The US Labor Market Is Looser Than It Appears

Most seers believe the US labor market is overly strong. Federal Reserve Chair Jerome Powell recently described it as “extremely tight” and “out of balance,” with demand for workers far outstripping supply. I beg to differ.

It is true that quit rates had risen as employees didn’t worry about finding new jobs. Also, job-switchers got annualized pay hikes of 8.4% in August, up from 5.8% early this year, according to the Federal Reserve Bank of Atlanta. That encouraged people to change jobs or strike for higher pay. There were 180 strikes involving 78,000 workers in the first half of 2022, up from 102 strikes covering 26,500 a year earlier.

Job openings are about twice the number unemployed, which means that to return to the 63.4% labor participation rate of February 2020, before the pandemic, it would require 2.8 million people moving into the labor force. Layoffs in July of 1.4 of million were about 23% below the average in 2019.