Strong hiring, low unemployment making economy pivot to pandemic

The Labor Department said Friday that employers added 678,000 workers to their payrolls in February, the biggest gain in seven months. The unemployment rate fell to 3.8% from 4.0% a month earlier, reaching a near 50-year low of 3.5% just before the pandemic.

More than 300,000 people joined the workforce, and the ranks of those reporting being unable to work due to COVID-19 fell by 1.8 million. Wage growth cools, a sign that a nationwide labor shortage may be narrowing as employers fill low-paying positions that were long dormant.

Hotels, restaurants, amusement parks and other hospitality industries led the way in hiring as firms sought to accommodate the growing number of vacationers, conference attendees and business travelers. Large states and cities have lifted some of the remaining COVID restrictions in recent days, which could further boost business and hiring.

Friday’s jobs numbers were the result of surveys of households and businesses in mid-February and thus did not show the impact, if any, on the economy of Russia’s invasion of Ukraine last week. Economists said bigger risks loomed large, including a sharp jump in oil prices, which could slash household spending and ultimately lead to economic and labor market recovery.

“We’re getting a preview of what the post-pandemic labor market might look like,” said Daniel Zhao, senior economist at Glassdoor. “The fundamentals of the labor market are strong.”

The sharp drop in the unemployment rate – from 6.2% a year ago and to a post-World War II high of 14.7% in April 2020 – could excite the Federal Reserve as it moves to raise interest rates for the first time when The epidemic started from March 2020, some economists said. Fed Chairman Jerome Powell told Congress this week that he planned to propose a quarter-percent increase at the Fed’s March 15-16 meeting to tackle high inflation.

The strong job numbers were overshadowed by investor concerns about Russia’s intense military offensive on Ukraine. The Dow Jones Industrial Average fell 179.86 points, or 0.53%, to 33614.80. The S&P 500 index fell 34.62 points, or 0.79%, to 4328.87.

Economists said the three shifts could lead to strong job growth this spring.

The first is the steady decline in virus cases. The second is the move in recent days by some states and cities such as Washington, New York, California and Hawaii to remove rules that require customers to be vaccinated and wear masks. Third is a potential drop in household savings, which could pressure people to rejoin the labor market to collect paychecks, especially when inflation rises and the stock market falters.

There are still 2.1 million, or 1.4%, fewer jobs in the US than in February 2020. This gap will close in a few months at the current pace of hiring. The economy has created three million jobs since October.

While Covid-19 infections have fallen sharply from their January peak, the pandemic is not over. Many industries say they still struggle to find workers; Job opportunities remain near record levels and employees continue to leave jobs at record rates, often leading to better-paying jobs, leading to staff shortages in many firms.

Employers like Hotel Operator Garn Development are desperate to fill positions, especially those at entry-level, to accommodate strong spending by families.

Gabe Garn, operations manager for the family-owned company, said bookings at the company’s hotels in Utah and several other western states grew nearly 60% from 2020 last year and continue to this year. Hotel managers have to clean rooms, serve meals and perform other tasks normally reserved for low-paid employees, Mr. Garn said.

While the company has had the fortune of a few late jobs, many workers left soon after being hired for better pay in other industries.

Mr Garn said, “Almost other times you don’t get the schedule you want, you just give up and look for something else because there’s recruiting everywhere.” “Now when we do interviews, it’s almost like we’re selling ourselves versus how the employee sells themselves to us. Now you have to convince them that you’re worthy of theirs and vice versa.”

The hospitality industry – one of the hardest-hit sectors during the pandemic due to a sharp drop in travel – accounted for 1 in 4 new jobs across the US in February. But the benefits were broad-based, including office jobs, construction, healthcare and other sectors. The Labor Department also revised the last two months of job growth.

The strong demand for hiring in such industries appears to benefit groups that typically have high levels of unemployment. The unemployment rate for workers without a high-school diploma fell to 4.3% last month, the lowest on record since 1992. The unemployment rate for black workers fell 0.3 percent to 6.6%, although the rate was twice that of white workers. , The unemployment rate for Hispanic workers fell by half a percentage point to 4.4%.

The decline in unemployment came from people who were unemployed for a short period of time. The number of people unemployed for less than five weeks fell by 286,000, while the number of people unemployed for six months or more remained stable.

Several changes seem to be helping industry and other service providers fill jobs.

Higher wages are potentially pushing workers back into the labor force, especially as the cost of living and household savings – while falling to historically high levels after stimulus checks and unemployment insurance from the federal government last year .

The average hourly wage of private sector workers increased by just one paise from January last month, after five consecutive months in which it had increased by at least a penny. Average wages fell last month for manufacturing, education and health and hospitality workers. Still, overall, workers earned 5.1% more in February than a year earlier.

The labor force participation rate – the share of people employed or looking for work – increased from 62.2% to 62.3%. But it remained 1.1 percentage points below its pre-pandemic level. Some economists are skeptical about whether the rate will recover completely. Many older workers retired early during the pandemic, and immigration has declined sharply.

The labor market may approach or perhaps be at or beyond a level of employment that can continue without stopping strong inflation. This has made it difficult for the Fed. Inflation in January at 7.5% – far higher than the central bank’s target of 2% – The Fed plans to raise interest rates several times this year to prevent the economy from overheating. But policymakers want to do so at a modest pace so that job growth can continue.

In December the Fed projected that unemployment would settle at 4% in the long run.

Amherst Pierpont chief economist Stephen Stanley said it could be difficult to lay off more workers. The share of adults aged 25 to 54 with jobs is only one percent lower than in February 2020. He estimates that there are about a million workers in that age group who are on edge. “The notion that there are millions of workers waiting to re-enter the job search very soon is probably not correct,” he said in a note to customers. “The labor market is heating up almost entirely due to extremely strong demand, a situation that is unlikely to be reversed for quite some time.”