The United States unemployment rate of 4.2% is the lowest since 1969—a stunning dynamic that has created optimism for the American workforce. “It’s really amazing,” says Alicia Sasser Modestino, an economist and associate professor at Northeastern. “A year ago, if you asked any economist, we would never have predicted this super-tight labor market.”
Modestino links the ever-increasing demand for labor to the “Great Resignation” created by the millions of American workers who have quit jobs during the COVID-19 pandemic. “In part it’s due to people reevaluating what they’re doing, but also very generous unemployment insurance benefits and other public support that have given workers the opportunity to take a pause and think about what is safe and needed for their families,” Modestino says. “The supply of workers coming back into the labor market has not been as rapid [as anticipated], and that has meant wages are getting bid up.
“A tight labor market gives workers more power and increases their wages and benefits—but it doesn’t always happen for people at the bottom,” Modestino says. “What’s a little bit different right now is that it’s not just for people at the top of the wage distribution. It’s also for people in low-wage, entry-level jobs.”