WASHINGTON, June 12 (Reuters) – U.S. Federal Reserve officials, who hoped to return the job market to its 2019, best-in-a-generation status after the pandemic, may be on the verge of success as the economy passes key milestones for labor participation and nears a return to pre-pandemic trend levels of employment.
The question now: Will the victory be short-lived as those same policymakers battle inflation by engineering an economic slowdown aimed at undercutting conditions that have been tilted heavily in favor of workers?
At the onset of the pandemic, “getting back to where we were was the first reaction, and we are basically there” though with different patterns of employment and stronger wage growth, said Michael Madowitz, macroeconomic policy director at the Washington Center for Equitable Growth.
But while the Fed in 2019 was asking “‘is this as strong as the labor market can get?’ Right now inflation…is driving the policy discussion,” he said. Fed rate hikes could have “very significant, uneven short-term impacts” on the job market.
The Fed is expected to hold rates steady at its meeting this week but possibly flag further hikes later this year and project a rising unemployment rate.
So far headline payroll employment growth remains strong. U.S. employers added 339,000 positions in May, a pace well beyond what was normal before the pandemic. That left U.S. employment perhaps just a few hundred thousand jobs short of where it would have been had the pandemic not occurred.
But the number of unemployed and the unemployment rate both increased, the jobless rate for Black workers rose nearly a full percentage point, and wage growth slowed, potential signs that the conditions which fueled “the Great Resignation” and a spike in wages for lower-paid jobs may be turning.
WHAT CHANGED?
On many fronts the U.S. labor recovery from the pandemic remains a work in progress.
Within the service sector, key industries such as health and education are short workers, a fact attributed in part to pandemic-era changes in people’s preferences about work and the workplace. The leisure and hospitality industry remains about 350,000 jobs short of where it stood in February 2020, before the spread of COVID-19 forced the shutdown of many in-person services beginning that March.
But increasingly policymakers and economists talk about the impact of the pandemic not just as the sort of deep structural shock that it first seemed. There were initial concerns, for example, that women’s employment and labor-force participation would be permanently scarred by the pandemic, but recent estimates indicate it has fully recovered, or nearly so.
While there were clearly structural changes – like the explosion in at-home work – what has become increasingly clear is that the pandemic accelerated a reshuffling of workers across occupations and industries that was already underway: An economy in need of more managers and truck drivers during an e-commerce…
Article from www.reuters.com