US Economy Desperately Seeking Workers

The Labor Department reported on Friday that the economy added 428,000 seasonally adjusted jobs in April. This is the same as the increase in March, indicating that employment is growing rapidly. The unemployment rate based on another survey was very low at 3.6%.

The Federal Reserve now wants to cool the job market. As the labor supply declines, wages rise and inflation becomes more difficult to control. However, this setting is not just a switch that central banks can turn on and off.

In an economy with continued strong underlying demand, it will take time to raise rates. Employers are also anxious for workers, and the Labor Department earlier this week said that all unemployed had 1.9 vacancies and that even slower demand growth might not put a dent in the job market. 

The reason the unemployment rate is low despite the extent of the reduction in employment is that to be considered unemployed, one must be actively looking for work. A lot of people don't do that. The participation rate, the proportion of workers who have a job or are actively looking for work, was 62.2% last month compared with 63.4% in February 2020.