The economy added 678,000 new jobs in February, bringing the unemployment rate down below 3.8 percent. The December and January jobs numbers were also revised up by 92,000. This resulted in 2,105,000 fewer jobs than before the pandemic.
Increase in Hours Likely to Push Private-Sector Hours above Pre-Pandemic Low
The decrease in average workweek length in January was partly reversed by the waning of the omicron. The combination of the increase in hours and the rise in jobs led to an 0.8 percent increase of the index of aggregate weekly work hours. This is equivalent to more than 1,000,000 private sector jobs without any change in hours.
The index of aggregate hour, which only measures the private sector and is 0.2 percent lower than its pandemic peak, is just 0.2%. The unincorporated self employed are now 440,000 higher than the 2019 average, and the incorporated selfemployed are up 220,000 over the February 2019 level (incorporated self-employed data aren’t seasonally adjusted). Hours worked in the private sector are likely to be higher than their pre-pandemic peak.
Moderating Wage Growth Could Be Possible
We have seen wage growth in low-paying sectors outpace overall wage growth over the past year. This trend appears to be continuing, even though the rate for growth in the lowest paid sectors may be slowing.
Over the last year the average hourly wage overall rose 5.1 percent, but it was at a 5.6 percent annual rate when comparing the last three months (December-February) with the prior three (September-November).
Production and nonsupervisory workers saw their hourly wages rise by 6.7 percent and 6.8 percent respectively over the past year. This is compared with the previous three months. The hourly wage for retail production and nonsupervisory workers increased 7.7 percent in the last year. This compares to the 9.1 percent annual rate for the previous three months. The average hourly wage for leisure and hospitality workers has increased by 14.3 percent in the last year. However, it rose only 8.2 percent compared to the previous three months.
As a rough estimate, a 5.0% rate of wage growth combined with the 2.3% rate of productivity growth over the past three years results in a 2.7% annual inflation rate.
Many sectors have jobs that are close to or above pre-pandemic levels
Strong job growth in recent months has led to employment in many sectors reaching pre-pandemic levels. Retail employment grew by 37,000 in February. It is now 104,000 more than it was before the pandemic. In February, 6,900 new jobs were added by airlines. The sector’s employment is up by 14,400 since February 2020.
In February, construction added 60,000 jobs, leaving employment at 11,000 below pre-pandemic levels. Manufacturing jobs increased by 36,000 but are still 178,000 lower than February 2020. The decline in employment in the auto industry was a major factor in growth, with 18,000 jobs lost due to the Canada convoy and semiconductor shortage.
The gap in employment from pre-pandemic levels continues to be concentrated in a few sectors. The sector of health care, which added 64,000 jobs in February but is still down by 306,000 from pre-pandemic levels, has seen a decline of 36,000. This is due to a decline in the number of jobs in residential and nursing care facilities.
Restaurants added 124,000 new jobs in February but employment is still down 824,000. This is despite real sales being above pre-pandemic levels. Although 28,000 jobs were added in the arts and entertainment sector, 263,000 are still below their pre-pandemic levels.
State and local governments are still having difficulty hiring. They added 24,000 jobs in February but are still below the pre-pandemic levels of 695,000. This represents almost one-third the total job shortage.
The most disaffected groups experience the largest drop in unemployment
As is often the case when the labor market tightens the most disadvantaged groups reap the greatest benefits. This was the case last month. Blacks’ unemployment rate fell by 0.3 percentage point, to 6.6%. This is 1.2 percentage points higher than the pre-pandemic high. Black teens saw a drop of 2.9 percentage points to 17.8%, which was 2.8 percentage point above the pre-pandemic low. It was 7.9 percentage point above the low reached last June.
Hispanics’ unemployment rate fell by 0.5 percentage point to 4.4%, which is 0.4 percentage points higher than the prepandemic low. The lowest recorded unemployment rate was the unemployment rate for workers who do not have a high school diploma. It fell by 2.0 percentage points to 4.3 percent. The unemployment rate for Asian Americans fell by 0.5% to 3.1%, but it is still 1.0 percent above the pre-pandemic low.
The Labor Market Near Normal, Despite the Pandemic Waning
Although 1.2 million people reported being outof work in February due to the pandemic still exist, this is down from January’s 1.8million. This figure can be attributed to the large drop in labor force participation since the pandemic. Prime age workers saw their labor force participation rate rise by 0.2 percentage points in February to 82.2 per cent. This level was not reached after the Great Recession, but it is still below 0.9 percentage points from its pre-pandemic peak.
This increase was all for men. Men saw a 0.6 percentage point increase in labor force participation in February, compared to a drop of 0.2 percentage points in women’s participation. This anomaly could be because participation rates dropped from pre-pandemic levels between men and women up to this month.
The share of long-term unemployment (more than 26 weeks) increased by 0.8 percentage point to 26.7 percent. This is slightly higher than normal but still far below the 40 plus% shares of the spring and summer last year. The share of unemployment caused by voluntary quitting rose to 15.1 per cent, which is normal in a strong labor market.
Overall, the labor market is looking very good
The pandemic has had little impact on the labor market. While unemployment and employment rates aren’t fully back to prepandemic levels yet, they are close to the levels of 2018, when many economists claimed we were at full-employment.
The fastest growing wages are in low-paying sectors. There are signs of slowing, which can be a good sign as wage growth at this rate cannot be sustained with high rates of inflation.
