While the future of the U.S. labor market has remained in lingo for the past several weeks, a new job report from the Labor Department points to a more optimistic future than expected. In light of variants, vaccination mandates and operational troubles, the workforce is starting to see substantial growth that is not taking the form of a one-off surge. While many thought we would find ourselves in a period of stagflation, the current state of the economy simply doesn’t fit that mold.
Not only did the Labor Department revise the August and September reports to reflect over 230,000 jobs added, but also it recorded substantial jumps within a variety of sectors in October; as of now, leisure and hospitality added 164,000 jobs, professional and business services added 100,000, manufacturers added 60,000, and transportation and warehousing added 54,000. According to the data, this puts the 3-month job growth average at 442,000. Although this number is substantially lower than the 889,000 peak recorded in the period from May to July, it nonetheless constitutes a surprisingly resilient pace for where we currently stand.
In terms of the unemployment rate, October saw a 0.2 percentage point drop to 4.6%. Again, while this is still technically a high rate, the New York Times points out that “in the last expansion, the United States achieved 4.8% unemployment in January 2016 — but didn’t reach 4.6% until more than a year later, in February 2017.” In addition, the data shows that the unemployment rate either decreased or remained stagnant across demographic groups; per the report, the unemployment rate decreased for Hispanic, Asian, women, and non-college-degree-holding workers while it remained flat for Black workers.
In another show of just how speedy this recovery has been, the share of workers between 25 and 54 who are employed increased by 0.3 percentage points just this month. Per the New York Times, this again stands in stark contrast to the 4 and a half years it took the same shift to happen from September 2012 to February 2017. Why is this growth so robust?
The main driving force behind the current, growing workforce is higher wages. According to the Labor Department, payrolls in October jumped by 531,000 – the highest recorded since July and the most widespread amongst all industries. For the private sector, hourly earnings rose by 0.4% in the same month and are now 4.9% higher than last year. For production and nonsupervisory employees, that latter rate is 5.8%; according to analysts, this is the steepest one-year gain since 1982.
Significance and Reactions
These aforementioned improvements are even more significant when put up against the backdrop of incessant supply chain delays and state v. federal court battles. This being said, reactions to this news have widely differed.
While the report boasted many positive markers, there still remains millions of Americans who have abstained from reentering the workforce despite being in their prime working years – much to the surprise of employers who are finding themselves in a veritable labor shortage crisis.
According to the report, the labor force participation rate, which records the share of working-age individuals who are currently holding a job or are looking for one, was one of the markers that remained unchanged from last month – currently standing at 61.6%; in the pool of 25-54-year-olds, the rate climbed up 1 percentage point to 81.7%. This negative trend is supplemented by the fact that total employment is down 4.2 million from February of last year and many employers are going out of business as they cannot compete with rising wages.
What is also clear is that a considerable chunk of the public is becoming increasingly discontent with the Biden administration’s efforts to address the state of the economy – as evidenced by his decreasing approval rating and the recent election results in New Jersey and Virginia.
With all of that being said, many consider this report to be the sign of changing times that they have long awaited. For one, analysts no longer believe that we are experiencing a dual problem of high inflation and stagnant growth, but rather a period of high inflation that inevitably raises associated problems.
Another positive trend is that, despite the many narratives attributing the labor shortage to unemployment stimulus checks and pandemic-related safety measures, the individuals who are leaving the workforce permanently are doing so for personal reasons that the pandemic illuminated, not prompted. This has effectively pushed employers and employees to reassess their needs and wants in order to reimagine the working conditions of historically-oppressive industries. Put simply, the pandemic has turned employer bargaining power promptly on its head, allowing employees to finally get their requests addressed.
All in all, the incoming holiday season has many business leaders and economists predicting an even faster growth to come, based on October’s numbers. In the words of Bank of America chief executive Brian Moynihan, for example, “the world is normalizing. We’re winning the war on the virus in Europe and North America, knock on wood. Consumers are spending a lot of money, and people are traveling, going to hotels and taking vacations.” The economy is surprisingly looking up, and one can only hope that the upward trend outlives the festivities.
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