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This article was originally published in the Richmond Times Dispatch on September 5, 2022.
As we celebrate our third Labor Day in what is hopefully a waning pandemic, the labor market remains tight. Some observers call it an “employees’ market.”
One sign of the tight labor market is the low unemployment rate. It was at 3.7% in August 2022—close to the 3.5% that was the low point in February 2020 that came on the heels of the nation’s longest economic expansion and just before the pandemic hit the U.S. economy.
Even though some large tech companies such as Meta, Microsoft, and Shopify recently announced layoffs that have helped push initial unemployment claims higher, workers are finding new jobs rather quickly.
Initial claims increased from a low of 178,000 in March 2022 to 241,500 during August. This is much less than the 300,000 or so monthly layoffs that occurred at the beginning of the three recessions that preceded the Covid-induced recession of 2020.
It took an average 22.3 weeks for an unemployed person to find a job in August with 37% of the unemployed finding a job in less than 5 weeks. By comparison, the average duration to find a job peaked at 31.6 weeks in June 2021—a year into the pandemic. The previous peak was an even higher 40.7 weeks in July 2011 after the Great Recession ended.
The relatively high quits rate is a sign that employees are feeling that they are in the driver’s seat. According to the Job Openings and Labor Turnover Survey (JOLTS) report compiled by the Bureau of Labor Statistics, the quits rate stood at 2.7% of total employment in July which translates into 4.2 million workers—a rate slightly less than the record 3.0% in December 2021 but much higher than the low of 1.6% of total employment in April 2020.
The JOLTS report also indicated that the number of job openings in July was unchanged from the previous month at 11.2 million. Based on the number of unemployed, there are 2 job openings for each unemployed person today compared with about 1.2 before the Covid-recession began.
Although it’s still a “red hot” labor market today, that is likely to change over the coming months as the Federal Reserve increases the federal funds rate target in an attempt to reign in inflation.
In fact, Federal Reserve Chair Jerome Powell said on August 19 that “Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will likely be some softening of labor market conditions.”