Fastest Ever Post-Recession Labor Market Recovery

https://fred.stlouisfed.org/series/UNRATE

9 States Reached All-Time Record Low Unemployment Rates in February

Nebraska, Utah, Indiana, Kansas, Arkansas, Mississippi, Montana, Oklahoma and West Virginia. The Republican leaning states are “winning”. The Bureau of Labor Statistics (BLS) has been reporting state data since 1976, so this is a GREAT result.

https://www.bls.gov/news.release/laus.nr0.htm

27 states reported unemployment rates below the optimistic “full employment” level of 4%. Another 17 were in the 4.0-4.9% range. Just 6 states were burdened with unemployment rates above 5.0%, with New Mexico at 5.6% the highest.

https://www.bls.gov/web/laus/laumstrk.htm

4 of the 51 “Large” Metro Areas Reported All-Time Record Unemployment Rate Lows This Year

Salt Lake City, Indianapolis, Oklahoma City and Atlanta set new records.

Geographically dispersed Nashville, Tampa, San Jose, Phoenix and Louisville are very close to setting new records.

https://fred.stlouisfed.org/series/SALT649URN

https://fred.stlouisfed.org/series/INDI918URN

https://fred.stlouisfed.org/series/OKLA440URN

https://fred.stlouisfed.org/series/ATLA013URN

As with the states, the distribution of results for the 51 metro areas with 1 million + populations is quite convincing. 8 metro areas are below the “unsustainable” 3.0% gold standard. 29 metro areas are below the 4.0% “full employment” level. 43 metro areas are below 5%. 8 areas exceed 5%. Detroit is second worst at 5.4%. Cleveland is in last place, struggling with 6.4%.

https://www.bls.gov/web/metro/laulrgma.htm

Unemployment Rate Will Fall: Record Open Jobs

https://fred.stlouisfed.org/series/JTSJOL

Unemployment Rate Will Fall: 500K Net Jobs Added Each Month in the Last 12 Months

https://fred.stlouisfed.org/series/PAYEMS

Unemployment Rate Will Fall: Labor Force Participation Rate May Increase 0.5% – 1.0%, But Not Further

https://fred.stlouisfed.org/series/CIVPART

Unemployment Rate Will Fall: Blue State Employee Returns From Covid Have Lagged

Red states have roughly returned to pre-Covid employment levels. Blue states have lagged by 3.5%. Mixed states have lagged by 2%. This can provide 3 million workers to fill some of the 11 million open jobs.

Unemployment Rates Will Fall: Wages are Up 11%

https://fred.stlouisfed.org/series/CES0500000003

Summary

7-Chart Tuesday (4/5/22)

I expect the overall unemployment rate will set a 68-year record in the next 3 months. The February 2020 3.5% and May 1969 3.4% lows will be eclipsed! Unemployment will be at the lowest rate in my lifetime (Jul 1956)! This is despite the many, many issues and risks we have on both the supply and demand sides of the labor market.

IMHO, there are many factors driving this GREAT NEWS. (1) American firms are making record profits based on domestic and global demand, so they are incentivized to hire more workers, even at higher than usual wages. (2) American firms are finding that they can pay higher than historic wages and still generate incremental profits from the incremental workers (see Costco). (3) The definition of “employable” workers is clear, but employers are slowly loosening their irrational requirements (college degrees). (4) Baby Boomers have accumulated unprecedented retirement assets, so they have slowly left the labor force in a “one way” exit. (5) The “informal” labor market has been institutionalized with Uber, gig, contract and temporary worker arrangements. (6) Reduced unemployment benefits have incentivized many (older, less skilled non-unionized) unemployed workers to reduce their “reserve wage” expectations and accept new employment at lower wages than their best historical experience. (7) With less stigma for “laying off” workers, employers are more actively hiring workers to fill all economically justified positions. (8) With lower recent illegal immigration, the “reserve army” of the unemployed is lower. (9) Modern recruiting systems provide employers with so many candidates that they are assured of finding matching workers relatively quickly.

In essence, we have a much more “efficient” labor market than in years past, so the minimum unemployment rate has been reduced from 5% to perhaps as low as 2%. This too, is good news.

President Biden certainly did not drive any of the above structural factors. However, he has not disrupted these forces or pushed fiscal or monetary policy to undo the good news. Sometimes, “leave well enough alone” is all that is required.