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Omicron Exits, Workers Enter, but Talent Shortage Remains

The February Jobs Report

March 4, 2022 by Rucha Vankudre, Kyle Rudman, and Tim Hatton

The job market is showing strong growth, with federal statistics reporting that 678,000 jobs were added to non-farm payrolls in February. But there’s no sign that the labor shortage is easing up, and wage growth has leveled off despite high inflation.

Unemployment edged down to 3.8% even as the labor force participation rate–the percentage of working-age people who are actually working–ticked up. The Bureau of Labor Statistics also revised its Employment Situation Report numbers upward for December and January, showing an additional combined gain of 97,000 jobs, capping a year of strong jobs growth.

One of the biggest takeaways from this month’s report was the waning impact of the Covid-19 Omicron variant. For example, the percentage of employed persons teleworking because of the pandemic was at 13% in February, down from its six-month high of 15.4% last month. 

And among the unemployed, 1.8 million fewer people were prevented from looking for work because their employer lost business. That number had been 6 million in January and now stands at 4.2 million. 

Job gains were solid across many industries. Leisure and hospitality fields saw the greatest increase (adding 179,000 jobs in accommodation and food services combined with arts, entertainment and recreation). Education and health services, professional and business services, and construction were the other big winners. The gain in construction jobs is especially encouraging because that industry had been flagging over recent months. 

Although those numbers are strong, there’s still reason for concern about the labor market going forward. 

Average hourly compensation increased very little, signaling an end to the steady growth wages had been experiencing over the past several months. That average increase—just one cent—did not keep pace with inflation, as it continues to soar. The past 12 months have seen the largest gain in the Consumer Price Index since 1982.

The labor force participation rate (LFPR) rose by 0.4% for men but fell by 0.2% for women. That tick downward in the women’s participation rate reverses a recent trend and presents a challenge when considering the large number of job openings still available. 

Next week, the BLS will release its Job Openings and Labor Turnover Survey for January, which will shed further light on this complex job market. There’s no sign that our labor shortage will be any less tight any time soon. 

For more coverage and analysis of this employment situation, catch up on our LinkedIn Live from this morning, where our Chief Economist Bledi Taska and Senior Economist Rucha Vankudre presented their first impressions on what this report tells us.

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