The US labor market is sending mixed signals. The Federal Reserve Bank of Dallas believes the data shows the job market is hot; the San Francisco branch says otherwise. Both are right. As the unemployment rate fell to 5.8% in May, the outlook for women and people of color is more difficult. Focusing on the weakest links is the only way for the central bank to achieve its goals.
The Fed’s views on the job market depend on how the data is cut. In a document released last month, the Dallas office focused on employers in its district who were struggling to find workers, noting in a survey that only about 52% of those polled said they would return home. their former employers, against 68% last July. There were also 1.2 people unemployed for every job offer, roughly the same rate as in spring 2017.
Competition for employees with at least a bachelor’s degree is indeed tight. The activity rate of this cohort was 72.5% in May, just below that of February 2020 before the start of the pandemic. Their unemployment rate has more than halved from the April 2020 peak of 8.4% to 3.2% in May.
The San Francisco Fed’s darker outlook reflects different data. He said this week that the pace of unemployment for women, blacks and Hispanics indicated worsening labor market conditions. The participation rate for women was 56.2%, up from nearly 58% before the pandemic. This suggests that millions of people have dropped out of the workforce, possibly due to a lack of childcare services. The number of long-term unemployed, at 3.8 million, is also higher than one would expect from the aggregate figures.
Pressure from Fed Chairman Jerome Powell for a large-scale recovery means putting more emphasis on troubling areas of the job market. He said the central bank’s decision to start raising interest rates and cutting back on asset purchases depended in part on full employment among large swathes of the population. He also highlighted the disappointing labor indicators for women and minorities.
Women make up almost half of the total workforce while blacks and Hispanics make up about 30%. With a record 8.1 million job openings and some employers struggling to find workers, targeting them would help reduce the disparities between labor supply and demand. And that would put the Fed on track to fulfill its mandate.
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– The US economy created 559,000 jobs in May, the Labor Department said on June 4. Economists polled by Reuters expected an addition of 650,000 jobs. The unemployment rate fell to 5.8% in May from 6.1% in April.
– Separately, a June 1 article from the Federal Reserve Bank of San Francisco said the job market is worse than numbers suggest due to declining labor force participation and high numbers of long-term unemployed.
– Another study by the Federal Reserve Bank of Dallas, released May 27, said labor market conditions are tighter than the numbers suggest. He noted that many employers in his district have said they have difficulty hiring workers, in part because many former employees are reluctant to return to their old jobs.
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