5 Reasons Why the Labor Market Recovery Was Historic


Protracted unemployment and a weak labor market is a traditional hallmark of the period following a recession: Even after a recession is technically over, workers often bear the consequences of a slow recovery through reduced worker power; extended periods of un- or underemployment; and general decreased financial stability. The COVID-19 recession was a sudden job loss shock with all the makings of an extended period of slow growth, as the economy experienced record high unemployment and a steep decline in real gross domestic product (GDP). A protracted recovery could have followed—and based upon the trajectories of other recent economic recoveries—that was the most likely outcome. However, targeted fiscal supports, including an expanded social safety net (such as unemployment insurance and enhanced financial support for children and families) as well as a historic federal vaccination program and rollout helped ensure this did not occur. Instead, the COVID-19 recession was the shortest recession on record: It lasted two months, and the economic recovery that followed was faster and more equitable than other recent recessions. For example, record-high employment rates for women aged 25 to 54 and record low unemployment rates for Black and Hispanic workers have been a feature of this economic recovery.

This column illustrates the strength and historic nature of the labor market recovery following the COVID-19 recession by analyzing five labor market indicators: nonfarm employment, monthly job growth, the unemployment rate, the unemployment rate for various demographics, and employment rates.

The jobs lost were recovered faster than before

The jobs recovery following the COVID-19 recession was faster than that of the three most recent prior recession recovery periods. (Figure 1) During the COVID-19 recession, 21.9 million nonfarm employment jobs were lost—the largest share of jobs lost during a recession on record (dating back to 1939). By June 2022, the labor market had recovered all jobs lost. Put another way, it took 28 months—a little more than 2 years—for the labor market to return to its prerecession level of jobs. In contrast, it, respectively, took more than six years and nearly four years for the labor market to recover the jobs lost during the Great Recession and the early 2000s recession. And importantly, those two recessions saw fewer job losses than the COVID-19 recession, meaning that there were fewer lost jobs to recover in the first place. The long recovery following the Great Recession has been attributed to a lack of a robust fiscal response, in contrast to the COVID-19 recession and recovery.

Figure 1

The labor market is adding jobs at a strong pace

The U.S. is no longer recovering jobs lost during the pandemic-induced recession: The labor market has gone above and beyond that milestone and is doing better than before the pandemic recession. Since recession-related job losses were fully recovered by June 2022, the economy has been adding an average of 297,000 additional jobs a month. (Figure 2) To put this pace into perspective, this is 1.6 times faster than monthly job growth before the recession.

The unemployment rate is beating projections

During the height of the pandemic recession (April 2020), the unemployment rate skyrocketed to a record high 14.7 percent. In February 2021—notably, before the passage of the American Rescue Plan, which funded the vaccine rollout and continued economic support to the families who needed it most—the unemployment rate had fallen quickly to 6.2 percent. At that time, the Congressional Budget Office projected that the unemployment rate would not reach 4 percent until mid-2025. (Figure 3) Instead, the unemployment rate fell below 4 percent by December 2021 and has remained below 4 percent since February 2022. This is the longest period of sub-4 percent unemployment in over 50 years.

Figure 3

A more equitable recovery

The fast-paced economic recovery meant that Americans did not suffer the scarring impacts of long periods of unemployment that have become common in other recessions—most notably, the Great Recession. Specifically, Black and Hispanic workers have benefitted from the robust and strong labor market recovery, particularly given they tend to be the “first fired, last hired.” Center for American Progress analysis has previously illustrated how, in recessions and economic recoveries, the Black unemployment rate tends to remain elevated for longer than the white unemployment rate. However, over the last two years, Black workers have experienced record low unemployment rates, while gaps to white workers have not widened, which is rare during economic recoveries. (Figure 4) Similarly, Hispanic workers have also seen record low unemployment rates, falling from record highs during the height of the recession.

Labor supply is on the upswing

Rapid labor supply expansions have become rare in recent economic recoveries. For example, employment rates for men aged 25 to 54 have still not recovered from its decline in the 2000s recession. (Figure 5) In fact, men’s (aged 25 to 54) employment rate has declined in each recession in the past 30 years and has typically not recovered its prerecession level at any point. Meanwhile, for women aged 25 to 54, their employment rates only recovered from the hit they took in 2008–2009 in October 2019. Employment rates for men and women aged 25 to 54 plummeted during the pandemic-induced recession.

Figure 4

For women aged 25 to 54, their employment rates fell to 63.4 percent in April 2020 – a low not seen since 1984. Meanwhile, for men of the same age group, their employment rates fell to a record low 76 percent. During the pandemic recovery, men and women have seen their employment rates improve to be near or exceeding pre-pandemic levels. Most notably, women of this age group are employed at their highest rates on record, driven by mothers with young children. Notably, prime-age men are on track to recover their recession job losses for the first time since 1990. Unlike with previous recession recoveries, when men aged 25 to 54 did not recover past losses, their employment rate is near where it was in February 2020.

Figure 5

Conclusion

The labor market recovery following the COVID-19 recession has been historic for workers, delivering drops in unemployment and improvements to employment quickly. Policymakers made the right choice through a robust fiscal response to prioritize a faster and more inclusive economic recovery rather than a long and protracted recovery. By doing so, they have created a strong economic foundation for implementation of the Biden administration’s investment agenda and other policies to grow the middle class.



This article was originally published by a www.americanprogress.org . Read the Original article here. .