The number of people in their prime-age bracket who are employed has exceeded its previous highest point prior to the pandemic.
With the most recent US labor market stats, a remarkable development has been noticed – the percentage of 25-54-year-olds in employment is exceeding even pre-pandemic levels from 2020 in what is an incredible moment for the nation.
The figures present a remarkable accomplishment in the aftermath of the Covid-19 recession. In comparison to 2008’s financial crisis, where it took more than twelve years for prime-age labor force participation to bounce back, this time it only took just over three.
The 2001 recession had a major impact on the labor force and the share of prime-age workers in the labor force declined significantly. Thankfully, that trend reversed for the better in March 2021 with an 80.7% employment rate for people in their prime age working years – this was the highest since 2001. Also, the unemployment rate for Black Americans saw a historic low at this time.
The U.S. Government’s response to the Covid fallout
The impressive comeback in prime-age employment can be attributed to the tactics taken by policymakers both in the United States and abroad.
The US managed to make it through the worst of the pandemic unscathed, thanks in no small part to the generous investments in vaccine research, along with various subsidies given to employers and citizens which has helped them avoid a disastrous economic fallout.
The government’s fiscal response to the crisis was, indeed, extensive and multifaceted. It included increased unemployment benefits, loans to businesses that kept employees, direct payments to individual citizens, and central bank support designed to stabilize the financial system.
The US has been one of the most generous countries when it came to providing financial assistance to families. A recent paper published by Federal Reserve researchers explored the policy responses to the last three US recessions, highlighting its support for citizens in need. Moreover, various scientific studies have indicated that income inequality has remained relatively steady in recent years due to a tightening job market.
Inflation is falling and a soft landing remains in sight
The rampant monetary stimulus measures taken by the government have come with a price, amplified inflation levels. This was especially noticed in June 2020, when the Consumer Price Index jumped 8.9% compared to the preceding 12 months. Fortunately, though, it has been on a gradual decline since then and currently stands at approximately 6%.
It is quite challenging to evaluate the exact impact of economic policy on prices, independent of the changes that have occurred due to Covid-19, such as a shift from services to goods and supply chain disruptions around the world.
The Federal Reserve’s decision to raise interest rates has certainly had repercussions in various sectors, such as the housing market. However, it seems that so far its greatest impact has been on the financial sector – with Silicon Valley Bank becoming a prime example of an institution unable to keep up with the interest rate changes. On the other hand, it would seem that labor markets have not felt much of its effect yet.
The new evidence proves that a soft landing is still feasible – a period of slowing inflation without triggering an economic downturn.
Wage increases are slowing to levels that match more closely with the Fed’s inflation target, thanks in part to the rise in labor force participation discussed above; since November, we’ve seen the largest increase in the labor force in 50 years, Employ America’s Preston Mui observes.
The job market is evolving and the rise in wages is being affected by it. An influx of new job seekers means that wages need to be adjusted in order to keep up with the aim of inflation set by the Federal Reserve. Wages have slowed down and are now more in tune with the pace of inflation. This has proven to be advantageous for employers, as it permits them to maintain their profits and still provide competitive salaries for workers.
Despite the US economy appearing more secure at the moment, there is still cause for concern. Local banks remain uncertain and have lessened their lending, contributing to an economy-wide slowdown. Additionally, it’s unclear how much longer the Fed will continue to tighten monetary policies.
The fast recovery of US employment should remind us of the possible negative outcome that could have occurred if not for the stimulus efforts. Without them, millions of Americans would have stayed jobless and had to rely on public assistance programs for much longer than necessary.