But there’s reason to be skeptical.
Over the course of the pandemic, it has been very hard for economists to accurately forecast the month-to-month changes.
At the start of 2022, jobs forecasts missed the mark spectacularly as the labor market did much better than expected: While some economists had predicted a negative jobs number for January, America ended up adding 467,000 positions, blowing the consensus of 150,000 jobs out of the water.
Here’s how that happened: The fallout from the Omicron variant wasn’t as bad as expected and historical seasonal patterns did not have the expected effect as businesses continued to struggle with the worker shortage.
How could that many jobs slip through the cracks?
It’s all down to how disruptive the pandemic has been. Month to month, the nation saw extreme changes in employment and that has distorted measurements and seasonal patterns, according to ADP chief economist Nela Richardson. Much of what worked before Covid just doesn’t apply any more.
That said, data has been trending in the right direction. Millions of jobs have been added back to the economy and, week by week, fewer people are filing for unemployment assistance.
Looking at the right data
But there are other measures of the labor market that don’t look as peachy: The rate of labor force participation, for example, hasn’t recovered as swiftly.
Workers were kept away from jobs for various reasons, including health and child care concerns. Even though Omicron didn’t hurt the economy as much as feared at the start of the year, it may have kept people on the sidelines, Richardson said. So that’s a space economists will be watching.
Another area is wages, which have been going up as businesses have tried to attract and retain staff amid high inflation and the ongoing labor shortage. For American workers, however, wages haven’t been rising enough to keep up with the fast pace of inflation.
“The other wild card is the Ukraine-Russia conflict,” said PNC chief economist Gus Faucher. Even though there will be little fallout in the labor market, there are major risks to the economy, he said. “These include a recession in Europe, even higher inflation because of rising energy prices, and the increasing likelihood that the Federal Reserve could be forced to raise interest rates so aggressively to combat inflation that the recovery stalls.”
