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US employers added jobs at a healthy pace in March, despite the economic shock that followed Russia’s invasion of Ukraine.
The Labor Department reported Friday that employers added 431,000 jobs last month as the unemployment rate fell to 3.6% from 3.8% in February. Employment gains for January and February were also revised upwards by a total of 95,000 jobs.
Employment growth in March was widespread, with bars and restaurants adding 61,000 jobs, retailers 49,000 and manufacturers 38,000 jobs.
The labor market remains exceptionally tight, putting upward pressure on wages and prices and fueling inflation fears at the Federal Reserve.
“It’s an unbalanced labor market,” Fed Chairman Jerome Powell said last week. “It’s great for workers. But we need the labor market to be sustainably greenhouse.”
Powell and his colleagues fear that if high inflation is left unchecked, it will eventually derail the jobs recovery. Prices in February were up 6.4% from a year ago, according to the Fed’s preferred measure of inflation — the largest increase since 1982.
The central bank began raising interest rates in March in an effort to calm demand and control prices. Powell said more aggressive rate hikes could be on the cards in the coming months.
A separate Labor Department report this week showed that vacancies outnumbered unemployed by almost two to one. Employers were forced to offer substantial wage increases in an effort to attract scarce workers.
“We don’t expect to see wage pressures drop anytime soon,” said Julia Pollak, chief economist at job search site ZipRecruiter.
Wages have increased by an average of 5.6% over the past twelve months.
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From the great resignation to the great return
There are encouraging signs that more people could join the workforce as health prospects improve.
Friday’s report showed the number of people working or looking for work rose by 418,000 in March, although the labor force was still somewhat smaller than it was before the pandemic.
In February, nearly 8 million people were off work because they had COVID-19 or were caring for someone who was sick. By March, that number had fallen to less than 3 million, according to the census bureau.
Pollak also mentions a ZipRecruiter survey that found more people expect to enter the workforce this year.
“The Great Return is the new labor market story,” Pollak said. “People are tired of sitting around doing nothing. Also, with the COVID relief payments gone, people are starting to feel a little more financial pressure to get back to work.”
The labor market is experiencing a lot of churn
There is also significant turnover in the job market, with millions of workers resigning every month – in many cases to move on to better jobs. Layoffs, on the other hand, are rare, as employers are eager to retain the workers they already have.
“People have confidence that they can leave their old job and find a new one,” said economist Nick Bunker of the Indeed Hiring Lab. “Those left are seeing a level of security that we haven’t seen in a long time.”
The challenge of finding workers may push some employers to invest in more labor-saving technologies, which would allow the existing workforce to be more productive.
“I think that will happen in service industries,” Powell told a meeting of business economists last week. “So you might just have some productivity there, which would be great. It would make those high wage increases that we’re seeing more sustainable.”