US Employment - March 2022
Higher Payrolls, A Drop in Unemployment, Higher Participation, and Higher Wages Point to a Robust Labor Market
The US job market is the brightest part of the economy. Many job openings, fewer COVID cases, higher wages, dwindling savings, and inflation have prodded workers back into the labor market. Payrolls have almost returned to pre-pandemic levels. The unemployment rate dipped to almost to where it was before the pandemic.
The highlights from The Employment Situation – March 2022 are listed below.
- The unemployment rate fell to 3.6% from 3.8%, almost reaching 3.5%, the lowest level since the pandemic began.
- 431,000 people were added to payrolls in March, the 15th straight month of gains exceeding 200,000 workers. The Bureau of Labor Statistics (BLS) revised January and February’s figures, adding a total of 95,000 workers.
- Payrolls remain 1.6 million less than before the pandemic.
- The labor participation rate ticked up from 62.3% to 62.4% of the population. The largest gain was among working age women. Labor participation includes people who are either working or seeking employment.
- Average hourly earnings increased 13 cents in February to $31.73. That is up sharply from the 1 cent gain in January. Wages are 5.6% higher than a year ago.
- In March, U-6, the broader measure of unemployment, fell from 7.2% in February to 6.9%, the lowest level since January 2020. Many economists believe U-6 is a better estimate of unemployment because, unlike the standard rate, it includes part-time workers who would prefer to work full-time and discouraged people who would like a job but gave up looking.
Many factors are contributing to gains in employment. Five are listed below:
- Most importantly, COVID cases were less severe, and the number of cases continued to fall. People feel safer dining out, traveling, and attending other activities that they avoided during the pandemic. Employment in the leisure and hospitality industries benefited the most, accounting for more than a quarter of the payroll gain. Many parents returned to work because they felt safer leaving their children in daycare.
- There are more job openings than people seeking work. Employers continue to increase wages and benefits to attract and retain workers.
- Downtown businesses have benefited from workers returning to the office in many urban communities.
- The cost of living is rising. Prices of necessities such as gas, food, and shelter continue to increase faster than wages. The Bureau of Economic Analysis reported earlier this week that households’ disposable income is not keeping pace with inflation despite wage gains.
- Savings are diminishing. Savings soared to record levels and helped finance the growth in spending during the pandemic when Americans socked away much of the windfall received from the federal government to offset income losses during the early stages of the pandemic. However, most of the temporary assistance programs have expired, and the savings rate has dipped to a very low level.
For months, many economists had predicted inflationary pressures would subside when workers returned to the workforce. We are not there yet. Policymakers are concerned that wage gains will perpetuate inflation as workers demand higher pay to offset the higher cost of living and businesses increase their prices to cover the added labor costs. The Fed’s target of 2% inflation is far less than the 5.6% wage gain. Higher wages and falling unemployment rates increase the Federal Reserve’s likelihood to continue to raise interest rates to curb inflation, especially if energy costs escalate and further inflate prices.
Check back to HigherRockEducation.org shortly after The Bureau of Labor Statistics releases its March CPI report on April 12th for our summary and analysis. It will provide valuable data and insights into how severely the Russian invasion impacts inflation.