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Real Time Economics
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U.S. payrolls grew by 431,000 in March and the jobless rate fell to 3.6% from 3.8% one month earlier. Jeff Sparshott and Greg Ip here to take you through the Labor Department's latest snapshot of the economy.
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Labor Supply Grows, Demand Grows Faster
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A healthy labor market needs both a steady supply of and demand for workers. Since the start of the pandemic we’ve had the demand but not the supply. That’s changing: The labor-force participation rate ticked up to 62.4% in March from 62.3% in February, though that is still down a full percentage point from February 2020. For workers aged 25 to 54, a figure less affected by population estimates and retirement, participation jumped from 82.2% to 82.5%, down just half a point from before the pandemic. The receding pandemic helped: 874,000 people didn’t look for work because of Covid, down from 1.2 million in February. Demand for workers is growing even faster, which is why the unemployment rate dropped to 3.6% from 3.8% in February, close to its prepandemic trough of 3.5%.
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That is sustaining solid wage gains: Hourly earnings rose 0.4% for the month and 5.6% from a year earlier. For leisure and hospitality workers, they jumped 1.2% on the month and 11.8% from a year earlier. These rates of growth are probably not compatible over the long run with the Federal Reserve’s 2% inflation target. —Greg Ip
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By One Measure, Employment Has Nearly Recovered
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With a healthy gain of 431,000 in March from February, and previous figures revised up a total of 95,000, nonfarm employment is now down just 1.6 million from February 2020, before the start of the pandemic. But employment, measured by the separate survey of households, jumped 736,000, and is down just 408,000 from February 2020. Because the unemployment rate is based on the household survey, this pushed the unemployment rate down to 3.6% from 3.8%. The two surveys often diverge because of normal statistical variation, and because they define employment differently. For instance, someone with two jobs is counted twice by the payroll survey but once by the household survey. When household employment is recalibrated to match the payroll concept, the divergence all but disappears: it’s down 1.5 million from before the pandemic. —Greg Ip
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Friday’s employment figures underscore the urgency Federal Reserve officials feel to quickly withdraw economic stimulus by raising interest rates in potentially larger intervals in the coming months. Even before the March report, Fed Chairman Jerome Powell expressed concern that the labor market is overheating, with job and wage growth rising at levels that may keep inflation too far above the central bank’s 2% target. The Fed raised its benchmark short-term rate last month by a quarter percentage point to a range between 0.25% and 0.5%, the first of what officials have indicated could be a series of many rate rises this year. In the two weeks since they last met, many Fed officials have indicated they could support raising
rates by a half percentage point instead of the traditional quarter point at their coming meeting, May 3 to May 4. —Nick Timiraos
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More women than men joined the labor force last month. Even with a solid gain in March, however, there are still about 864,000 fewer women either working or looking for work than before the pandemic hit. There are about 690,000 more men in the labor force than in February 2020. "Women’s careers have been most severely disrupted, both due to the industry composition of job losses and due to the pandemic’s effects on childcare and schooling. The large 324,000 increase in female labor force participation [in March] suggests that women may finally be able to resume their careers and get back on the promotion ladder," said Julia Pollak, chief economist at ZipRecruiter.
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As Covid-19 cases fell, so did the pandemic's impact on the labor market. Absences from work due to illness were the lowest since June 2021.
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The share of employees who teleworked because of the pandemic was the lowest of the Covid-19 era, and the number of people unable to work because their employer closed or lost business due to the pandemic was the lowest on record. (Pandemic-specific questions were first included in the May 2020 survey.)
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The number of people on temporary layoff surged at the height of the pandemic. In March, the figure had about returned to its February 2020 level.
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And the unemployment rate is only one-tenth of a percentage point from its pre-pandemic bottom of 3.5%, which was a 50-year low.
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The broad picture of recovery masks the underlying shifts in economic activity spurred by the pandemic. People are buying more goods—especially online—so employment in transportation, warehousing and retail has surpassed levels in February 2020. Leisure and hospitality, state and local government, and education and health services are among the sectors that are still lagging.
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What Economists Are Saying
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"The data show the labor market still has strong positive momentum and is making rapid progress towards pre-pandemic health." —Rubeela Farooqi, High Frequency Economics
"The persistent increase in prime-age labor force participation and decline in unemployment is an indicator that Americans are looking for work and employers are hiring them. Concerns about labor shortages seem to be more about employer competition than about Americans not working." —Daniel Zhao, Glassdoor
"The job market is on a solid trajectory as robust demand pulls more workers into employment with strong and increasingly stable wage growth." —Nick Bunker, Indeed
"Strong wage gains should continue to draw individuals into the labor market, boosting the labor force participation rate. Such a rise in labor supply will be essential to alleviate some of the current inflationary pressures." —Kathy Bostjancic, Oxford Economics
"The rapid drop in the unemployment rate says that the pool of potentially available workers continues to drain quickly. With the large number of job openings reported in the most recent data, there will continue to be significant upward pressure on wages." —Mike Fratantoni, Mortgage Bankers Association
"There were no signs that the war in Ukraine or the surge in oil prices had put a temporary hold on hiring in any parts of the economy." —Michael Pearce, Capital Economics
"Hiring continues along at a robust pace that is still more than twice the average of the past expansion. If the March pace were to be sustained, payrolls would be back to their pre-Covid levels in July of this year." —Sarah House, Wells Fargo
"American labor market dynamics remain robust with wages rising and individuals re-entering the workforce at a remarkable pace." —Joseph Brusuelas, RSM US
"There are currently in essence two job openings for each unemployed person. That is why wages are rising by a hefty 6.8%. Workers are not better off, however, as inflation is running even higher at 7.9%." —Lawrence Yun, National Association of Realtors
"Although the economy is showing signs of slowing and Fed tightening is set to cool conditions even further, the strength of the labor market was still apparent in March." —Jim Baird, Plante Moran Financial Advisors
"March continued an extraordinarily steady run of robust job gains, paired with labor force expansion, rapidly declining unemployment, and continued wage pressures. Overall, the March employment data reflects a labor market that continues to run hot and with little sign of momentum slowing." —Robert Rosener, Morgan Stanley
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Real Time Economics offers a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here.
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