American workers have a lot to appreciate this Labor Day
Everyone who wants a job has one, businesses are less likely to lay off workers, and employees are getting more flexibility and benefits.
Labor Day is fast approaching, and it’s an opportune time to look at how things are going for American workers. To generalize about our hugely diverse workforce, the statistics firmly show that for the typical worker things are going well. Indeed, it’s no exaggeration to say things are going very well.
Most importantly, everyone who wants a job has one. The national unemployment rate is about as low as it has ever been at 3.5% and has been there for over a year. Unemployment has been lower, but only briefly, and only when the country was at war. Unemployment is low here in Philadelphia, from coast to coast, and across all demographic groups, including for Black and Latino workers.
This low unemployment is especially impressive given the strong rebound in the labor force, which got hammered during the pandemic. There had been lots of hand-wringing that generous government support during the pandemic, like enhanced unemployment payments, was incentive for people not to work. If that was ever the case, it isn’t now. Indeed, the labor force participation rate for prime-age workers ages 25-54 has fully recovered from the pandemic, and then some.
Behind the low unemployment is businesses’ extraordinary reticence to lay off workers. The pickup in job cuts at technology companies at the end of last year and early this has since abated. Businesses’ No. 1 problem since before the pandemic has been finding and retaining workers, and they recognize this problem will continue as the large baby-boomer generation retires. Allowing more foreign workers into the country also appears impossible given our vexing immigration policies. Companies don’t want to lay off workers who might have jobs elsewhere when they are needed again in a few months.
The extraordinary number of open job positions reinforces this concern. This is especially true in health care and educational services — industries critical to the Philadelphia economy. But even manufacturing and construction, which typically get hit hard when interest rates are rising, as they are now, still have an unusually large number of vacant spots.
The surfeit of available jobs means workers have been empowered to switch to better jobs — jobs more suited to their skills, education, and interests, and at much better pay. Wages have increased strongly across all occupations, industries, and regions of the country, but especially in perennially low-wage jobs. Wages for jobs in the bottom 25% of pay — mostly leisure and hospitality and retail jobs — have increased more quickly than for all other workers, especially those in the top 25%.
Workers, therefore, are much happier in their jobs. According to an annual survey of job satisfaction conducted by the Conference Board, well over 60% of workers say they are satisfied with their jobs. This is the highest share since the survey began in the late 1980s. The low, close to 40%, came in the wake of the financial crisis. It is interesting to note that workers say they have a much better work-life balance. Thank you, remote work.
Of course, workers face challenges. Most immediately, this hot job market is in the Federal Reserve’s crosshairs. The Fed hopes to raise interest rates high enough, fast enough to cool off job and wage growth and quell inflation — but not so high and fast that businesses lay off workers in droves and ignite a recession.
Pulling this off won’t be easy, but so far, so good. Job growth remains strong, though it is throttling back. Businesses aren’t laying off more workers, but they have become more circumspect in their hiring. Businesses are also paring back employees’ work hours and temporary help. Wage growth also is moderating and is near what is consistent with the Fed’s inflation target. The job market isn’t quite where the Fed wants it to be, but it isn’t too far off, and the trends look good.
Workers also face a longer-term challenge from businesses’ rapid adoption of generative artificial intelligence. The Hollywood writer’s strike has brought this worry to the fore. Those creative workers fear that AI will take many of their jobs and undermine their incomes. But if history is a guide, it is likely to take years for the new technology to be adopted effectively. For sure, many jobs will ultimately be lost to AI, but many others will be created, much like what happened when electricity was widely adopted in the 1920s and the internet came on in the 2000s.
It’s been a long time coming, but it’s a great time to be an American worker.
Mark Zandi is chief economist for Moody’s Analytics.