COVID may have reshaped the blue-collar economy

Reallocation friction could affect the labor market through 2023.

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COVID may have reshaped the blue-collar economy


Future. A phenomenon called “reallocation friction” — in which there are plenty of job openings but no one taking them despite high unemployment — is taking hold of the American economy. The phenomenon could affect the labor market through 2023… and it could force companies to take measures like raising wages, offering insurance, or reaching out to untraditional hires to get things back on track sooner.

At who’s leisure?
Why are restaurants struggling to find enough employees while so many millions of people are still out of work?

  • Leisure and hospitality industry jobs — aka 1 in 10 American jobs — are some of the lowest paying in the economy… and COVID is making people rethink if they want to return.
  • But in order to find new jobs, some people may be out of the workforce longer as they move to a different state or go to school to learn a new skill.
  • So this creates a phenomenon where “jobs go unfilled — keeping unemployment elevated, even though the demand for those jobs is there.” That’s called “reallocation friction.”

Some economists believe that this phenomenon will cause the labor shortage to continue well into 2023. That could create ripple effects throughout the economy. For example, fewer waiters means less dining out… which could force several restaurants to close their doors.


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