Glassdoor Economic Research

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao. The job market logged steady job gains, adding 678,000 jobs in February, marking the tenth straight month with job gains over 400,000. As the Omicron wave receded, job gains rebounded significantly. The unemployment rate dropped down to 3.8 percent from 4.0 percent. After a surprising January jobs report, the February jobs report is reassuring, providing confidence that steady job gains are continuing despite the ebbs and flows of the pandemic. Solid Payroll Growth Sets Labor Market Up for Strong Recovery Payrolls rose by 678,000 jobs in February 2022, despite the ongoing Omicron wave. At February's rate of jobs growth, it would take just four more months to recover to pre-pandemic employment levels. If jobs growth can be sustained, we could return to pre-pandemic employment levels a little more than two years after the pandemic struck, the fastest pace since the 1981 recession and a remarkable recovery for a crisis where the unemployment rate peaked near 15 percent. Similarly, the monthly pace of job gains so far in 2022 with just two months of data is 579,500. While that pace is unlikely to be sustained through the whole year, that would translate into an annual pace of 6.95 million, which would set a new record, a powerful sequel to 2021's record jobs growth. Payroll Growth Steady Even in COVID-Sensitive Sectors Payroll gains were largest in leisure & hospitality (+179,000 jobs), professional and business services (+95,000) and health care and social assistance (+94,200). After the January revisions and seasonal adjustment updates, jobs growth has been significantly smoother for COVID-sensitive sectors. For example, leisure & hospitality job gains have ranged from 134,000 and 224,000 since March 2021. Unemployment Ticks Drops to 3.8 Percent, New Pandemic Low The unemployment rate ticked down to 3.8 percent in February 2022, hitting a new intra-crisis low. The labor force participation rate increased modestly to 62.3 percent. The Black unemployment rate fell to 6.6 percent in February while the white unemployment rate dropped to 3.3 percent. The Black unemployment rate is now more than double the white unemployment rate for the third month in a row, though the gap shrank in February. Omicron's Impact Quickly Fading Omicron's impact is quickly fading from the jobs report. It clearly doesn't seem to be muting headline jobs growth. Additionally, average weekly working hours rebounded to 34.7 in February, climbing closer to pre-Omicron levels. Similarly, 1.6 million Americans reported being absent from work due to illness in February, less than half the 3.6 million out sick in January. Wage Growth Slows in February Average hourly earnings rose 5.1 percent year-over-year, decelerating from 5.5 percent growth in January. Wage growth is still strong, but the deceleration in February combined with the solid jobs and labor force growth is a Goldilocks result for the Federal Reserve, with some moderating wage inflation combined with more progress towards full employment. However, high wage growth is a reflection of the strong fundamentals in the labor market where demand vastly outstrips supply. As the pandemic continues to hold back labor supply in 2022, wage growth is likely to remain strong. What to Expect in 2022 With the Omicron wave receding rapidly, the labor market has unlocked faster jobs growth. Additionally, employer demand for workers exceeds labor supply significantly, which is likely to keep jobs growth healthy even if demand slows amid disruptions from the war in Ukraine and rising interest rates in coming months. The war in Ukraine reemphasizes the risk of inflation in the economic recovery, especially as price increases are concentrated in areas that the Federal Reserve may not have much control over. Ultimately, however, today's jobs report helps build confidence in the resilience of the recovery and its ability to continue driving jobs growth despite unanticipated headwinds. More Insights Payroll gains rebounded to 678,000 in February as even the modest slowdown from Omicron faded. Job gains have been over 400,000 for 10 straight months now, robust jobs growth we would've loved to see pre-pandemic. If the coming reports match Feb's jobs growth, we're on track to return to pre-crisis levels of employment in just 4 more months—the fastest pace of recovery since the 1981 recession. That would be a remarkable feat following a crisis where unemployment peaked near 15 percent. Last year, we added 6.7 million jobs to payrolls, the highest on record since 1940. While it's unlikely we'll see 10 more months of Jan & Feb's jobs growth pace, so far we're tracking towards 6.9 million jobs, a strong sequel to 2021's record jobs growth. Payrolls gains were broad-based ranging from COVID-sensitive sectors—like leisure & hospitality (+179,000) or education & health services (+112,000)—to professional & business services (+95,000) or construction (+60,000). The remaining shortfall in jobs vs. pre-crisis levels is primarily concentrated in leisure & hospitality, health care, education and government. While professional & business services and transportation & warehousing are now solidly above pre-pandemic. Average hourly earnings growth fell to 5.1 percent, a modest deceleration from 5.5 percent in February. Strong job gains amidst moderating and not accelerating wage growth is likely a positive mix of data points for the Federal Reserve as it prepares to begin hiking. We are seeing deceleration in wage growth for production and nonsupervisory workers across a whole host of industries over the last few months. Though wage growth does remain strong in many industries, just not quite as high as in 2021. The unemployment rate dropped to 3.8 percent in February, setting a new pandemic low on the back of both a drop in unemployment and a healthy uptick in labor force participation. The unemployment rate did improve for Black workers to 6.6 percent, though this is now the third month in a row where Black unemployment is more than double the white unemployment rate. The impact from Omicron is fading quickly as employees absent due to illness fell from the record highs in February. In the March Beige Book from the Federal Reserve, many employers reported the Omicron wave passing faster than previous waves. Another place the fading impact of Omicron shows up is in remote work. The share of workers remote due to COVID fell in February to 13 percent after surging in January. Not quite as low as in late-2021, but that number should fall further in March as Omicron recedes.

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