WASHINGTON (`) — Over the past year, America’s job market has been running like a mature machine, adding an impressive average of 540,000 workers a month despite a punishing rate of inflation, Russia’s ruinous war in Ukraine, a still-risky pandemic and nervousness in the financial markets and the Prospect of significantly higher borrowing costs.
Hiring gains have exceeded 400,000 every month since May 2021.
And most economists believe the winning streak has continued: they expect Friday’s jobs report for April to show employers added 400,000 jobs over the past month, according to a survey by data firm FactSet. They have also forecast that the unemployment rate will remain at 3.6%, a level above a half-century low set just before the pandemic broke out two years ago.
The resilience of the labor market is particularly striking amid galloping inflation, rising borrowing costs and widespread fears that the US Federal Reserve’s sharp hikes in interest rates will eventually trigger a recession.
“The job market remains in solid shape as we enter the spring quarter,” said Stuart Hoffman, chief economic adviser at PNC Financial. “Demand for labor is very strong… Firms are competing for labor and offering higher wages.”
This week, the Labor Department provided further evidence that the job market is still booming. It reported that just 1.38 million Americans were on traditional unemployment benefits, the fewest since 1970. And it said employers posted a record high of 11.5 million job openings in March and that layoffs remained well below pre-pandemic levels.
In addition, the economy today has an average of two vacancies for every unemployed person. This is the highest such proportion on record.
And in another sign that workers are enjoying unusual leverage in the labor market, a record 4.5 million people quit their jobs in March, apparently confident they could find a better opportunity elsewhere. Additionally, 3.8 million people re-entered the labor market last year, meaning they either have a job now or are looking for one. Some of them were on the sidelines for many months after the outbreak of the pandemic.
Despite all the glimmering signs of a healthy job market, it’s unclear how long the hiring surge will last. On Wednesday, the Federal Reserve raised interest rates by half a percentage point – the most aggressive move since 2000 – and announced more large rate hikes. As the Fed’s series of rate hikes come into effect, it will become ever more expensive for consumers to borrow, spend and rent.
Economists warn that these sharply higher borrowing costs could derail the remarkably strong recovery from the COVID-19 recession, which wiped out 22 million jobs in March and April 2020. The ultra-low interest rates engineered by the Fed. Generous relief checks gave households the financial means to keep up their spending. And the rollout of vaccines encouraged them to return to shops, restaurants and bars.
But chronic shortages of goods, supplies and labor have contributed to skyrocketing inflation — the highest inflation rate in 40 years. Russia’s invasion of Ukraine in late February dramatically deteriorated the financial landscape, sending global oil and gas prices skyrocketing and seriously clouding the national and global economic picture.
Meanwhile, as many industries have been slowed by labor shortages, companies have been raising wages to attract applicants and retain their existing workforce: Hourly wages rose 5.6% in March from a year earlier – the third-biggest monthly rise in Labor department records the year 2007.
Despite this, wage increases have not kept pace with the rise in consumer prices: Adjusted for inflation, hourly wages have actually fallen for 12 straight months.
That’s why the Fed, which most economists say has been far too slow to recognize the threat of inflation, is now aggressively raising rates. His goal is notoriously difficult: a so-called soft landing.
“Trying to slow the economy just enough without triggering a recession,” said Rubeela Farooqi, chief US economist at High Frequency Economics. “Their track record is not particularly good.”
Today’s breaking news and more in your inbox
Comments are closed.