WASHINGTON — Solid hiring, strong wage increases and sharp price hikes are drawing more Americans into the workforce. The trend, if sustained, would bring long-awaited relief to companies desperate to fill vacancies.
The number of people either working or looking for work has still not fully recovered from the mass layoffs following the COVID-19 outbreak. But Friday’s job report showed that things are clearly moving in that direction. A sustained surge in jobseekers could eventually cool last year’s sizzling wage gains, allay the Federal Reserve’s concerns about raging inflation, and possibly even put the economy on a more sustainable growth path.
If that were the case, it would be an impressive result given the array of economic uncertainties threatening to sap growth, from a surge in inflation exacerbated by Russia’s invasion of Ukraine, to the still-damaging effects of COVID, to the The Fed’s rate hikes, which have just begun, are developing into the most aggressive in years.
The government’s Friday jobs report for March also showed that businesses and other employers added 431,000 jobs over the last month and that the unemployment rate fell to 3.6%. That rate is only slightly above the pre-pandemic unemployment rate of 3.5%, the lowest in five decades.
Here are five top takeaways from the job report:
After the pandemic hit the US economy in spring 2020 and put 22 million people out of work, many Americans seemed unwilling to return to low-paying jobs in restaurants, hotels and other service businesses, especially while COVID was still raging. Employers advertised millions of vacancies that remained unfilled.
Now, with wages rising at the fastest pace in decades and COVID steadily easing, Americans are pouring back into the workforce at their fastest pace in 20 years.
This is most evident in the so-called full-time workers aged 25-54, which economists follow because they largely exclude students and those expected to retire.
A full 80% of people in this age group are now employed, not far from the 80.5% figure pre-pandemic. In April 2020, the value had fallen below 70%.
“We’re well away from pre-pandemic levels,” said Nick Bunker, an economist at Indeed Hiring Lab. “We could be there in a few months.”
WOMEN ARE GETTING BACK INTO THE WORKFORCE
With schools reopening and daycare centers recovering, women have also accelerated their return to the labor market. During the pandemic, women – particularly mothers – were more likely to either lose their jobs or quit and retire altogether.
However, this trend reversed significantly in March. Of the 418,000 people who either found work or started looking for a job this month, about three-quarters were women. The proportion of women either in employment or looking for a job rose to 76.5% in March, up seven-tenths from the previous month and not far from the pre-pandemic level of 76.9%.
The corresponding number for men is much higher at 88.7%, but is also about half a point below pre-COVID levels.
HIGH WAGES WILL KEEP THE FEDERAL RESERVE ON THE MARGIN
With consumers spending steady and the economy growing at its fastest rate in nearly four decades, companies have been desperate to fill a record number of vacancies. Businesses large and small have raised wages to attract and retain workers.
In March, average hourly wages without a supervisor rose 6.7% year-on-year, matching the annual pace seen in January and February. Barring two months distorted by the pandemic, these are the strongest annual gains in four decades.
While such healthy hikes are great for workers, they’re fueling the biggest surge in inflation since the early 1980s. Unless companies find ways to make their operations more efficient, they will pass at least some of their higher labor costs on to customers in the form of higher prices.
On a monthly basis, wage increases have slowed over the past three months, Bunker said, suggesting wage increases may have peaked.
Still, the Fed is widely expected to raise its short-term interest rate by half a percentage point at its May and June meetings. This would be the Fed’s first half-point rate hike since 2000 and a sign of how quickly Fed Chair Jerome Powell plans to start cooling the economy in a bid to curb inflation.
MOST INDUSTRIES HAVE ALL THEIR JOBS RECOVERED
Of 11 key industries in the US economy, six have regained all of the jobs they lost during the pandemic recession. Most other industries are pretty close.
The only exception is leisure and hospitality, which includes restaurants, bars, hotels, amusement parks and other forms of recreation. One of America’s largest employers, leisure and hospitality, still has 1.5 million fewer jobs than before the pandemic, down 8.7%.
The changes also provide insight into how the economy has evolved over the past two years. The industry with the largest percentage gain was transportation and warehousing, which now has 10% more jobs than before the pandemic. This increase reflects the surge in online shopping over the past two years.
THE LAWN DIFFERENCES HAVE REDUCED BUT STILL EXIST
The nation’s most persistent unemployment gap — that between black and white workers — narrowed somewhat in March. Unemployment for black Americans fell from 6.6% to 6.2%, while for whites it fell from 3.3% to 3.2%. That three-point gap is narrower than a year ago, when unemployment was 9.5% for blacks and 5.3% for whites.
Yet unemployment for black workers remains nearly twice that for white workers, a persistent rate that William Darity, an economist at Duke University, has called “a strong index of discrimination.”