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The US economy continues to sit in a fragile state where seemingly anything could push it into a recession. The fact that it hasn't happened yet is thanks largely to an enduring labor market, and two profound forces have emerged to help keep it afloat: prime-age women, especially mothers, and remote job opportunities.
Economists at Wells Fargo found that 83.5% of prime-aged people, who are between 25 and 54 years old, are either employed or actively seeking a job, the highest level since 2002.
Within that group, women have a workforce participation rate of 77.8%, the highest since the onset of the pandemic in 2020.
This strong growth can be attributed to several factors, including rising education levels and more unmarried women, trends that were on the rise before the pandemic.
Additionally, the Wells Fargo economists also identified women with young children as a new strength for the job market. This group has long been underrepresented in the workforce — thanks to the challenges of finding affordable childcare — but their increase in workforce participation since 2020 is due to a sharp rise in remote work opportunities, according to Wells Fargo.
While mothers with young children are still behind women without children under the age of 18, their participation in the workforce grew at a faster rate.
This surge in employment, particularly among mothers with young children, has played a significant role in boosting the economy. Some recent studies have given more hope of a "soft landing" despite several continuing economic challenges. [moved down]
Wells Fargo
A recent Brookings study using mothers with children under the age of five found a similar jump in workforce participation recently.
In the Brookings study, 70.4% of mothers with at least one child under five now participate in the workforce. That is higher than the pre-pandemic peak of 69%, which held pretty steady in the 10 years leading up to the COVID-19 outbreak.
"While childcare remains a persistent challenge for women in this age group, the rise in remote work opportunities has helped lead to a particularly robust recovery in labor force participation among mothers with young children," the Wells Fargo economists wrote.
To be sure, this level of workforce participation could drop in the coming months as childcare opportunities become harder to find. Nearly $24 billion in federal funds, which helped keep childcare services afloat for the past two years, expired on September 30. More than 700,000 childcare programs could close as a result.
The labor force was slow to rebound early in the COVID-19 recession. However, since then, labor force participation has steadily risen to 62.8%, inching closer to pre-pandemic levels.
In September, US Treasury Secretary Janet Yellen spoke about the strength of the labor market as one of the big reasons she doesn't "see any signs that the economy is at risk of a downturn."
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The robust labor market has helped boost the economy despite inflation still above the Federal Reserve's 2.0% target.
This was the message delivered by Solus Alternative Asset Management's chief strategist, Daniel Greenhaus, during a recent appearance on CNBC's "Last Call."
"At the end of the day, people have jobs, they're making money," Greenhaus said. "They have more money in net worth today. And as long as they are working, all this other stuff is bearable."
Unemployment is still low and has held steady in recent months at 3.7%. The US also added 263,000 nonfarm payrolls in November, down slightly from the revised 284,000 in October, but still better than the median forecast of 200,000 from economists surveyed by Bloomberg.
Meanwhile, the percentage of the working-age population with a job has remained near highs not seen since the late 90s.
Former PIMCO chief economist and current professor at Georgetown's School of Business, Paul McCulley, was recently a guest on CNBC's "Fast Money" and also pointed to the job market as to why the "consumer is strong, period."
"It's important to note that we are seeing disinflation in wages, and that's a key part in the soft-landing story," McCulley said. "What we are not seeing is a sharp deceleration in job growth. People may not be getting outsized raises, but they are getting jobs and keeping jobs. And I think that is the sturdy portion of our economy, and there is every reason to expect it to continue sturdy."
Amid other promising economic indicators, if this trajectory continues for the employment landscape, even in the face of persistent challenges like childcare and inflation, it will strengthen hopes for a soft landing in the economy.
