More People Are Returning to Work, Some Groups Faster Than Others

As the economic effects of the pandemic continue to fade, more people are getting back into the workforce—some groups more than others. 

The labor force participation rate edged up to its highest level since the pandemic left tens of thousands unemployed, the Bureau of Labor Statistics said Friday. The labor force participation rate was 62.5% in February, up from 62.4% in January, but was shy of the 63.3% rate seen on the eve of COVID-19’s arrival. 

Within that overall figure, some groups have gotten back to pre-pandemic norms or even higher. Black workers, for example, are participating in the labor force at a higher rate than at any time since 2008.

The steady uptick in the labor force participation rate raises questions about whether the strong job market—where there are nearly two open positions for every unemployed worker—is truly contributing to inflation, as officials at the Federal Reserve have warned. The theory goes that companies are raising wages fast in order to compete for talent amid a labor shortage. 

The Fed has hiked interest rates with the goal of slowing the economy and reducing the demand for workers and slowing pay raises. Some economists, however, are pushing back against that narrative, arguing that the workers are there to be hired.

The increasing labor force explains why the unemployment rate rose in February, ticking up to 3.6% from its 53-year low of 3.4%, despite the economy adding a healthy 311,000 jobs. Average hourly earnings rose a lackluster 0.2% over the month, the smallest increase in a year.

“The Fed keeps insisting there are no more workers,” said William Spriggs, chief economist of the AFL-CIO in an online roundtable hosted by Northeastern University. “What the numbers are showing is, firms are expanding. They're adding workers and the workers are there.…There clearly is a supply of workers available.”

The worker supply isn’t recovering equally quickly across age groups. For example, people in their prime working years are now working or looking for jobs at the same rate they were before the pandemic hit, while the participation rate for older workers fell in February, hovering near the low point it hit when the pandemic struck, as the charts below show. 

Older workers are facing a much tougher labor market than younger ones, said Teresa Ghilarducci, a professor of economics at The New School, at the roundtable. Many were forced to retire or otherwise lost their jobs when the pandemic arrived, and have yet to resume looking for work. 

“Those people have not come back to the labor force,” she said. “So for the older worker population, the labor market looks like it's really softening and getting worse."