Minneapolis Fed's Kashkari says labor supply should improve by this fall

Childcare, a diminishing pandemic and unemployment benefits expiring are all factors.

June 25, 2021 at 8:54PM
Child care is still a “profound issue” depressing the labor market, Neel Kashkari said, but that pressure should alleviate as schools open for in-person learning this fall. (Glen Stubbe, Star Tribune/The Minnesota Star Tribune)

Federal Reserve Bank of Minneapolis President Neel Kashkari said Friday that many Americans will probably return to work this fall when schools fully reopen, enhanced unemployment benefits expire, and as the pandemic in the U.S. hopefully continues to diminish.

"I think all three factors are holding back labor supply," he said during a virtual town hall meeting with the Minnesota Council of Nonprofits and Minnesota Council of Foundations. "But by September, all three of those factors should really be better and then we should then see a lot more labor supply."

In recent months, as businesses have begun to resume more normal operations, many firms have been complaining they can't find enough workers. It's a bit of a "conundrum," Kashkari said, at a time when more than 7 million Americans who were working before the pandemic remain on the sidelines.

Child care is still a "profound issue" depressing the labor market, he said, a pressure that should alleviate as schools open for in-person learning this fall.

The role of enhanced unemployment benefits has become a big source of political debate. Many Republican-led states are ending early a supplemental $300 a week in payments that runs through early September in the hopes of pushing more people to return to work.

Kashkari said the Fed has been looking at the data to figure how big a factor the generous benefits may be playing, but it's a hard thing to quantify. Still, he said it makes sense that some people receiving enhanced unemployment benefits might do the math and decide to wait to return in September, when there should still be a lot of jobs open.

"If I had this extra benefit right now, it kind of makes sense to me I probably would hang around for a few more months, enjoy the summer, and then knowing that these benefits are going to expire, then go back into the workforce," he said.

On top of that, he said many Americans are still nervous about the virus and about getting back on buses and returning to crowded places even if they're vaccinated.

"As the virus hopefully continues to diminish as vaccines continue to be widespread, I would expect the confidence to begin to return and people will feel comfortable going back to work."

At the same time, he reiterated a point he often makes: that he's skeptical when businesses claim there is a worker shortage. While many are willing to pay more when the price of corn or oil goes up, they're not often as willing to do so when it comes to wages, he said.

"I don't know why businesses have this emotional view about wages, but they do," he said.

about the writer

about the writer

Kavita Kumar

Community Engagement Director

Kavita Kumar is the community engagement director for the Opinion section of the Star Tribune. She was previously a reporter on the business desk.

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