Job Market's 2.6 Million Missing People Unnerves Star Harvard Economist

Behind the five-decade low US unemployment rate of 3.5% lies a 2.6 million-person mystery.

That’s roughly how many more Americans should be working or looking for jobs if the economy’s labor force participation rate was the same as before the Covid-19 pandemic. But something’s still off, leaving everyone from mom-and-pop businesses to Federal Reserve economists scrambling to answer a crucial question: Where are these workers?

Economist Raj Chetty and his big-data experts at Harvard University’s Opportunity Insights lab went looking for these missing people. Their research relies on an innovative method of tracking the economy, built in the early months of the pandemic, that blends anonymized transaction data from private companies.

The data highlight to Chetty and his team just how much those awful months in 2020 still haunt the US economy. Even as their tracker shows metrics like job listings, consumer spending and small business revenue surging back above January 2020 levels, the US is missing about a fifth of its pre-pandemic low-income workforce. At least some of those workers moved to higher-paying jobs, but, after adjusting for wage growth, researchers found employment for the poorest quarter of the workforce was still 13.5% below pre-pandemic levels at the end of 2021.

Analyzing local trends, researchers found an important clue to where those missing workers went: Low-wage workers are scarcest where 2020’s devastation was worst.