Economists are currently assessing if the predictions of a decelerating labor market were inaccurate or simply early. At present, the growth in the labor market is steady and robust. This suggests that the labor market dynamics are still positive, despite the forecasts. However, it’s important to continue monitoring these trends as economic conditions evolve.
Wage growth slowed slightly in February
Year-over-year percentage change in earnings vs. inflation
Despite predictions of an economic slowdown, the labor market appears to be thriving.
In February, employers added 275,000 jobs, surpassing expectations, according to a report from the Labor Department released on Friday. This occurred even as the unemployment rate increased.
This marks the third consecutive month of seasonally adjusted gains exceeding 200,000 and the 38th straight month of growth. This is compelling evidence that, four years after the onset of pandemic shutdowns, the American job market remains robust.
Rubeela Farooqi, the chief economist at High Frequency Economics, stated, “We’ve been expecting a slowdown in the labor market, a more material loosening in conditions, but we’re just not seeing that.”
While the figures for December and January were revised downward by a total of 167,000 due to the higher degree of statistical volatility in the winter months, this does not alter the overall picture of consistent, strong growth.
Simultaneously, the unemployment rate, which is based on a household survey rather than business data, rose to a two-year high of 3.9%. This increase from 3.7% in January was due to people losing or quitting their jobs, as well as new entrants into the job market.
A broader measure of underemployment, which includes individuals working part-time who would prefer full-time work, has been on a steady rise and currently stands at 7.3%.
On a positive note, the labor force participation rate for individuals in their prime working years (ages 25 to 54) surged to 83.5%, equalling a level from last year that was the highest since the early 2000s. However, the participation rate for those aged 55 and over remains significantly below its pre-pandemic level. This could be partly due to the thriving housing and stock markets, which have enabled more individuals to retire.
Over the past year, average hourly earnings have seen an increase of 4.3%. Since May, wage growth has been outstripping price increases, indicating that workers’ purchasing power has been improving. However, it’s important to note that the rate of these wage increases has been slowing down recently. This could be due to a variety of factors and is something economists and policymakers will likely be keeping a close eye on.
Kory Kantenga, a senior economist at LinkedIn, pointed out that the recent increase in real wages has motivated people to rejoin the labor market, which is a positive trend for workers. However, he also noted that as the rate of wage growth decelerates, the probability of more people entering the job market decreases. This highlights the importance of maintaining strong wage growth to encourage labor market participation. It’s a delicate balance that policymakers need to manage carefully.
Until the previous fall, economists were forecasting relatively modest growth in employment, with job creation focused in a handful of industries. While some sectors that had expanded during the pandemic have lost jobs, anticipated declines in areas such as construction have not occurred.
Recent months have seen a wealth of positive economic data. This has led analysts surveyed by the National Association for Business Economics to increase their projections for the gross domestic product and reduce their unemployment trajectory expectations. Inflation has been easing, prompting the Federal Reserve to signal potential interest rate cuts later this year. Many view this as a precautionary measure in case the job market experiences difficulties.
Mervin Jebaraj is indeed the director of the Center for Business and Economic Research at the University of Arkansas. His work involves providing applied economic and business research to federal, state, and local governments, as well as businesses operating or intending to operate in the state of Arkansas.
The term “federal government shutdowns” refers to situations when funding legislation required to finance the federal government is not enacted before the next fiscal year begins. During a shutdown, the federal government curtails agency activities and services, ceases non-essential operations, furloughs non-essential workers, and retains only essential employees in departments that protect human life or property.
“Draconian budget cuts” generally refer to severe reductions in government spending. These cuts can have significant impacts on various sectors and can lead to a slowdown in the pace of economic activity. However, a slower but more sustainable pace of economic activity, as mentioned by Mervin Jebaraj, could potentially lead to long-term stability and growth. It’s important to note that the specifics of these cuts and their impacts can vary widely depending on the context and the specific policies implemented.
The U.S. job market in 2023 saw an average monthly gain of 225,000 jobs. However, the job growth rate is expected to slow down in 2024. Despite this, the job market remains robust with the creation of new jobs across various sectors.
In terms of specific sectors in February 2024:
- The health care sector added 67,000 jobs, with a notable increase of 90,700 jobs.
- The government sector added 52,000 jobs.
- The construction sector added 23,000 jobs.
- The retail sector added 19,000 jobs.
- The restaurant sector added 42,000 jobs.
No major industries lost a substantial number of jobs. However, high interest rates continue to suppress manufacturing, and the credit intermediation sector, which mostly includes commercial banking, has lost about 123,000 jobs since early 2021.
As for labor shortages, the U.S. is still missing 1.7 million Americans from the workforce compared to February of 2020. The job quitting rate remained unchanged at 2.2% in December 2023, indicating a subsiding wave of job quitting.
Productivity growth is also observed. The U.S. labor productivity improved by 1.44% YoY in December 2023, and it’s expected to register 1.8-percent annual growth. This improvement in productivity makes it easier for employers to pay more without increasing prices.
These trends indicate a cooling but still strong job market with opportunities for more durable growth.
The home health services sector has indeed seen significant growth in recent years. As of 2023, home health services represented a third of all new jobs in healthcare, with a 6% employment increase over the past year. The U.S. home healthcare services market size was valued at USD 90.47 billion in 2022 and is projected to grow to USD 156.28 billion by 2030. This growth is partly due to the increasing geriatric population and the prevalence of age-related disorders.
On the other hand, nursing and residential care facilities have seen a decline in popularity since the Covid-19 pandemic in 2020. As of February 2024, employment in nursing and residential care facilities is still 139,400 jobs or 4.1% below pre-pandemic levels. This decline is partly due to staffing shortages and the possibility of tighter regulation.
However, the increase in jobs in home health services has fully offset the decline in nursing and residential care facilities, leading to a net gain in employment in the healthcare sector. This shift in employment trends reflects changes in the healthcare industry and the evolving needs and preferences of patients and their families. It also highlights the resilience of the healthcare sector in adapting to these changes and continuing to provide essential services to those in need.
Elaine Flores is indeed the Chief Operating Officer of Medical Home Care Professionals, a small home health agency based in Northern California. The agency has faced significant challenges over the years, including natural disasters and the COVID-19 crisis.
The nursing profession is indeed facing a retirement wave. In 2023, 43% of nurses eligible for retirement planned to retire in four or more years, while only 13% planned to retire within the year. This trend is likely to continue into 2024 and beyond.
Hospitals often offer attractive benefits packages, which can make it challenging for home health agencies to compete. However, the influx of immigrants could potentially alleviate some of the labor shortage in the healthcare sector.
The employment landscape in 2024 is indeed mixed. While there have been layoffs in the tech and media sectors, sectors like healthcare, construction, and manufacturing are more optimistic. However, employee confidence overall has been falling, with only 45.6% of employees expressing optimism about the business outlook for the next six months in January 2024. This is a complex issue influenced by various factors such as layoffs, hiring freezes, and changes in the economy.
The labor market is indeed complex and can be challenging for different groups of people. As Aaron Terrazas, the chief economist at Glassdoor, has pointed out, job searches are taking longer for people with graduate degrees. Skilled workers in risk-intensive industries who have been laid off are having a hard time finding new jobs. On the other hand, the job market remains competitive for blue-collar or frontline service workers.
For those struggling to find steady employment, gig work has become an increasingly popular option. This trend is not reflected in payroll data, but it’s a significant part of the employment landscape.
Take the case of Clifford Johnson, a retired accountant from Orlando, Florida. After retiring and beginning to draw Social Security, his circumstances changed when he separated from his husband. The cost of renting an apartment in Orlando’s hot housing market is $2,350 a month. Despite his efforts, Mr. Johnson has not been able to secure another accounting job. A retail position did not work out for him, and he has depleted his limited savings. To make ends meet, he now drives for Uber Eats full time.
Mr. Johnson’s situation underscores the challenges faced by older individuals in the labor market. As he puts it, the experience is quite different for someone who is 70 and still trying to make a living compared to someone who is 25 or just graduating from college.
Predicting the path forward for the labor market is not straightforward. Despite various threats — including wars, substantial interest rate increases, and bank collapses — the labor market has shown resilience. However, the future remains uncertain, and it’s crucial for individuals and policymakers alike to stay informed and adaptable.