September 2, 2022 by Ethan Gilbert
Today, the Bureau of Labor Statistics posted a great jobs report. The economy added 315,000 jobs, above the consensus estimate with manufacturing job gains coming in strong as well, adding 22,000 positions – again above the consensus. While low wage growth is generally not something to celebrate, the 0.3% wage growth gain on the month was on the low end of the estimate and may be indicative of easing inflation.
My personal favorite, “the Employment-Population Ratio – 25-54 years,” jumped from 80.0 to 80.3, meaning 80.3% of adults aged 25-54 are employed. I think this is the best metric of employment in the United States and this month’s reading is 0.2% off from pre-pandemic levels, suggesting the job market has largely recovered. This statistic was first tracked in 1948 when it stood in the low 60s. The highest posting ever is 81.9 from the year 2000.
But the BEST number from today’s job report was the unemployment rate which jumped from 3.5% to 3.7%. This may be counterintuitive, but the reason for the unemployment rate increase was because more people entered the workforce. The “participation rate,” or the percentage of people, age 15 and older, who are employed or looking for a job increased from 61.1 to 61.4, meaning 800,000 people who weren’t looking for a job last month, now are.
In this tight labor market, more people looking for jobs eventually means more people employed which is great for two reasons. First, more people working means more wealth being created, which makes everyone (including investors) richer in the long run. Second, more people working should increase the supply of goods and services which should alleviate inflationary pressures.
One month doesn’t make a trend, and these forces will take time to work their way through the economy, but an increase in the labor force will be very helpful to the economy right now. The increase in labor force participation may, in part, be due to inflation pressures forcing people back to work to make ends meet. It doesn’t always work this way, but it’s a great thing when the economy is self-correcting.