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04.21.22

Regional Research Finds Supply Chain Disruptions Persisting and Demographic Trends Weakening Labor Force Growth

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Disruptions Are Expected to Continue, Prompting Some Firms to Rethink Supply Chain Management

Despite expectations that supply chain strains would have eased by now, they have persisted, in some cases to an even greater degree than earlier in the pandemic, according to Cleveland Fed business contacts. As these challenges linger, firms have extended their timelines for expected recovery, and many believe that it will be at least the second half of 2022 before they experience meaningful relief. In response, some firms are changing the way that they manage their supply chains, and these changes are expected to be long-lasting.

This District Data Brief provides data and anecdotes from surveys and interviews by researchers at the Federal Reserve Bank of Cleveland.

Demographic Trends Are Major Factors in Today’s Weak Labor Force Growth

The U.S. labor force declined by 2.3 million people between December 2019 and December 2021, sparking widespread debate about the underlying factors constraining labor supply. This District Data Brief looks at how the decrease of the 20/60 differential, the percentage difference between the number of people in their 20s and the number of people in their 60s, has contributed to slower labor force growth. A smaller differential generally means a smaller flow of people into the labor force.

Based on population projections, the 20/60 differential in the U.S. will remain near 10 percent through 2040. Therefore, we should expect these demographic trends to limit the growth of the labor force for the foreseeable future. In other words, 2021’s slow labor force growth may not be an anomaly, but rather a harbinger of what is to come. Slow labor force growth typically brings with it slower employment growth and, unless demand for labor falls, increased bargaining power for workers.

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia. For more information, go to www.clevelandfed.org or follow us on Facebook, Twitter, Instagram or LinkedIn.

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