Americans Still Fully Employed

 Popular Economics Weekly

BLS.gov

The Bureau of Labor Statistics graph above shows why the US Federal Reserve keeps raising interest rates. The US unemployment rate dropped from 3.6 to 3.5 percent in March. It was 14.7 percent in April 2020. It was last 3.5 percent in February 2020 at the on set of COVID-19.

The U.S. added a robust 236,000 new jobs in March, defying the Federal Reserve’s hopes for a big slowdown in hiring as the central bank struggles to tame high inflation. We have never before seen such a precipitous drop in unemployment. It took ten years—from 2010 to 2020—to reach 3.5 percent after the Great Recession. It took slightly more than two years to return to 3.5 percent again, in July 2022.

Average hourly wages are rising at 4.2 percent, and the labor participation rate of working-age adults is 80.7 percent, back to pre-pandemic levels. Where are more workers to be found to keep up with employers’ job openings?

The decline in the unemployment rate to 3.5 percent was despite 480,000 entering the labor force. The separate Household survey from which the unemployment rate is derived showed employment increasing 577,000 last month.

While the increase in payrolls was the smallest in more than two years, the number of new jobs created last month was still stronger than is normal for this time of year.

Leisure and hospitality added 72,000 jobs in March, lower than the average monthly gain of 95,000 over the prior 6 months. Most of the job growth occurred in food services and drinking places, where employment rose by 50,000 in March.

Government employment increased by 47,000 in March, the same as the average monthly gain over the prior 6 months. Only two sectors shrank in jobs—retail trade and construction services.

If the Fed continues to raise interest rates, those workers in the lowest paying restaurant and leisure sectors will suffer the most, who spend most of their incomes.

The standard Fed mantra is that higher inflation harms low-paying sector workers the most. Really? The Fed’s current stated goal is to raise the unemployment rate at least 1 percent. That means the loss of 1-2 million jobs.

I believe workers, given the choice, would rather pay slightly more for their goods and services than lose their jobs!

Harlan Green © 2023

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