The labor market has its track on a gradual improvement. According to the Labor Department’s address yesterday, nonfarm payrolls rose a seasonally adjusted 192,000 in March and figures for the prior two months were revised up by a combined 37,000, and the unemployment rate stays at 6.7%. Even though many expected strongly a sharp upward trend in labor market early this year, the sheer number of new-added payrolls were not performed as so.
Ever since the recession start from 2008, the job supply was struck down to a low point where over 8.8 million positions were lost during the crisis. It is said that the private part jobs hit a level that surpass the apex before recession, while the government positions still remain well below the peak.
The moderate growth in jobs addressed by Fed chairwoman Janet Yellen as a cause for pausing the plan of raising interest rate. She seems to worry that those signs of softness in labor market imply the economy is still on its way toward positive. Her points suggest that the figure of unemployment rate cannot work as a mere criteria to evaluate market’s health.
Besides that, we already knew that there is a big reason behind the declination of unemployment rate, which is more and more jobless people are giving up on seeking new positions. Those people’s quit shrank the denominator and narrowed the unemployment rate. According to CNN, 347,000 people dropped out of the workforce last December and drag down the participation rate for men alone matched a record low dating back to 1948. If add up the share for women, the number still weaker than is was in 1978.
This March, only 63.2% of Americans 16 or older are participating in the labor force, a number even higher than past months. In fact, the participation rate has been declining since the year 2000, but the 2008 recession accelerate this progress. There is a substantial question raised after all this: Where Have All the Workers Gone?
One possible explanation given in this article in WSJ is that the expansionary monetary policy raises the risk of inflation and shrinks the paycheck, thus subdues their inspiration of job seeking activities. This could be the reason for those who earn few from hourly work but may be irrelevant for those who get high paid. However, I think people who quit pursuing a job must earn their lives somewhere else, in this case, I think investment in stock market could be the new source of income for them. The rumor about minimum wage policy could also play a role in this. Millions of American are working part-time. Those jobs could be affected severely by a bit raising in minimum wage. But mostly, I think the long-last softness in labor market caused more people to lost faith and choose to quit.
It’s been a long way to go before reaching the normal economy level and get unemployment rate back to its healthy situation. However, the participation problem is becoming severely and required for more attention.