How America’s Jobs Machine Keeps Humming
An influx of workers is helping to keep the labor market in balance
By Aaron Back
As the U.S. job picture brightens, some analysts say flexible-hour positions are among the reasons. PHOTO: SPENCER PLATT/GETTY IMAGESThe U.S. economy keeps adding jobs at a Goldilocks-like pace that isn’t quite strong enough to rekindle inflation fears.
Could flexible work arrangements be partly to thank?
The Labor Department said the economy added 275,000 jobs in February, well above the 198,000 that economists were expecting.
There were also substantial downward revisions to the prior two months.
January’s initial estimate of a barn-burning 353,000 jobs was revised down to a more gentle 229,000.
Still, the steadily strong overall pace of job creation is striking.
As Scott Anderson of BMO Capital Markets pointed out in a note, the three-month moving average of payroll gains moved up to 265,000 in February from 233,000 in January.
Meanwhile, wage pressures are actually softening.
The year-over-year gain in average hourly earnings slowed slightly, to 4.3% in February from 4.4% in January.
This is something the Federal Reserve wants to see as it suggests inflation pressures continue to head in the right direction.
What explains the consistent and resilient performance of the labor market?
On the demand side, there are both structural and cyclical factors at work.
Structurally, certain sectors such as healthcare seem to be in perpetual need of additional staffing, driven partly by the aging baby boomer generation.
The healthcare and social-assistance sector, as defined by the Labor Department, added 90,700 workers in February, up from 86,600 in January and 64,500 in February of last year.
Some more-cyclical sectors also seem to be doing fine, with leisure and hospitality adding 58,000 jobs in February and construction adding 23,000, though manufacturing shed 4,000.
No one is quite sure how the labor market is absorbing all this new hiring without overheating.
In a note Friday, BlackRock executive Rick Rieder argued that there has been a “dual positive supply shock” in the labor market from an influx of immigration and work-from-home policies.
This means there are more workers to fill roles, helping to contain inflation.
There appears to have been an uptick in immigration as the pandemic eased—one initially undercounted by government agencies.
As a result, in January the Congressional Budget Office estimated that the U.S. population rose by 0.9% in 2023 from a year earlier compared with a Census Bureau estimate of 0.5%.
Even more intriguing, BlackRock’s Rieder argues that work-from-home policies “have enabled a surge in labor market participation, particularly among prime age female workers.”
Whether a worker is male or female, it is easier to commit to a job when one knows that he or she can be home part of the time should a child or an elderly relative need care.
The overall workforce participation rate, essentially the percentage of the over-16 population that is working, has been steady for the past three months at 62.5%—higher than for much of the past few years, but slightly below the 63.3% it reached in prepandemic February 2020, according to Fed data.
But the prime-age workforce participation rate—that is, among 25- to 54-year-olds—reached 83.5% in February, matching highs touched last year that hadn’t been seen since the early 2000s.
Flexibility on the job, it seems, is lending flexibility to the economy.
That, in turn, is giving even the Fed more room to maneuver.
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