March 29, 2022
(The monthly Employment Situation is scheduled for release by the Bureau of Labor Statistics on Friday, April 1st at 8:30 AM Eastern Time.)
We should expect another strong jobs report in March, with growth in the range of 400,000 to 500,000 jobs, as the labor market gets still closer to its pre-pandemic state. Strong economic growth, coupled with the waning of the pandemic, should mean large jobs gains and a further drop in unemployment.
Labor Force Participation Approaches Pre-Pandemic Rates
The labor force participation rate (LPFR) is getting close to the pre-pandemic levels for nearly all demographic groups. For prime age workers (ages 25 to 54) the 82.2 percent LFPR was just 0.3 percentage points below its year-round average in 2019, and 0.9 percentage points below the peak hit in February 2020.
For men, the LFPR last month was 0.3 percentage points below the 2019 average and 0.5 percentage points below the pre-pandemic peak hit in January 2020. The LFPR for prime age women was 0.2 percent below its year-round average in 2019, but 1.1 percentage points below the peak hit in February 2020.
The 55.6 percent LFPR for workers between the ages of 16 to 24 is 0.3 percentage points below its 2019 average, but 1.4 percentage points below its peak in February 2020. The February LFPR for workers between the ages of 55 and 59 was 73.5 percent, 0.6 percentage points above its 2019 average. For workers between the ages of 60 and 64 the LFPR was 57.6 percent, 0.1 percentage points above its 2019 average.
Its likely that much of the remaining falloffs in LFPR from pre-pandemic peaks will be eliminated in March. In February, 1.2 million people still reported that they were not in the labor force because of the pandemic, either due to concerns about their own health or the health of family members. With omicron wave waning rapidly, this figure should be substantially lower for March.
Slowing Wage Growth
Nominal wages have been increasing at an unsustainable pace since the second half of 2021. There is some evidence that wage growth is slowing, at least in the industries seeing the most rapid pandemic increases.
For production and nonsupervisory workers in leisure and hospitality, the average hourly wage for production workers is up 14.3 percent over the last year but rose at just an 8.2 percent rate comparing the last three months (December-February) with the prior three months (September-November).
For production workers and nonsupervisory workers in the private sector as a whole, the hourly wage rose 6.7 percent over the last year, and 6.8 percent comparing last three months with prior three. The average hourly wage for all workers rose 5.1 percent over the last year, but it increased at a 5.6 percent annual rate comparing last three months with prior three.
Many employers responding to the difficulty in hiring workers by increasing the length of the workweek for the workers they had. The average workweek in February was 34.7 hours, an increase of 0.3 hours from the 2019 year-round average. This increase of nearly 1 percent provides the same amount of labor as another 1.2 million workers putting in the 2019 average workweek. With the labor market getting back to a post-pandemic normal, we might expect that the workweek will move back towards its 2019 level.
Pandemic Sensitive Sectors Likely to See Strong Growth
People are largely returning to their pre-pandemic habits when it comes to things like going to restaurants and traveling. The Open Table data on reservations is now very close to pre-pandemic levels. Similarly, the falloff in travelers, relative to pre-pandemic levels, reported by TSA is likely explained by fewer business travelers.
These patterns mean we should again see strong job growth in the hotel and restaurant industries. We should also see good growth in the arts and entertainment industry, as people again are going to see music and other forms of live entertainment.
Stronger Growth in State and Local Government Employment
Employment by state and local governments is still down by 695,000 from its pre-pandemic level. This is almost one-third of the total shortfall in jobs. This sector added 24,000 jobs in February, which continues to have difficulty hiring. They added 24,000 jobs in February but are still down 695,000 from pre-pandemic levels. This is almost one-third of the total shortfall in jobs. That was the fourth consecutive month of job gains, but at the February pace it would take almost two and half years to get back to the pre-pandemic level of employment.
Stronger Job Growth in Caregiving Industries
The caregiving sectors also have employment sharply below pre-pandemic levels. Employment in nursing and residential care facilities was almost 400,000 below its pre-pandemic level in February, while jobs in childcare were down by 124,000. These drops are equal to 11.8 percent of pre-pandemic employment in both sectors.
We have been seeing modest job growth in both areas in recent months. This may pick up some in March, if employers are making these jobs more attractive, or alternatively, if some workers find they don’t have better alternatives.
Further Drops in Unemployment is Expected for Disadvantaged Groups
Blacks and Hispanics both saw large drops in their unemployment rates in February. The unemployment rate for Blacks fell 0.3 percentage points to 6.6 percent, 1.2 percentage points above pre-pandemic low. For Black teens the drop was 2.9 percentage points to 17.8 percent, 2.8 percentage points above the pre-pandemic low and 7.9 percentage points above the low hit last June. The unemployment rate for Hispanics fell 0.5 percentage points to 4.4 percent. The February unemployment rate for Blacks was still 1.2 percentage points above its pre-pandemic low, while the rate for Hispanics was 0.4 percentage points above its pre-pandemic low. With a good jobs report, we should see the unemployment rates for these groups move closer to their pre-pandemic level.
Distribution of Unemployment by Reason Looks Normal
The percent of unemployment due to voluntary quits has risen sharply the last two months. At 15.1 percent in February, the share is what we would expect for a 3.8 percent unemployment rate. A substantial rise in this number would suggest that the labor market is getting still tighter, which would raise more concerns about inflation.
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