Defying a pandemic and supply chain disruptions, the US economy has created more than 400,000 jobs every month for nearly a year – a meteoric winning streak in extremely uncertain times.
And despite soaring inflation, the wave of hiring likely continued last month in the face of another jolt: Russia’s war in Ukraine, which has disrupted the economic outlook and propelled gasoline prices to painful levels.
Economists polled by data firm FactSet expect the Labor Department’s jobs report for March to show employers added 478,000 jobs and the unemployment rate fell from 3.8% to 3.7%. That would mark the lowest unemployment rate since just before the pandemic hit two years ago, when unemployment hit a 50-year low of 3.5%.
The government will release the March jobs report at 8:30 a.m. Eastern Time on Friday.
“With the war in Ukraine, growing economic uncertainty and soaring energy prices, we may see a slight slowdown in hiring in March,” said Daniel Zhao, senior economist at job site Glassdoor. “However, employer demand remains strong, which should support a good level of hiring.”
The booming U.S. labor market reflects a strong rebound from the brief but devastating coronavirus recession, which shed 22 million jobs in March and April 2020 as businesses closed or reduced hours and Americans stayed home to avoid infection.
But the recovery was quick. Fueled by generous federal aid, savings accumulated during the pandemic and ultra-low borrowing rates designed by the Federal Reserve, American consumers have been spending so fast that many factories, warehouses, shipping companies and ports have failed keep pace with customer demand. Supply chains collapsed, driving up prices.
As the pandemic subsided, consumers expanded their spending beyond goods for services, such as health care, travel and entertainment, which they had long shunned during the worst of the pandemic. The result: Inflation is hitting 40-year highs, causing hardship for many low-income households who face steep increases for basic necessities such as food, gas and rent.
It is unclear whether the economy can maintain its momentum from the past year. The government relief checks are gone. The Fed raised its benchmark short-term interest rate two weeks ago and will likely continue to raise it until next year. These rate increases will mean more expensive loans for many consumers and businesses.
Inflation has also eroded consumers’ purchasing power: hourly wages, adjusted for consumer price inflation, fell 2.6% in February from a year earlier – the 11th month row in which inflation outpaced year-over-year wage growth. According to AAA, average gasoline prices, at $4.23 a gallon, were up 47% from a year ago.
Squeezed by inflation, some consumers are reducing their spending. The Commerce Department reported on Thursday that consumer spending rose just 0.2%% in February — and fell 0.4% after adjusting for inflation — compared to a 2.7% increase in January.
Yet the labor market continued to rush. Employers posted a near-record 11.3 million jobs in February. Nearly 4.4 million Americans have quit their jobs, a sign of confidence that they could find something better.
“We’re still seeing a very tight job market,” said Karen Fichuk, CEO of recruiting firm Randstad North America, who noted that the United States now has a record 1.7 job openings for every unemployed worker. .
Even so, so many jobs have been lost in 2020 that the economy still remains more than 2 million below where it was just before the pandemic hit. Over the past year, employers have added an average of 556,000 jobs per month. At this rate – no guarantee to continue – the nation would recover all jobs lost to the pandemic by June. (This would still not include any additional hires that would have been made over the past two years under normal circumstances.)
Better job prospects are beginning to bring people back into the workforce who had been sidelined due to health issues, difficulty finding or paying for child care, generous unemployment benefits that have now expired or other reasons.
Over the past year, 3.6 million people have joined the US labor force, meaning they now have a job or are looking for one. But their ranks are still nearly 600,000 short of their February 2020 level, just before the pandemic hit the economy.
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