U.S. labor market is ‘getting closer and closer to full employment,’ economist says

The Conference Board Chief Economist Dana Peterson joins Yahoo Finance Live to discuss the February jobs report.

Video Transcript

BRIAN CHEUNG: --for commentary on that February jobs report. And for that, we've got Dana Peterson, The Conference Board chief economist, here with us. Dana, it's great to have you on the program this afternoon. I caught your note that said the outsized gain we saw today may not be sustainable. That's a pretty notable comment, especially when you consider we got two back-to-back blowout reports in January and February. Why might the momentum not continue?

DANA PETERSON: Sure. Well, certainly, we expected that we were going to have big gains in employment even without COVID omicron cropping up. And we did see that. We saw a little bit of slowing. And so we could still see a few more months of half a million job gains. But certainly, we're getting closer and closer to full employment if we're not already there. Imagine a bathtub filling up with water. You can only put so much water in there before you spill over.

And so it's likely that we're going to see smaller but still healthy payroll job gains as we get deeper into the year. There's also a lot of risk around what's going on with respect to the Fed is going to start hiking interest rates, which will slow growth, and then also the crisis in Eastern Europe and how that will influence not only inflation but global growth, and thereby US growth, and consequently, employment.

AKIKO FUJITA: Dana, looking at wage growth-- or lack thereof, I should say-- that seems to run counter to what we've heard from so many of these companies who are saying that they are having to pay up more because of their inability to be able to fill some of these roles. Can you explain a bit of that disconnect? And does that data today that we saw suggest that things are starting to moderate?

DANA PETERSON: Well, it's one data point where you had zero increase in the month-on-month rate. But when you look at the year-on-year pace, wages are up 5%, 5.1%. That is a lot when, in the past, before the pandemic, we were looking at wage growth that we were trying to at least get to 2.5%, 3%. And so wages are still rising very rapidly even though you had one month-on-month change that was unchanged.

So I think the story is still consistent. Businesses are looking at very expensive labor costs. And certainly, as you have more people who are willing to switch jobs, who are going to bid up their wages as much as they can, you're still going to see those pressures. So even if, say, in the next few months, we see wages-- and this is not a forecast-- just kind of tossing this out there-- wage growth slow, we're still well above the average that we saw over the last 10 years.

BRIAN CHEUNG: Yeah, when we talk about wages, I've always been of the opinion that that conversation or that argument is a bit moot for the people that don't have jobs. Wage increases and wage trends don't matter for the people that aren't employed. So when we talk about these more marginalized groups historically in recoveries, when you talk about low-wage-- Black, oftentimes Hispanic-- workers, do you see anything in this report that tells you about the picture for them? Because it was interesting to me that the unemployment rate did tick down for some of these groups as the employment-to-population ratio increase, which would be good things.

DANA PETERSON: Right. And unfortunately, even before the pandemic, we had these gaps between racial groups relative to the aggregate in terms of unemployment rates where it is true for Hispanic and also Black workers that their unemployment rates are higher. But we have seen throughout the recovery from the pandemic and now an expansion in the US, and even leading up to today's data, the unemployment rates for those other groups are still falling. And still in all, many people are still working. And so certainly, when you talk about wage increases, that is certainly for the people who are working. But we are seeing conditions improve for these other groups.

AKIKO FUJITA: Dana Peterson, chief economist at The Conference Board, it's good to talk to you today. Really appreciate the time.