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Unemployment nears pre-pandemic levels – The New York Times

Federal Reserve officials are tasked with promoting “full employment,” and while it’s been difficult to guess what that means as the economy recovers from the huge job losses at the start of the pandemic, March’s hiring data once again seemed right for policymakers confirm that the labor market is running hot.

Now central bankers are hoping that conditions will settle into a more sustainable equilibrium.

The unemployment rate fell to 3.6 percent in March from 3.8 percent in February, data released on Friday showed. Unemployment is fast approaching the pre-pandemic unemployment rate of 3.5 percent.

At the same time, wages rose by a strong 5.6 percent last year. For comparison, wage growth was between 2 and 3 percent for most of the 2010s.

While the proportion of those in employment or job seekers remains low compared to its pre-pandemic level and people are returning to the labor market every month, it is not clear when the supply of potential workers will return to previous levels. Meanwhile, officials fear the labor market is showing signs of an unsustainable heat, with labor shortages and rising wage rates that could help push prices higher while inflation is already high.

“In many ways, the job market is extremely tight, significantly tighter than the very strong job market just before the pandemic,” Fed Chair Jerome H. Powell said in a recent speech. Mr Powell has previously described the current job market, where there are 1.8 job openings for every unemployed person, as “an unhealthy level”.

The Fed has started raising rates and has signaled that it will raise them significantly this year. Increasing borrowing and spending may slow consumer and corporate demand, give supply a chance to catch up and cool the labor market. The goal is to slow down the economy just enough to bring inflation under control and lay the foundations for sustainable growth.

https://www.nytimes.com/2022/04/01/business/economy/jobs-fed-full-employment.html Unemployment nears pre-pandemic levels – The New York Times

Ian Walker

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