Americans are returning to the workforce at an accelerated pace – do they really need work?

Through Christopher Decker, University of Nebraska Omaha [This article first appeared in The Conversation, used with permission]

The U.S. economy surprised analysts by adding 467,000 jobs in January, overcoming omicron concerns and continuing a long streak of gains, the Bureau of Labor Statistics reported on February 4, 2022.

Yet, at the same time, the unemployment rate has gone up a notch, from 3.9% to 4%.

Confuses? Shouldn’t a strong increase in jobs bring down unemployment?

I believe that the main reason for these contradictory results is a jump in the number of people joining the labor market – in fact, the biggest increase in 19 months.

The share of working-age Americans either in work or looking for work — known as the labor force participation rate — fell sharply at the start of the pandemic.

But there are signs that labor force participation may finally be picking up. From a low of 60.2% in April 2020, it has been slowly rising since. And the latest report showed it climbed a further 0.3 percentage points to 62.2% in January, the highest since the depths of the pandemic in mid-2020. The 2.2 percentage point gain since April 2020 may not sound like a huge amount, but it equates to around 5.8 million people joining the workforce.

Inasmuch as economist who has been closely monitoring the labor market for a year, I think people are both encouraged and forced to look for work. My interpretation of the evidence suggests that those who give up and held back to re-enter the workforce are now finding employment opportunities too valuable to pass up.

On the one hand, wages continue to rise – they increased rapidly in January 2022, with average hourly wages up 5.6% over the previous year.

At the same time, it seems that many companies are reacting to desires of workers to have some flexibility in schedules and a better work/life balance.

Greater job flexibility can be seen in the increase in the number of Americans working remotely. The number of employees working from home due to the pandemic increased to 15.4% of the workforce in Januaryas the omicron variant spread and staff members were given the option to work from home.

But it is not only employer-related factors that explain the increase in labor market participation.

For those without a stable job and income, personal resources can become depleted over time. Some people who left the workforce at the start of the pandemic may have been able to fend for themselves and cover essential expenses such as housing and groceries by relying on personal savings, support from family members Where generous pandemic-related government benefits.

However, these resources are not infinite. the the number of long-term unemployed Americans has fallen in January, following a trend seen throughout 2021, suggesting an increasing number of people are returning to the labor market.

Moreover, the the cost of living is soaring at the fastest rate in 40 years. And for households that relied on one income during the pandemic, the problem is compounded by lagging wages, putting pressure on families.

In other words, people who have lost their jobs may not be able to hold on any longer if inflation continues to outpace wage increases.

But even with rising labor force participation, the U.S. economy still has a long way to go before persistent labor shortages hammering companies cease and labor markets return to pre-pandemic levels.

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Christopher Deckereconomics teacher, University of Nebraska Omaha

This article is republished from The conversation under Creative Commons license. Read it original article.