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Employers continue hiring spree even as war in Ukraine ratchets up economic fears

U.S. employers added 431,000 jobs in March, as the unemployment rate fell to 3.6% from 3.8% in February. The tight job market is putting upward pressure on both wages and prices.

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Signs with the message 'Now Hiring' are displayed in front of restaurants in Rehoboth Beach, Delaware, on March 19.
Signs with the message 'Now Hiring' are displayed in front of restaurants in Rehoboth Beach, Delaware, on March 19. Stefani Reynolds | AFP via Getty Images

U.S. employers added jobs at a healthy clip in March, despite the economic shock following Russia's invasion of Ukraine.

The Labor Department reported Friday that employers added 431,000 jobs last month, as the unemployment rate fell to 3.6% from 3.8% in February. Employment gains for January and February were also revised upwards by a total of 95,000 jobs.

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The job growth in March was widespread with bars and restaurants adding 61,000 jobs, retailers adding 49,000 and manufacturers adding 38,000 jobs.

The job market remains unusually tight, which is putting upward pressure on both wages and prices and fueling inflation worries at the Federal Reserve.

"This is a labor market that is out of balance," Fed chairman Jerome Powell said last week. "It's great for workers. But we need the labor market to be sustainably tight."

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Powell and his colleagues worry that if high inflation goes unchecked, it will ultimately derail the jobs recovery. Prices in February were up 6.4% from a year ago, according to the Fed's preferred inflation measure — the sharpest increase since 1982.

The central bank began raising interest rates in March in an effort to cool off demand and rein in prices. Powell has said more aggressive rate hikes could be in store in the coming months.

A separate report from the Labor Department this week showed vacant jobs outnumbered unemployed workers by nearly two to one. Employers have been forced to offer substantial pay raises in an effort to attract scarce workers.

"We don't expect to see wage pressures fall any time soon," said Julia Pollak, chief economist for the job search website ZipRecruiter." "On the contrary, what we are seeing is wage growth pressures broaden."

Wages have risen by an average of 5.6% over the last twelve months.

Federal Reserve Chair Jerome Powell speaks during a luncheon at the 2022 NABE Economic Policy Conference at the Ritz-Carlton in Washington, D.C., on March 21
Federal Reserve Chair Jerome Powell speaks during a luncheon at the 2022 NABE Economic Policy Conference at the Ritz-Carlton in Washington, D.C., on March 21 Samuel Corum | Getty Images

From the Great Resignation to the Great Return

There are encouraging signs that more people may be joining the workforce as the health outlook improves.

Friday's report showed the number of people working or looking for work grew by 418,000 in March, though the labor force is still somewhat smaller than it was before the pandemic.

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In February, nearly 8 million people were not working because they were sick with COVID-19 or caring for someone who was sick. By March, that number had fallen to less than 3 million, according to the Census Bureau.

Pollak also points to a ZipRecruiter survey which found more people expect to enter the job market this year.

"The Great Return is the new labor market story," Pollak said. "People have had enough of sitting around doing nothing. Also, with COVID relief payments fading away, people are starting to feel a little bit more financial pressure to come back to work."

The job market is seeing a lot of churn

There is also significant churn in the job market, with millions of workers quitting each month — in many cases to switch to a better job. Layoffs, on the other hand, are rare, as employers are eager to hang on to the workers they already have.

"People have confidence that they can leave their old job and find new ones," said economist Nick Bunker of the Indeed Hiring Lab. "Those who stay are seeing a level of security that we haven't seen in a long time."

The challenge of finding workers may push some employers to invest in more labor-saving technology, which would allow the existing workforce to be more productive.

"I do think that will happen in the service industries," Powell told a gathering of business economists last week. "So you may well have productivity there, which would be great. That would make these high wage increases that we're seeing more sustainable."

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Transcript :

AILSA CHANG, HOST:

We got a really positive report card today on the nation's job market. U.S. employers added 431,000 jobs last month, and the unemployment rate fell to just 3.6%. With sizzling demand for workers and at least a temporary lull in the pandemic, more people are now coming off the sidelines to look for jobs. And in a lot of cases, they're finding them. NPR's Scott Horsley joins us now with more. Hey, Scott.

SCOTT HORSLEY, BYLINE: Great to be with you.

CHANG: Great to be with you. So I understand that this is now the 11th month in a row that the U.S. has added more than 400,000 jobs. Can we officially say that the economy has fully recovered from the damage done by the pandemic? I mean, what do you think?

HORSLEY: Not quite. We're still about 1.6 million jobs short of where we were before the pandemic. But that gap is closing pretty rapidly. There had been some concern that the spike in gasoline prices last month following Russia's invasion of Ukraine might have weighed on job growth. But restaurants, retailers, factories, construction crews all added jobs at a healthy pace in March. What's more, employment gains for January and February were revised up by a total of 95,000 jobs. At the White House, President Biden expressed hope that all these additional workers will help the economy to deliver both the goods and services that the American people have been clamoring for.

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PRESIDENT JOE BIDEN: If more and more Americans get jobs as they do, it's going to help ease the supply pressures we've seen. And that's good news for fighting inflation. It's good news for our economy, and it means that our economy has gone from being on the mend to being on the move.

HORSLEY: At 3.6%, the unemployment rate has almost returned to where it was before the coronavirus struck. And that decline in unemployment was really broad-based last month. Men, women, Blacks, whites, Latinos, Asian Americans, African American unemployment actually saw the biggest drop in March, although at 6.2%, it is still above the national average.

CHANG: Right. But I mean, Scott, even with all of these new jobs added last month, employers - they still want, they still need more workers right now, right?

HORSLEY: That's right. Right now job openings far outnumber unemployed workers, which is unusual. But there was some good news on that score. More than 400,000 people joined or rejoined the workforce last month. That's on top of another big gain in February. So while we still have fewer workers than we did before the pandemic, the worker shortage is beginning to ease a bit. Julia Pollak is chief economist with the job search website ZipRecruiter. She thinks a lot of would-be workers who sat out 2021 are going to be back in the workforce this year.

JULIA POLLAK: The great return, I think, is the new labor market story. Of course, the year got off to a rocky start with omicron, but now seems to be the time that people are starting to stream back.

HORSLEY: COVID cases are way down since the beginning of the year, so people might feel more comfortable getting back to work. And with COVID relief payments from the government now long since expired, some people might be feeling some economic pressure to start drawing a paycheck.

CHANG: Yeah. Well, when workers do come back into the job market, do they find that they have more leverage?

HORSLEY: Yeah, it's a workers' market right now. Employers are eager to hire, and in many cases, they're willing to pay more, offer better schedules, more flexibility. Tonya Breslow (ph) helps to recruit workers for restaurants around the country. That's an industry that added 61,000 jobs last month. And Breslow says the tables have turned.

TONYA BRESLOW: It's the candidates now interviewing the prospective employers. It's not the prospective employers interviewing the candidates. The candidates have leverage, whereas before they did not have leverage.

HORSLEY: Wages are up 5.6% in the last year. In the hospitality industry, they're up nearly 12%. Now, inflation watchdogs are keeping a close eye on that. They're nervous that the wage increases might feed into higher inflation. But President Biden says he's not worried about the increased bargaining power for workers. He says it's long overdue.

CHANG: That is NPR's Scott Horsley. Thank you, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.