skip navigation
Blog

Stay up to date on timely topics and market events. Subscribe to our Blog now.

ECONOMY
May 06, 2022

Payroll Data Show Labor Markets Healing, But Only Gradually

By Michael J. Bazdarich, PhD

Stay up to date on timely topics and market events. Subscribe to our Blog now.

US Labor Department data released today showed private-sector jobs rising by 406,000 in April, with a modest -37,000 revision to the March jobs estimate. Government commentary stated that job gains were widespread, and this was indeed the case, with all major sectors adding jobs on the month.

Meanwhile, wage gains moderated further on the month, with all-worker average hourly wages rising 0.3%, down from 0.6% monthly gains late last year. Over the last three months, both all-worker and production workers average hourly wages have risen at a rate of 3.7%, right at pre-Covid rates, as seen in the accompanying chart.

Exhibit 1: Growth in Average Hourly Earnings
Growth in Average Hourly Earnings
Source: Bureau of Labor Statistics. As of 30 Apr 22. Select the image to expand the view.

The jobs gains, of course, are way above pre-Covid rates. This reflects the fact that in most industries payroll levels are still way below pre-Covid trends.

We like to focus on six industries that have been hit especially hard by Covid restrictions and related Covid fears among customers: health care, restaurants, amusements and sporting events, lodging, and passenger travel. Combined, these industries are still 3 million jobs below pre-Covid growth trends. At their recent paces of jobs gains, we are still many years away from these sectors fully recovering from Covid effects.

For other service sectors, conditions are not so stressed. Other service sectors are “only” about 1.5 million jobs below pre-Covid growth trends, and at the recent pace of job gains, they could reach full recovery by the end of 2023.

For goods-producing (mostly manufacturing) and construction, employment levels are nearly back to pre-Covid trends. Of course, for these sectors, production and demand levels are above pre-Covid experience, so some net job gains relative to trend would be expected here. This suggests some further room for recovery in jobs here as well. Still, in manufacturing, at least, robust recent job gains have been offset by declines in the workweek, suggesting that employers there are returning to working conditions approximating normalcy (compared to the stressed operations of the last two years).

Both the Fed and Wall Street analysts continually state that labor market conditions are extremely tight. It is worth pointing out that this tightness is due not to high levels of employment or employment demand, but rather to sharp declines in labor force participation brought on both by Covid restrictions and Covid benefits that discouraged work. Conditions are returning toward normalcy, with labor force participation rebounding in recent months. It is reasonable to think that labor market conditions will ease, but it still looks as though full recovery from Covid effects is more than a year away.

© Western Asset Management Company, LLC 2022. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.