Jobs remain abundant despite retreat from record highs during pandemic recovery

WASHINGTON (TND) — The American labor market has continued to show strength through a barrage of interest rate increases and stubborn inflation to keep the economy afloat while some economists point to potential signs of a looming recession.

The post-pandemic emergence of the economy has led to ample opportunity for the nation’s workers who have been able to leverage high levels of openings into new opportunities with better pay and benefits and held off some of the most dire scenarios that could have resulted from the Federal Reserve’s interest rate crackdown.

Federal data on the labor market has shown some retreat from the pandemic-era records set in multiple aspects of the employment picture, but some economists say that could just be a matter of a return to equilibrium rather than a sign of impending spike in unemployment and layoffs.

Job openings came down to 9.59 million in March, the lowest figure in nearly two years. However, that figure beat expectations and still leaves over 1.6 jobs available for every American looking for work. Unemployment also remains near 50-year lows, falling to 3.4% last month.

There have been lingering concerns over the Fed’s rapid pace of interest rate increases the chance of tilting the economy into a recession and bringing on higher levels of unemployment, a scenario that has not played out despite some high-profile layoffs at large companies.

Fed chairman Jerome Powell has acknowledged those concerns, but said the central bank remains committed to bringing inflation down even if it costs higher unemployment or a recessionary period.

“We are essentially looking at a choice between two bad things — a recession on one hand, or continued inflation on the other. It's one of those situations where there are no good options,” said Ryan Young, a senior fellow at the Competitive Enterprise Institute. “So far, we're avoiding the recession, so the Fed is getting to do the right thing without a severe trade-off in terms of unemployment or a recession. So in that context, even if the numbers are kind of mediocre, it's still fantastic news.”

Overall, employment has also held relatively strong in most sectors of the economy, even those that have had layoffs like tech, construction and manufacturing. Some of the most notable layoffs have come from tech giants like Meta, Google and Amazon, but other businesses have kept hiring and offset those losses.

Powell has remained optimistic that the U.S. can get out of the inflationary period without having a painful recession.

“I continue to think that it's possible that this time is really different,” he said after last week’s rate increase. “And the reason is there's just so much excess demand, really, in the labor market. It's interesting, as you know, we've raised rates by 5 percentage points in 14 months, and the unemployment rate is 3.5%, pretty much where it was, even lower than where it was when we started.”

More people have started to enter the labor force in an encouraging sign for Fed officials hoping to loosen some of the demand. Participation in the labor force for prime-aged workers between 25 to 54 has hit a high not seen since 2008, but is still down for workers 55 and up, who are choosing to retire or use savings built up during the pandemic to prolong a return to the workforce.

Data from the Bureau of Labor Statistics show the overall labor participation rate was 62.6% in April, still below the pre-pandemic level of 63.3% in February 2020. The participation rate has increased every month since December.

It’s unclear how the labor market and economy will continue to perform moving forward as the Fed transitions to an expected pause on interest rate hikes, as inflation is still well above the preferred target of 2% and there is still potential for more fallout from the collapses of three U.S. banks.

Predictions for a recession in the latter half of the year have remained, though Powell and some other economists have remained optimistic that a soft landing is still a potential outcome.

“That speaks to the underlying health of the economy going into all of this,” Young said. “There was no financial crisis, no savings and loan crisis. The only significant problem we have right now is inflation and debt, which isn't nothing, but the underlying institutions are strong enough to deal with that for the time being.”