The U.S. Job Market Is Hot*
The most reliable indicators all imply that conditions for those in the labor force are the best they have been in decades, if not ever. Yet millions of people remain out of work due to the pandemic.
American businesses are desperate for workers, with many employers paying dramatically higher wages to retain talent and fill new openings. By most measures, the U.S. job market isn’t simply hot, it’s arguably the greatest sellers’ market for labor in decades, if not ever.
Yet total employment was well below the levels of February 2020 even before the Omicron variant likely put a temporary dent on hiring. (While we’ll learn the extent of the impact on Friday, the Biden administration is already working to lower expectations.) The magnitude and speed of the recent recovery dwarfs anything we’ve seen since the 1940s, but there are still around 3.6 million fewer Americans working than there were before the pandemic.
This is an unusual combination. It suggests that “labor shortages” are a consequence of healthy demand and constrained supply, particularly of lower-paid workers who may be staying home until the public health situation improves. The good news is that their eventual return to the job market may relieve some of the pressure on wages—and on underlying inflation.