The U.S. Federal Reserve's hoped-for a surge in people into the U.S. job market fell short in October as the labor force participation rate has been flat for 15 months and continued broad wage gains reflecting what is going to be the key supply bottleneck for the central bank.
The Fed is watching for its possible effect on inflation as the average hourly earnings rose 4.9% in October, the most since March, and the Fed is watching for its possible impact on inflation.
So far the wage gains are generally welcomed by the Fed, likely to support spending and economic growth in coming months as pandemic-era government programs decline, and providing some evidence the central bank"s ultra-easy monetary policy is helping the least well off.
Earnings in the lower- paid leisure and hospitality industry, the hardest hit in terms of joblessness at the outbreak of the pandemic and still the farthest from recovering lost employment, rose more than 11% as of October compared to a year ago, which is nearly double the pace of the next closest industry, transportation.
The Fed hopes that people would return to jobs or increase actively seeking work in larger numbers, as a result of a strong October employment report, with 531,000 jobs added, but the Fed's hopes that people would return to jobs or start actively seeking work in larger numbers. Since August of 2020, the labor force participation rate has gone back to the pre-pandemic level of 63.4% that policymakers have set their sights on.
Capital Economics Senior U.S. said that it wouldn't improve until that improves. Economist Michael Pearce, wages are likely to remain higher and the Fed leaves open to the risk that maximum employment may arrive sooner, with a lower than anticipated level of jobs.
There was almost no sign of a pick-up in labor supply. That suggests the sharper increase in wage growth in recent months has further to run, Pearce said. Fed officials are arguing that participation rates will rebound as they feel that they are unable to deal with virus fears and caregiving burdens. We're concerned that the big drop in participation over the past few years will be permanent as growth in the labor force continues to go down, even as case numbers drop back. The increase in wages is in line with changes in prices overall and labor productivity, which means it won't be an inflationary force on its own, and help turn what's expected to be a temporary period of rising prices into something more persistent.
The latest gains helped narrow the gap in the U.S. income distribution, bringing the average hourly pay at a bit closer to the national average of $31, and slower the spread with workers in the highest- paid and tech- influenced information industry.
The transition of the economy back to fuller reliance on private earnings will be one of the key ways to support the U.S. growth that Fed officials and economists expect to accelerate now that the pandemic is easing again.
An Atlanta Fed real-time tracker for quarterly economic growth for the rest of 2021 jumped Friday to 8.5%, a pace that shows an easing of pandemic concerns and which could make up the job market's remaining lost ground sometime next year.
The unemployment rate of 4.6% is just one percentage point below the 3.5% mark hit at the start of the pandemic, and it has clawed back more than 90% of the surge in the spring of 2020 when it spiked to 14.8%.
Wages have been moving up strongly, very strongly. Powell said last week that it was very important and it was generally a good thing, and it's very important, and it's generally a good thing.
It is possible that the Fed will use a new increase in interest rates from the current near- zero level to reach maximum employment. It is a concept that the central bank has not quantified but judges against an array of statistics including the behavior of labor force participation and wages.
The two influences each other, and Powell said this week that the lack of improvement in the numbers of people working or actively looking for work has surprised him.
The infections from the coronaviruses variant were decreased, but we thought that schools reopening and elapsing unemployment benefits would produce some kind of additional labor supply. He said that doesn't seem to have been the case.