By Julia Horowitz, CNN Business
America’s job market is showing signs of strength — welcome news after a choppy summer.
The US economy added 531,000 jobs in October, according to government data released Friday. That’s stronger than in August and September, though gains for both months have been revised higher.
Still, economists are increasingly starting to wonder: As shortfalls of workers persist, has the labor market changed for good? If the answer is yes, the ramifications for policymakers could be huge.
Businesses are still struggling to attract and retain enough staff to keep up with an explosion of demand. Employers had hoped that improved access to child care and reduced Covid-19 fears would boost the number of people looking for work this fall. Instead, the number of people actively searching for jobs was flat in September and October, according to Indeed, which recently polled 5,000 people in the United States.
Churn also remains an issue. In August, the most recent month for which data is available, a record 4.3 million workers quit their jobs.
Joseph Brusuelas, chief economist at RSM US, told me that he’s closely monitoring what happens in the coming months with two demographic groups: women aged 25 through 54, and baby boomers who may have retired early.
Women with young children disproportionately left the labor force during the pandemic, and many haven’t come back. Meanwhile, new research from the Federal Reserve Bank of St. Louis found that Covid-19 pushed an estimated 3 million older Americans to retire sooner than expected.
These groups should start to rejoin the workforce in greater numbers. The approval of vaccines for children aged five to 11 in the United States could mitigate some concerns about the virus that kept parents at home. And this is the point in the recovery when some retirees should start reconsidering their decisions as wages rise, Brusuelas noted.
“In previous cycles, once the unemployment rate tended to drop below 5%, retirees tended to show up,” Brusuelas said. The US unemployment rate fell to 4.6% in October. “We should start to see this now.”
And if these workers don’t come back? That could indicate a deeper shift.
“It may signal what lasting structural damage there is to the workforce from the pandemic,” Brusuelas said.
Big picture: If a 4.5% unemployment rate now signifies “full employment” in the United States, and not 3.5%, as before the pandemic, that could encourage the Federal Reserve to roll back crisis-era policies even faster than expected.
For now, the Fed has said it’s waiting for the employment situation to improve before hiking interest rates from historic lows.
Watch this space: Central banks are trying to telegraph their next steps to investors to avoid unsettling markets. But data on jobs and inflation remains hard to read. The Bank of England surprised investors on Thursday when it opted not to raise interest rates, citing uncertainty about the effects of the end of the country’s furlough program.
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