Understanding America's Labor Shortage: The Industries Most Affected

The COVID-19 pandemic caused a major disruption to the American workforce—something many have dubbed “the great quit.” In 2022, more than 50 million workers quit their jobs, up from 47.8 million in 2021. In 2023, that trend began to ease, with 30.5 million workers quitting by August.

Looking more closely at developments in the labor market, it is more appropriate to describe it as “the great shakeup.” While quit rates remain high, hiring rates continue to outpace them, as many workers move to other jobs in search of better work-life balance and flexibility, higher compensation, or a strong company culture.

The U.S. Chamber of Commerce closely monitors trends in job openings, labor force participation, and quit rates affecting industries across the country. Read on for an analysis of the industries most affected by these trends.

For a comprehensive look at the state of our workforce, visit our America Works Data Center. For a detailed look at the impact of the labor shortage across the country, click here, and for a breakdown of labor shortages by state, click here. The data is available here.

The catering and hotel industry is struggling to retain employees

Jobs that are entirely in-person and traditionally have lower wages had a harder time retaining workers even before the pandemic. For example, the leisure and hospitality industry had the highest churn rate of any industry, with the accommodation and food services subsector of that industry consistently recording a churn rate of about 4 percent or more since July 2022.

Across all industries, hiring rates have consistently exceeded quit rates. Looking again at the leisure and hospitality industry, the industry lost 781,000 workers in January 2024, but 1.05 million people were hired in the industry in the same month. In fact, since November 2020, the leisure and hospitality industry has had the highest hiring rate of any industry, ranging from 6% to nearly 19%. This hiring rate remains significantly higher than the national average, which has been around 3.7% since January 2024.

When looking at labor shortages across industries, the education and health services sector and the professional and business services sector consistently have the highest number of job openings. It's worth noting that professional and business services cover a wide range of occupations, including legal services, scientific research, and occupations such as landscape gardeners, cleaners, and garbage collectors.

In more stable sectors with higher wages, such as the financial sector or manufacturing, the number of layoffs is lower.

A closer look at labor force participation

The Bureau of Labor Statistics' latest employment report shows that thousands of people are entering the labor market, which is good. However, labor force participation is still not reaching pre-pandemic levels for a variety of reasons.

If the labor force participation rate were at February 2020 levels, we would have two million additional workers—and this shortage is affecting every industry in nearly every state. Even if every unemployed person filled an open job in their respective industry, there would still be millions of unfilled jobs, highlighting the widespread labor shortage.

To better understand changes in the labor force, it is important to look at labor force participation in different industries.

The entire manufacturing industry suffered a severe setback after losing around 1.4 million jobs at the beginning of the pandemic. Since then, the industry has made significant progress in recovery and has made concerted efforts to fill vacancies. While durable goods manufacturing has recovered more strongly compared to non-durable goods manufacturing, a gap remains as of January 2024, with a total of 622,000 vacancies in the manufacturing industry still unfilled.

On the contrary, the construction industry is struggling with a labor surplus. The number of unemployed workers with experience in this industry exceeds the number of vacancies. In 2023, there were an average of 383,917 vacancies per month, while the monthly average of job seekers with experience in this field is 480,333.

It is important to note that a labor surplus does not guarantee that all jobs will be filled, since workers are not necessarily located in the geographic areas where the vacancies are located. Nor does it mean that an industry will have all the workers it needs in the coming years.

All industries currently have job openings and all industries are actively recruiting. The hiring rate varies considerably from industry to industry, with some industries hiring more than others.

For example, consider the mining and lumber industry, which is relatively small in terms of employment. From January to December 2023, this industry hired the fewest workers, a total of 286,000. This is in sharp contrast to the leisure and hospitality and professional and business services sectors. During the same period, each of these industries hired around 13 million workers.

Unemployment occurs to varying degrees in cases of labour shortages

In the United States, a healthy unemployment rate is usually in the range of 3 to 5%. As of February 2024, the average unemployment rate across the country was 3.9%. In this context, 6.5 million people are unemployed. This group includes people with varying levels of experience from a variety of industries.

In industries with below-average unemployment, fewer experienced candidates are available to fill job openings. This situation leads to increased competition among companies in these industries, which vie for the limited pool of available talent.

The prevalence of remote work has declined sharply since 2021, despite workers' preference for flexibility. This year, only a quarter of all workers work remotely part of the time. While this is a small number compared to the pandemic peak, it towers above the pre-pandemic norm and suggests that remote work will play some role in the years to come.

Certain industries and occupations simply cannot function without in-person work. The highest propensity for in-person work is in food and beverage, transportation, and retail, where nearly 80% of employees work entirely on-site. Industries with a low proportion of physical labor or customer service tasks, on the other hand, are more likely to work remotely, such as information and finance, where less than 30% of employees work entirely on-site.

The U.S. Chamber of Commerce is proud to lead the business community in identifying the actions employers can take to remain competitive and attract and retain talent. Companies can expand their applicant pool by removing barriers to entry into the workforce, such as expanding access to child care, offering innovative benefits, engaging in secondary hiring, and providing new and existing employees with opportunities for on-the-job training and reskilling.

Labor market challenges for businesses are expected to continue for decades to come as our nation's workforce ages and employers add new jobs. Here's what the latest data says about the workforce of the future—and what companies need to know about it.

Learn how the U.S. Chamber is advancing solutions through the America Works Initiative. For more information about the America Works Initiative, contact Stephanie Ferguson at [email protected].

About the authors

Stephanie Ferguson

Stephanie Ferguson is director of global employment policy and special initiatives. Her work on labor shortages has been cited in the Wall Street Journal, the Washington Post and the Associated Press.

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Hoover machines

Makinizi Hoover is a senior manager of strategic advocacy at the U.S. Chamber of Commerce. Her responsibilities include the development and project management of comprehensive data centers that serve as a valuable resource for policymakers, businesses and the public.

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