Microsoft president sees ‘new era’ of stagnating labour pool

Labour force participation shrank for the second time in three months, to 62.2%, showing no persistent improvement since the start of 2022

U.S. companies are facing a "new era" in which fewer people are entering the workforce and pressure to pay higher salaries may become permanent, Microsoft Corp's President Brad Smith told Reuters in an interview.

(Sign up to our Technology newsletter, Today’s Cache, for insights on emerging themes at the intersection of technology, business and policy. Click here to subscribe for free.)

At the software maker's Redmond, Washington, headquarters, Smith highlighted one source of what he called today's "greater economic turbulence." In his office, he walked over to a wall-sized touchscreen device and pulled up a series of charts, showing how population growth has tumbled in the United States, Europe, China and Japan.

The trend of around 5 million people expanding the U.S. working age population every five years since 1950 has shifted, starting in the period between 2016 and 2020 when growth slowed to 2 million, and is now slowing further, said Smith late last week, citing United Nations data. Major markets overseas have seen outright labour force declines.

"That helps explain part of why you can have low growth and a labour shortage at the height at the same time. There just aren't as many people entering the workforce," said Smith, who helps oversee the nearly $2 trillion company selling cloud-computing services to major businesses.

Government stimulus during the pandemic, COVID-19 concerns, childcare and other factors have contributed to the current labour shortage as well.

Executives including Mark Zuckerberg, chief executive of Facebook parent Meta Platforms Inc, have recently fretted about the economy. Zuckerberg warned the United States might face "one of the worst downturns that we've seen in recent history," though Smith said it would be premature to declare a recession inevitable.