The economy needs more people to join the job hunt

There are two ways for the job market to cool down. One is that hiring slowed down significantly. The second is to get more people into the workforce. The latter is clearly preferable, but it is unclear how much of the second the US will receive.

The Labor Department on Friday reported that the economy added 428,000 seasonally adjusted jobs in April — matching March’s increase and showing that employment is growing at a notable rate. The unemployment rate, based on a separate survey, kept very low 3.6%.

The Federal Reserve now wants to cool down the job market. The shallower the supply of workers, the more wages rise, and the harder it is to bring inflation back under control. But recruitment is not a switch that the central bank can simply turn on and off. It will take time for it interest rate increase to work their way into an economy in which basic demand remains strong. And employers are desperate for workers, with the Labor Department reporting earlier this week that as of March there were record 1.9 job opportunities For every unemployed worker, even slower growth in demand may not make a dent in the job market any time soon.

What will greatly help the situation is more people returning to the workforce. Although the unemployment rate is just above the 50-year low of 3.5% it registered in February 2020, just before the Covid-19 crisis hit, there are still less than 1, 2 million jobs compared to that time. Population growth and shortages compared with pre-pandemic levels are even greater.

The reason the unemployment rate is low despite the decrease in employment levels is that, to be considered unemployed, one must be actively looking for work. A lot of people don’t do that. The labor force participation rate – the proportion of workers who have a job or are actively looking for work – was 62.2% last month compared with 63.4% in February 2020. Of course, that That’s much better than the worst of the pandemic, but a lot of things seem like they could draw more people back into the workforce, such as the availability of vaccines, the reduction of easing concerns about Covid-19 and the end of additional benefits for the unemployed, did not have as much impact as economists had hoped.


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Maybe with the arrival of warmer weather, worries about Covid-19 continuing to ease, and the stockpile of savings many Americans amassed during the pandemic begins to dwindle, many will go away. more job hunting. That’s definitely what the Fed is looking for: During his press conference on Wednesday After the Fed meeting, Chairman Jerome Powell said that he and other members of the central bank’s rate-setting committee “generally expect that we will have some more involvement.”

However, if that increase doesn’t come, the Fed will be put in a position where it will feel the need to slow job growth sooner rather than later. To do that, it will need to raise interest rates more quickly, raising the odds that it goes too far and sends the economy into recession.

The monthly jobs report reveals key indicators of the labor market and the overall state of the economy, but it doesn’t show the whole picture. The WSJ explains how to read the report, what it shows and what it doesn’t. Artwork: Liz Ornitz

Write letter for Justin Lahart at [email protected]

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