Thursday, August 25, 2022

Atlanta metro area’s 2.8% unemployment rate in July says a lot about the current state of the labor market

Atlanta metro area employment and unemployment numbers for July tell an interesting tale about the area’s current labor market.

The Georgia Department of Labor reports that the area’s unemployment rate dropped to 2.8%, down 0.4% over the month as the number of unemployed persons declined by 11,842.

With the number employed growing by only 692, most of the decline came as 11,145 people dropped out of the labor force.

People choose to enter or exit the labor force for multiple reasons. Pressure on family budgets can draw people into seeking employment, while the opportunities to earn higher wages can also induce people to exchange their nonwork time for a paycheck.

Groups of people who are outside the labor force normally include nonworking spouses of employed people, fulltime students, and people who have chosen to retire from employment and are living off their pensions and retirement savings.

With inflation in the Atlanta area running at an annual rate of 11.5% as of June, it would be expected that inflation pressures would drive people back into seeking work, but so far, the July numbers do not indicate that is the case.

On a more positive side, higher wage rates might also encourage people to seek employment, but the reluctance of employers to raise wages, and therefore increase their employment costs, has muted wage increases.

At least for now you have a standoff. People seeking employment are finding it relatively easy to find work, but people who remain outside the labor force are not rushing in to fill vacancies. Probably, this equilibrium will not continue.

Longer term, if inflation continues to erode savings and household earnings, or if employers choose to raise wages because they find they are losing business due to unfilled vacancies, more people may choose to seek employment and thus increase both the labor force numbers as well as possibly the unemployment rate.

Alternatively, if the economy slows, employers may find it unnecessary to fill vacancies and may begin to lay off workers. This effect will also increase the unemployment rate.

In either case, it is likely to expect the Atlanta area unemployment rate to increase over the next year.

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