By CHRISTOPHER RUGABER
WASHINGTON — Strong hiring, strong wage increases and strong price increases are drawing more Americans into the workforce. The trend, if it holds, would spell long-awaited relief for companies that have been desperate to fill jobs.
The number of people working or looking for work has yet to fully recover from the massive layoffs that followed the COVID-19 eruption. But Friday’s jobs report showed it is clearly headed in that direction. A sustained surge in job seekers could eventually cool off last year’s red-hot wage increases, ease the Fed’s concerns about runaway inflation, and possibly even put the economy on a more sustainable growth path.
If so, it would represent an impressive result given the host of economic uncertainties that threaten to undermine growth, from rising inflation made worse by Russia’s invasion of Ukraine to the still damaging effects of COVID-19 and the just-started series of the Federal Reserve. interest rate hikes, which are shaping up to be the most aggressive in years.
Friday’s government jobs report for March also showed businesses and other employers added 431,000 jobs last month and the unemployment rate fell to 3.6%. That rate is only slightly higher than the pre-pandemic unemployment rate of 3.5%, the lowest in five decades.
Here are five main takeaways from the jobs report:
The labor shortage is decreasing
After the pandemic hit the US economy in the spring of 2020, putting 22 million people out of work, many Americans seemed reluctant to return to low-paying jobs in restaurants, hotels and other service businesses, particularly while COVID was still raging. Employers posted millions of jobs that became vacant.
Now, however, with wages rising at their fastest rate in decades and COVID-19 steadily disappearing, Americans are returning to the workforce at the fastest rate in 20 years.
This can be seen most clearly among so-called prime-age workers, ages 25 to 54, whom economists track because they mostly exclude students and people likely to retire.
Some 80% of people in that age group now have jobs, not far from the pre-pandemic figure of 80.5%. By April 2020, the figure had sunk below 70%.
“We’re within striking distance of pre-pandemic levels,” said Nick Bunker, an economist at Indeed Hiring Lab. “We could be there in a couple of months.”
Women return to the workforce
With the reopening of schools and the recovery of daycare centers, women have also accelerated their return to the workforce. During the pandemic, women, particularly mothers, were more likely to lose their jobs or quit and leave the workforce altogether.
However, that trend reversed sharply in March. Of the 418,000 people who found or started looking for work that month, roughly three-quarters were women. The proportion of women who have or are looking for work jumped to 76.5% in March, seven tenths more than the previous month and not far from the pre-pandemic level of 76.9%.
The equivalent figure for men is much higher, at 88.7%, but it is also half a point lower than it was before COVID-19.
High pay to keep the Fed on its toes
With consumers spending steadily and the economy growing at its fastest pace in nearly four decades, companies have been desperate to fill a record level of job openings. Companies large and small have raised wages to find and keep workers.
In March, average hourly wages excluding supervisors rose 6.7% from a year earlier, matching the annual pace in January and February. Except for two months distorted by the pandemic, those are the strongest annual gains in four decades.
While these healthy raises are great for workers, they’re fueling the biggest rise in inflation since the early 1980s. Unless businesses can find ways to make their operations more efficient, they’ll spend at least some of their higher labor costs to customers in the form of higher prices.
On a monthly basis, wage gains have slowed over the past three months, Bunker said, suggesting wage increases may have peaked.
Still, the Fed is expected to raise its short-term benchmark rate by half a percentage point at its May and June meetings. Those would be the Fed’s first half-point rate hikes since 2000, and it would be a sign of how quickly Fed Chairman Jerome Powell wants to start cooling the economy to contain inflation.
Of the top 11 industries in the US economy, six have regained all the jobs they lost during the pandemic recession. Most other industries are pretty close.
The only exception: Leisure and hospitality, which includes restaurants, bars, hotels, amusement parks and other forms of leisure. Leisure and hospitality, one of the largest employers in the United States, still has 1.5 million fewer jobs than before the pandemic, a decrease of 8.7%.
The changes also allow a glimpse of the evolution of the economy in the last two years. The industry with the largest percentage increase has been transportation and warehousing, which now has 10% more jobs than before the pandemic. That increase reflects the huge increase in online shopping in the last two years.
Racial gaps narrow
The nation’s most stubborn racial unemployment gap, the one between black and white workers, narrowed a bit in March. Unemployment for African Americans fell to 6.2%, from 6.6%, while for whites it fell to 3.2%, from 3.3%. That three-point gap is smaller than a year ago, when unemployment for black workers was 9.5% and for whites 5.3%.
Still, unemployment for black workers remains nearly double that for whites, an enduring ratio that William Darity, an economist at Duke University, has called “a powerful index of discrimination.”