The unemployment rate is 3.6 percent — but there are signs all is not well – Grid News

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The unemployment rate is 3.6 percent — but there are signs all is not well

Few thought that the post-pandemic economy would be marked by a superhot jobs market, but that appears to be the state we are in. America’s latest jobs numbers appear to be growing at a fast clip, with 428,000 new jobs created in April and the unemployment rate staying steady at 3.6 percent.

Still, even if jobs are looking better than ever, it seems like Americans’ perception of the economy is poor. This is probably due to inflation, which is eating at that wage growth thanks to substantial increases in the cost of living for a broad swath of the country. And then there’s the stock market, which has fallen sharply recently.

To get the down-low on the latest jobs numbers, Politics and Ideas Editor Kay Steiger talked to Domestic Economics Reporter Matthew Zeitlin about what this all means. This interview has been edited for length and clarity.

Kay Steiger: America has been putting up incredible job numbers since the beginning of the year, and unemployment is hitting some historic lows. Why?


Matthew Zeitlin: Two reasons. The first is obviously that more workplaces can and are open. While today’s economy is not the same as it was in February of 2020, it’s also not the same as it was in April 2020, when the job market bottomed out after shrinking by some 20 million jobs. So, we’ve been seeing steady growth in sectors like restaurants and hotels that have reopened, while some sectors, like transportation and warehousing, have actually seen more job growth recently than they experienced before covid.

The second reason is that demand for labor is extraordinarily high. While the number of jobs has been growing steadily, the number of unfilled jobs per unemployed person is almost two, indicating that employers are desperate to hire. Why? Well the underlying growth of the economy, at least when it comes to consumption by consumers, is still quite high.

KS: Is it possible for a too-hot job market to have bad effects on the economy?

MZ: Yes, the Federal Reserve has been the one talking about the high level of vacancies per unemployed person. It sees this as a sign that the economy is out of balance and one of the causes of inflation.

KS: Is there anything else in this jobs report that stuck out to you?


MZ: While the headline jobs numbers were solid — the pace of job creation in terms of average monthly jobs growth is over two times what it was following the Great Recession — there was some lurking bad news. For one, the Bureau of Labor Statistics revised down the jobs figures for February and March by 39,000. The second thing is that the labor force, the group of people looking for a job or employed, shrunk by 363,000. The labor force participation rate had been climbing since early this year but has now stalled out a bit.

KS: We also saw the other day that the quit rate is still pretty high. What does that tell us about this picture?

MZ: The quit rate is only one part of the story. What is sometimes called “the Great Resignation” is perhaps something more like “the Great Reshuffle.” What that means is that, yes, many people are leaving their jobs, but they’re also getting new ones. This report, which showed pretty broad-based growth in employment, is another confirmation of that.

KS: Usually a red-hot job market leaves people feeling good, but I saw a poll the other day that indicates just 23 percent of Americans have a remotely positive view of the economy. What’s going on?

MZ: Inflation. The cost of living, especially for basics like food and gas, has shot up, and the rise in overall prices is at its quickest since the early 1980s. This means that for some, their living standards have actually gone down (but not all, some workers on the lower end of the wage scale have seen their real wages go up). It’s not surprising that many people view the economy negatively, even if aggregate employment numbers are impressive.


KS: If we’re running out of people to fill these jobs, what options are there? Are there more creative ways to fill them? Should we be looking harder at increasing immigration?

MZ: Many businesses would surely be happy with a liberalized immigration policy that let them fill some of these job openings. But that’s not the only way to do so. While unemployment is 3.6 percent, the labor force participation rate is still 62.2 percent compared with its pre-covid level of 63.4. This likely means there are still workers “on the sidelines,” i.e., not looking for jobs or employed, but who could still be drawn back into employment. For instance, the labor force participation rate for workers 55 and above is still well short of where it was in early 2020, likely due to early retirements and fear of contracting covid. If this were to normalize, the labor supply would increase.

Thanks to Lillian Barkley for copy editing this article.

  • Matthew Zeitlin
    Matthew Zeitlin

    Domestic Economics Reporter

    Matthew Zeitlin is an economics reporter at Grid focused on the domestic impact of major stories such as coronavirus, the supply chain and economic volatility.

  • Kay Steiger
    Kay Steiger

    Managing Editor

    Kay Steiger is the managing editor at Grid.