The confusing job report in December raises concerns about how many Americans may have left the workforce permanently due to the COVID-19 pandemic.
The United States added 199,000 jobs last month, well below economists’ expectations, but unemployment fell sharply to 3.9 percent, the Ministry of Labor reported on Friday. Wages also rose 0.6 per cent last month while labor force participation remained stable, a sign of growing demand for workers before the omicron variant took off in the US
Employers have been fighting for months to hire and retain workers, who have gained new influence in a pandemic-controlled economy.
More than 10 million open jobs were posted in November, according to data from the Ministry of Labor published on Tuesday, and more workers left their jobs voluntarily – probably to take new ones with higher wages – than ever before. Unemployment claims have also remained below pre-pandemic levels since mid-November, with companies desperate to avoid layoffs of scarce workers.
Nevertheless, the intense need for labor has not drawn about 1.7 million Americans who left the labor force in 2020 – and thus not included in unemployment – back into the job hunt.
“Unemployment is now only 0.4 percentage points higher than it was before the pandemic. But with 1.7 million fewer people in the labor force than could be expected given the state of the economy, the labor market is less recovered than unemployment. Propose,” he wrote Jason FurmanJason FurmanManchin’s “intervention” may have saved the Democratic Party – for now liberal economists got the note: Build Back Better could not possibly worsen inflation Biden should signal to the Fed that it is okay to raise interest rates next year MORE, a top economic adviser to the Obama White House, and Wilson Powell III of Harvard University, in a Friday analysis.
Skinny labor force participation may limit economic growth and productivity, while leaving more Americans out of the full benefits of the post-pandemic recovery. Bringing more Americans back to work is also the key to reducing pressure on supply chains and consumer prices, which rose in November at the fastest annual pace in four decades.
Economists expected covid-19 vaccines, the end of federal pandemic unemployment assistance and school reopening to help pull Americans back into the workforce last year. It is not yet clear how the omicron variant will affect the economy, but many economists fear that it could keep many of these workers out of the labor market – if they have ever planned to return.
Increasing cases have encouraged many schools and businesses in the service sector to limit or eliminate personal interaction. And although omicron appears to be less serious for those fully vaccinated against COVID-19, health experts say it is still likely to overwhelm hospitals with sick patients.
“These less than stellar numbers were recorded before the omicron variant began to spread significantly in the United States. Hopefully, the current wave of the pandemic will lead to limited damage to the labor market,” Nicked Bunker, research director at Indeed, explained in a Friday analysis.
“The labor market is still improving, but a more sustainable comeback is only possible in a post-pandemic environment,” he continued.
With no end to the pandemic in sight, the Fed is facing difficult choices on how best to position the economy to continue to expand without increasing pressure on employers.
The Fed announced last month that it would reduce its monthly bond purchases at a faster pace and hinted at a rate hike as soon as March. While the Fed had been wary of withdrawing on stimulus and limiting future job growth, the bank has since focused on averting higher and broader inflation.
“The reality is that we do not have a strong recovery in labor force participation yet, and we may not have it for a while,” the Fed leader Jerome PowellJerome Powell The FOMC minutes are a wake-up call for investors. Biden is facing a time constraint to choose financial watchdogs. Can the Federal Reserve develop a soft landing for the US economy? MORE told reporters after the bank’s monetary policy committee met last month.
“At the same time, we have to make policy now and inflation is well above target, so this is something we have to take into account,” he continued.
Fed officials acknowledge that a deep omicron-driven downturn could weaken the economy enough to take the pressure off inflation at the expense of fewer job gains. But some economists insist the Fed should not increase in March even though demand for workers remains high.
Adam Ozimek, chief economist at Upwork, said the United States could actually get more jobs than the monthly employment report indicates. The Ministry of Labor has made significant adjustments to previous monthly job gains, which are calculated through a survey of companies, and added 114,000 to October and November totals in the latest report.
“Establishment data makes it look like job growth is slowing down. And if job growth is slowing while the demand for labor is high, it will indicate that many people have a permanent or semi-permanent excellent workforce. And if you throw high inflation with it, it starts. “I do not really think so,” said Ozimek.
He added that the lack of significant uptake in social security collection and a great need for lower paid jobs means that the Fed should be patient with letting the economy recover.
“They really need to see what has happened to the underlying job growth, and the signals are simply too scary to conclude that it has slowed down,” Ozimek said.