Economy: US labor market continues to recover

The US labor market remained on course for recovery in March. Unemployment has continued to fall and is rapidly approaching pre-coronavirus levels. Employment continued to rise, albeit at a slightly slower pace than analysts had expected.

The US Federal Reserve is likely to worry about rising wages, as they can fuel inflation, which is already very high.

The unemployment rate fell by a further 0.2 percentage points to 3.6 percent compared to the previous month, as announced by the US Department of Labor in Washington on Friday. On average, analysts had expected a decline to 3.7 percent. The rate is just above the level of 3.5 percent that it had reached before the corona pandemic. At the time, economists had spoken of de facto full employment.

According to the ministry, around 6 million people are currently unemployed. Shortly before the outbreak of the corona pandemic, around 5.7 million people were unemployed. Here, too, the labor market is approaching its pre-Corona level. During the pandemic, the labor market collapsed dramatically at times.

Wage growth accelerated. Average hourly wages increased 0.4 percent month-on-month and 5.6 percent year-on-year. In the previous month, the increases were 0.1 and 5.2 percent.

Increasing wages are a good thing for employees, but they pose a threat to the central bank’s goal of price stability, which has already been violated. Higher wages fuel consumption and thus strengthen the pricing power of companies. In addition, companies are trying to pass on rapidly rising labor costs to sales prices, which is further driving inflation.