© Reuters. Pedestrians walk in the cold near the White House, as temperatures drop throughout the day as part of a large winter weather system across the country, in Washington, U.S. December 23, 2022. REUTERS/Jonathan Ernst


WASHINGTON (Reuters) – Shifts in U.S. employment over the past two years toward sectors with higher wages and productivity, and higher average hours worked, may drive further gains in labor productivity going forward, two top Treasury Department economists said on Friday.

In an analysis published Friday, Ben Harris, assistant secretary for economic policy and Tara Sinclair, deputy assistant secretary for macroeconomics, said the U.S. recovery from the COVID-19 pandemic has seen employment recovering “much faster” than after recent recessions.

They said the U.S. labor market recovery had been “exceptionally strong,” the U.S. economy was now over 5% bigger than before the pandemic began and core inflation was lower than in many major advanced economies.

“Acknowledging that other advanced economies faced different economic shocks — notably, our European partners were more adversely affected by Russia’s war against Ukraine—the evidence shows that the U.S. economic recovery has been quite strong,” Harris and Sinclair wrote in a posting on the Treasury website.

The posting came hours after the Labor Department reported a slight increase in the U.S. unemployment rate to 3.6% in February and higher-than-expected payroll gains, with hiring concentrated in a narrower range of industries.

Harris and Sinclair did not address the fresh data, but noted significant differences in employment statistics among Group of Seven economies in the early phase of the pandemic, largely due to differences in how those economies supported workers and businesses during the shutdowns.

In the United States and Canada, unemployment insurance was most suited to rapid, large-scale support. Meanwhile many European economies leveraged social safety nets, often in a way that led to continued employment in official statistics.

Despite differences in the initial response, employment rates were now low across the G7 nations, they said.

But labor productivity growth in the United States had outpaced that of Europe and Japan, possibly because the U.S. unemployment insurance system allowed greater movement of labor relative to systems that preserved employer attachment.

“In general, U.S. employment has reallocated from lower wage industries to high-wage and higher productivity industries. U.S. employment has also shifted to industries with higher average hours worked, implying a stronger recovery in hours relative to employment. This reallocation of labor may drive further gains in labor productivity going forward,” they said.

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