employment-related legislation. Federal agencies and state legislatures, therefore, have become the main drivers of employment policy
• The pandemic exacerbated job displacement, which is creating employee demand for new ways of working, skillsets, and approaches to improving workplace policies. Understanding the complex dynamics of the current U.S. labor market is key to identifying in-demand jobs and skills, guiding investments in education and training and, ultimately, the nation’s economic recovery.

Part I of this Report looks at the state of the workforce and what factors are steering employee and employer behavior.

Part II provides an overview of how federal, state, and local government decision-making is affecting labor and employment law.

Part III outlines steps policy makers can take to address the employment challenges stemming from the historic transformation of the U.S. workforce.

Click here to read the full report.