Workers Return to Offices, Wages Rise

Payroll employment rose by 431,000 in March, after an upwardly revised 750,000 in February. Private sector payrolls rose 426,000; a rise in hiring at public schools, which remain grossly understaffed, offset public sector losses at the state and federal levels. Government wages have been slow to accelerate in line with private sector wages.

Hiring in leisure and hospitality continued to drive overall gains, with an increase of 112,000. Throughput at TSA checkpoints, hotel occupancies and foot traffic at restaurants all picked up during the month as the Omicron wave abated and travel for spring break returned. The later than usual Easter spread travel more evenly between March and April; some resorts sold out.

Next up was professional services with gains of 102,000. The gains were heavily in tech jobs. Hiring in accounting has also surged and now exceeds pre-crisis levels by nearly a half million. Demand for accountants skyrocketed in response to strong mergers and acquisitions activity and the need to hit more concrete Environment, Social and Governance (ESG) targets. More than $130 trillion in global private sector finance has been pledged to invest in the transition to renewables and efforts to stem climate change.

Hiring in retail jumped 49,000 after large gains in February. This reflects the return of people shopping in-store. Instant gratification is coming back.

Employment in manufacturing remained strong at 38,000 job gains. Mining activity began to pick up in smaller fields in response to firmer oil prices; the administration is pushing hard to get larger companies to ramp up. Production in the vehicle sector rebounded with an easing of chip shortages. The question is, how long can that last?

New lockdowns in China and the war in Ukraine are further disrupting supply chains; the worst effects have been in Europe. Vehicle producers in Germany were forced to idle when a supplier in Ukraine was shuttered.

Hiring in health care slowed. Employment in nursing homes continued to lose ground. Child care saw a small bump but remains deeply in the hole from a year ago. Burnout is high in both the health and education sectors; quit rates have soared. The two sectors have seen the most workers switching fields as opposed to hopping jobs in the same field for higher wages.

Average hourly earnings rose 0.4% during the month and jumped to 5.6% from a year ago. That marks an acceleration from the pace of February. Wage gains are moving up the food chain.

Hours worked edged lower after rebounding in February but remained elevated relative to pre-pandemic levels; that is amplifying the rise in wages, especially among younger, nonsupervisory workers. Those earnings jumped 7% in March from a year ago. Wages for leisure and hospitality led gains. Professional services also posted gains.

Workers are returning to the office. Those working remotely slipped to 10%, a new pandemic low. Many have returned via hybrid models.

Separately, the unemployment rate dropped to 3.6%, close to the low of February 2020. Participation in the labor market edged up to 62.4% but remains almost one percent below the pre-crisis peak.

About half of the drop in participation can be attributed to the pandemic-related surge in retirements. The over-65 crowd has begun to unretire and return to work; those on fixed incomes have little choice but to return amidst the increases in everyday expenses.

The gain in participation was strongest among Asians and teens. The move to bring teens back in reflects how tight the labor market remains. Women are also beginning to return; those with small children have the hardest time.

The number of workers out sick and needing care plummeted with the drop in COVID infections. Caregiving tends to hit women harder than men; they benefit when the number of those out sick drops.

Those forced to accept part-time work instead of full-time due to economic weakness remained at exceedingly low levels in March. This is something that bears watching as the pandemic morphs into an endemic because it could mean more seasonal staffing shortages.

Multiple job holders receded a bit but remained off the lows we saw last summer and fall. That is largely due to the surge in inflation and the need to fill the hole that higher prices are burning in people’s wallets.

Bottom Line
The demand for workers continued to outstrip the supply in March; wages accelerated even as more people returned to the labor market. Those gains coupled with another sharp upward revision to last month’s data underscore the strength of the labor market. Those shifts will reinforce the Federal Reserve’s need to focus more on combating inflation, which will get worse before it gets better. The chill of rate hikes will take time to bite; the term Christmas in July could have a whole new meaning.

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