February jobs report: Job growth shows no signs of slowing, say U-Michigan economists
The U.S. labor market grew by 311,000 jobs in February. Unemployment ticked up to 3.6%, while the number of employed expanded and the labor force participation rate also ticked up.
Since October 2022, labor force participation has expanded slowly but steadily from 62.2% to 62.5%. This has brought 1.6 million additional people into the labor force over the past four months, allowing employers to continue to hire at rapid rates despite the historically low unemployment rate. While many anticipated that job growth would slow, so far it shows no signs of slowing.
Job growth over the past three months has averaged 351,000 jobs per month, similar to the six-month average of 336,000 and the 12-month average of 362,000. While job growth is clearly not accelerating, it also shows no signs of slowing.
The question is whether job growth of this pace can be sustained until labor force participation fully recovers. While many are concerned that the labor market is too tight, threatening to fuel further inflation, that view is based on the unemployment rate. Today’s wage data showed that wage growth has slowed substantially over the past few months, with annualized hourly wage growth of only 2.9% in February.
The question on everyone’s mind: Is the labor market too tight, are we operating above potential? The answer depends on whether you think we can recover from the negative labor supply shock that was the pandemic and return to pre-pandemic labor force participation rates. Recent growth in the labor force participation rate shows that continued recovery is possible.
Labor force participation has risen steadily since late 2022, driven largely by women and people of color
In each month from November 2022 through February 2023 labor supply rose, although at a small enough increase that no individual month was substantial enough to declare a clearly rising labor force participation rate.
Stepping back and looking over the entire period shows a clear and significant increase. The overall labor force participation rate rose from 62.2% in November 2022 to 62.5%in February, an increase of 1.6 million people. This marks a high point for labor force participation since the pandemic began. Over this time period, women's labor force participation rose from 56.5% to 57.2%, hitting a post-pandemic high, while the participation rate for men ticked down from 68.1% to 68%.
Looking over a longer horizon, men's labor force participation has been largely stagnant since the beginning of 2022 and is slightly lower than the post-pandemic high of 68.2% seen in March 2022. While women's labor force participation showed weakening in the fall of 2022, today's rate of 57.2% shows growth that has brought 816,000 more women into the labor force compared to what would have happened with the labor force participation rate of a year ago.
While both men and women have yet to return to their pre-pandemic labor force participation rates, women have narrowed the gap more. Among prime age women—those ages 25 to 54—women's labor force participation is at a new all-time high, having fully recovered and continued to grow. In contrast, the labor force participation rate of prime age men remains below pre-pandemic rates.
There are also large racial gaps in the expansion of labor supply, with labor supply growing the most among Black and Hispanic workers. The labor force participation rate of Hispanic adults increased from 65.7% in November 2022 to 66.8%in February and it rose from 62.3% to 63.4% among Black adults.
The labor force participation rate among Hispanic workers has largely stagnated over the last year. While it is at a post-pandemic high, it remains below its pre-pandemic rate. In contrast, the labor force participation rate among Black workers is up over a full percentage point over the last year and is now higher than it was prior to the pandemic.
Labor force participation rates are substantially lower for white adults following the pandemic
The labor force participation rate of white adults rose from 61.8% to 62.1%, but their labor force participation rate remains slightly below the post-pandemic high reached in March 2022 and equal to the rate a year ago, and remains more than a percentage point below its pre-pandemic rate. While white workers were the least likely to lose work in the early stages of the pandemic, they have been less likely to return to the labor market, with a smaller rebound in 2020 and very little growth since then.
Women were slower to recover jobs but they are now adding jobs faster than men
In February 2020, women held half of all nonfarm payroll jobs. By April 2020, that share had fallen to 49.3%as women had lost 11.9 million jobs, while men had lost 10 million. Women regained slightly more jobs than men by the end of 2020, enough to narrow but not close the gap.
Taking a look at the three years since the pandemic began, women lost 400,000 jobs a month on average in the first year. By the second year, women were gaining 300,000 jobs a month. That growth slowed in the third year to 197,000 jobs a month.
For men, the job loss was smaller in the first year, averaging 335,000 jobs per month. Male job growth was faster in the second year, averaging 322,000 thousand. As a result, by February 2022, women held 49.7% of jobs, similar to their share in February 2021.
Male job growth slowed much more than job growth for women in the third year, with 165,000 jobs held by men added per month. In February 2023, monthly job growth was fairly evenly split between men and women, and women's share of jobs overall was 49.8%.
One explanation for this pattern is that female-dominated occupations were the slowest to recover and grow out of the pandemic. As a result, women looking for jobs after the pandemic have had to look across a wider set of industries.
Women have entered previously male-dominated occupations in higher numbers since the beginning of the pandemic
At the beginning of the pandemic, women lost more jobs than men both because the industries they are most likely to work in lost the most jobs and they lost the most jobs in any given industry. The result was that education and health services became slightly less female-dominated as did leisure and hospitality.
Since then, more women have been hired back than men, but the shares of women in these occupations remain lower than prior to the pandemic. In male-dominated occupations like information, construction, manufacturing, and transportation and warehousing, women's job growth has substantially outpaced their share of jobs.
The result is that women's share of jobs has grown in these male-dominated occupations. These shifts illustrate how women's labor force participation is still evolving, as women have been willing to shift to new occupations as market conditions shifted away from services toward goods.
Nonfarm payrolls show overall that women's recovery and growth has been slower than that of men. This pattern is a historical anomaly, as previous recessions have seen women's jobs recover more quickly. However, in previous recessions, job growth in female-dominated occupations like education and health services led the recovery.
As job growth shifts from male-dominated occupations to female-dominated occupations, whether employers find it easy to hire will ultimately depend on whether women's labor force participation continues to grow.
Women have gained jobs in construction at three times their share of the industry
Since the start of the pandemic, women have gained a disproportionate share of construction jobs, raising their share of jobs from the very small 13.1% to the not-quite-as-small 14.1%.
The recently passed CHIPS Act requires a lot of new construction workers. Some have worried that it will simply be impossible to hire all the construction workers needed for the planned projects. For example, Catherine Rampell recently pointed out that projects in Ohio will require more construction workers than are available in all of Ohio. Where are these workers going to come from?
One answer is women. Women have been gaining jobs in construction at three times their share of the industry. Similarly, women have been gaining jobs in manufacturing at almost two times their share of the industry.
Perhaps it's no wonder that states like Oregon have started bundling child care with apprenticeship programs. They want to train women, and women need child care to be able to take some of these positions. More expansively, the CHIPS program requires those looking to access more than $150 million in subsidies to provide child care to their workers.
Child care programs will help bring more women into construction and manufacturing, but it is worth noting that research shows white men are the most likely to benefit from such child care subsidies. This research highlights the fact that in most families with kids, all parents are attempting to work and a lack of child care can create employment problems for men and women.
About the analysis
The University of Michigan's monthly Rapid Insights labor market analysis is conducted by Betsey Stevenson, economist at the Gerald R. Ford School of Public Policy; and Benny Docter, senior data and policy analyst at Poverty Solutions. The project is funded by the Robin Hood Foundation, with support from the Ford School and Poverty Solutions.