U.S. hospitals’ labor shortage eases in September, demand remains high
NEW YORK, UNITED STATES — The labor shortages that have troubled U.S. hospitals and health systems since the COVID-19 pandemic are beginning to stabilize, according to a recent report by Fitch Ratings.
While the pandemic significantly increased labor costs and staffing challenges, these issues are now showing signs of easing, even as the demand for healthcare services continues to be strong.
Healthcare wage growth moderates after pandemic spike
According to the U.S. Bureau of Labor Statistics, hospitals experienced a sharp increase in wage growth in late 2021 and throughout much of 2022, with year-over-year average hourly earnings reaching or exceeding 8%.
Fitch Ratings said that this surge was primarily due to hospitals’ efforts to reduce high turnover rates and reliance on external contract labor. However, from January to July of this year, wage growth has moderated to an average of about 3%, slightly above the 4.2% average for 2023.
Consistent healthcare workforce expansion
Despite these challenges, hospitals and health systems have successfully expanded their workforces for 32 consecutive months, with an accelerated pace over the past year.
Hospitals reported average monthly job additions of 18,650 between September 2023 and August 2024, a notable increase from the previous year’s average of 14,510.
As of August, hospital payrolls have risen by 6.7% since February 2020, surpassing the broader private sector’s 4.6% growth during the same period.
Persistent healthcare labor shortages
While the trends are positive, the healthcare sector still faces a significant labor shortage. Job openings in the healthcare and social assistance sector have decreased from 7.9% in January to 6% in July, yet this remains higher than the 4.2% average of the 2010s.
Fitch Ratings indicates that this points to a persistent shortage of clinical labor that will take time to resolve. Additionally, the sector’s quit rates have decreased to 2.3% as of July, still above the last decade’s 1.6% average.
Healthcare demand driven by aging population
The demand for healthcare services remains high, particularly due to the aging baby boomer population, which continues to drive the need for more healthcare workers.
“Hospitals are still dealing with post-pandemic pent-up service demand, especially from seniors, that has kept labor needs high,” noted Fitch Director Richard Park. He added that while high volume levels are beneficial, they also present challenges such as administrative burdens and payment delays, particularly with Medicare Advantage insurers.
As hospitals navigate these challenges, the easing of labor pressures offers hope for a more stable future in healthcare staffing.
