{"id":11475,"date":"2021-12-02T14:06:30","date_gmt":"2021-12-02T20:06:30","guid":{"rendered":"http:\/\/blog.uwsp.edu\/cps\/?p=11475"},"modified":"2021-12-06T15:03:15","modified_gmt":"2021-12-06T21:03:15","slug":"the-u-s-economy-like-nothing-that-youve-seen-part-2-labor-market","status":"publish","type":"post","link":"https:\/\/blog.uwsp.edu\/cps\/2021\/12\/02\/the-u-s-economy-like-nothing-that-youve-seen-part-2-labor-market\/","title":{"rendered":"The U.S. Economy: Like Nothing That You\u2019ve Seen Part 2\u2013Labor Market"},"content":{"rendered":"\n
\"The<\/figure>\n\n\n\n

The Labor Market Overview<\/strong><\/h2>\n\n\n\n

A collage of factors influenced the\nlabor market in 2021, with some of those factors likely to continue impacting\nthe labor market in 2022. The economic rebound of 2021 prompted a flurry of job\nopenings; however, those job openings were not always filled, and talk of a\n\u201clabor shortage\u201d resulted. First, an overview of the labor market is presented\nfollowed by a discussion of factors affecting the labor market. <\/p>\n\n\n\n

Employment <\/h4>\n\n\n\n

The chart below shows the roller coaster for U.S. employment from January 2020 through October 2021. Prior to the effects of COVID-19 on the economy, U.S. employment peaked at 152.5 million in February 2020. Two months later in April, employment dropped to 130.2 million. In two months, employment had declined by approximately 22.3 million jobs. 20.7 million jobs were lost in April; the magnitude of the job loss was unprecedented. It was most significant drop in monthly employment since the Bureau of Labor Statistics began tracking monthly changes in employment in 1939. Prior to 2020, the biggest drop in monthly employment was approximately 800,000 jobs in March 2009, almost 20 million less than the number of jobs lost in April 2020. Prior to the financial crisis, nonfarm employment peaked at 138.4 million in January 2008 before bottoming out at 129.7 million in February 2010. During the financial crisis, approximately 8.7 million <\/em>jobs were lost over two years<\/em>. During the COVID crisis in 2020, 22.3 million<\/em> jobs were lost over two months<\/em>. <\/p>\n\n\n\n

Since May 2020, employment has\nconsistently recovered. The June 2020 addition of 4.8 million jobs was the\nlargest gain since the Bureau of Labor Statistics began tracking monthly\nchanges in employment in 1939. Prior to 2020, the biggest increase in monthly\nemployment was approximately 540,000 jobs in May 2010, over 4 million less than\nthe number of jobs added in June 2020. In 2021, a resurgence of COVID\ncontributed at least partially to a summer slowdown in employment growth.\nBetween May and July approximately 1 million jobs were added to the U.S.\neconomy. Between July and September, approximately 0.6 million jobs were added.\nHowever, employment growth increased strongly in October as 531,000 jobs were added,\nand employment reached 148.3 million. Since employment growth returned in May\n2020, over 18 million jobs have been added back to the economy.<\/p>\n\n\n\n

All Employees, nonfarm Payrolls (seasonally adjusted)<\/strong><\/p>\n\n\n\n

\"All
Source: U.S. Bureau of Labor Statistics<\/em><\/figcaption><\/figure>\n\n\n\n

The Unemployment Rate<\/h4>\n\n\n\n

Changes in the unemployment rate\nover the course of the business cycle in normal times typically occur\ngradually, often characterized by persistence and momentum. Persistence means\nthe variable will slowly gravitate to a historical average; momentum means the\nvariable will continually move in the same direction for a period of time.\nNeither happened in 2020. The unemployment rate was volatile, moving significantly,\nrapidly, and in opposite directions. <\/p>\n\n\n\n

The chart below shows the U.S.\nunemployment rate since January 2020. The onset of COVID in 2020 caused the\nunemployment rate to skyrocket from a pre-COVID low of 3.5% in February 2020 to\na peak of 14.8% in April, a two-month increase of 11.3%.  The 10.4% increase that occurred in April was\nthe largest monthly increase based on available Bureau of Labor Statistics data\nsince 1948. Prior to 2020, the largest monthly increase in the unemployment\nrate was only 0.7% in April 1958. During the COVID crisis in 2020, the unemployment\nrate increased 11.3% over two-months<\/em>. During the financial crisis, the unemployment\nrate increased 5.6% over 29 months<\/em>, from a 2007 low of 4.4% in May to a\npeak of 10.0% in October 2009. <\/p>\n\n\n\n

Beginning in May 2020, the\nunemployment rate began a consistent downward trend and reached 6.7% by year end.\nStrong job gains in October 2021 led to a further drop in the unemployment rate\nto 4.6%. In approximately a year and a half, the unemployment rate declined\nover 10%. The 8.1% drop that occurred in the unemployment rate from April\nthrough December 2020 was unprecedented. Prior to 2020, the largest drop in the\nunemployment rate that occurred during a given year was 2.1% in 1983. <\/p>\n\n\n\n

Although the overall unemployment\nrate has declined, differences in rates remain for major worker groups. The\nunemployment rate in October was 4.3 percent for adult men, 4.4 percent for adult\nwomen, and 11.9 percent for adult teenagers. The unemployment rate was 4.0\npercent for Whites, 7.9 percent for Blacks, 4.2 percent for Asians, and 5.9\npercent for Hispanics. In 2020, the unemployment rate for persons with a\ndisability continued to be much higher than the rate for those without a\ndisability, rising to 12.6 percent. In addition to employment challenges,\nunfortunately Social Security rules are restrictive and significantly limit the\namount of income and assets that a disabled person may have. Exceeding those\nlimits means risking losing benefits \u2013 including healthcare. Even part-time\nemployment could cause a disabled person to lose Social Security benefits,\ndespite an employer not offering health insurance. <\/p>\n\n\n\n

Unemployment\nRate (16 yrs. and older)<\/strong><\/p>\n\n\n\n

\"Unemployment
Source: U.S. Bureau of Labor Statistics<\/em><\/figcaption><\/figure>\n\n\n\n

The Labor Market and \u201cLabor\nShortage\u201d<\/strong><\/h2>\n\n\n\n

Employment growth and the decline\nin the unemployment rate have been extensive since April 2020 when the negative\nimpacts of COVID on the economy peaked. Although employment growth has been\nsignificant, there were still approximately 4 million fewer employed in October\n2021 than in February 2020. Despite the decrease in employment, \u201clabor\nshortages\u201d have been discussed as many businesses have not been able to hire desired\nemployees. Next, a discussion of factors potentially affecting the labor market\nand \u201clabor shortages\u201d. <\/p>\n\n\n\n

Extended Unemployment Benefits<\/h4>\n\n\n\n

In March 2020 the Coronavirus Aid,\nRelief, and Economic Security (CARES) Act was passed by Congress and became\nlaw. The CARES Act established the Federal Pandemic Unemployment Compensation program,\nwhich provided an additional $600 per week to individuals who were collecting\nregular unemployment insurance benefits. The additional $600 payment ended in\nJuly 2020, but in January 2021 the program was partially reinstated, with an additional\n$300 payment that was scheduled to end in March 2021.  The American Rescue Plan, passed in March\n2021, extended federal unemployment programs, including the $300 additional\npayment, through September 4, 2021. However, states could opt out of the\nextended benefit program. In an attempt to incentivize workers to return to\nwork, 26 states ended the federal benefit before September, with 22 states\nending the program in June.<\/p>\n\n\n\n

Did ending the benefits early\nprompt a flood of workers to return to work? No, according to multiple studies.\n\u201cEarly Withdrawal of Pandemic Unemployment Insurance: Effects on Earnings,\nEmployment and Consumption<\/em>\u201d from a team of economists and researchers at Columbia\nUniversity (K. Coombs and S. Naidu), Harvard University (C. Janke and R.\nKluender), the University of Massachusetts Amherst (A. Dube), and the\nUniversity of Toronto (M. Stepner) concluded that ending the unemployment\nbenefits early provided only a relatively small increase in employment relative\nto states that did not end benefits. However, the resulting decrease in\nconsumer spending that resulted from 7 out of 8 people not<\/em> finding\nemployment caused a drastic decline in consumer spending and lowered state\neconomic growth from what would have occurred if benefits did not end. The\nbottom line \u2013 ending the unemployment benefits early did not result in a\nsignificant return to work for the unemployed.<\/p>\n\n\n\n

UKG, a payroll and time management\nfirm, compared data of states that ended unemployment benefits early relative\nto states that did not end benefits. The UKG data showed that states ending\nadditional federal unemployment benefits grew workforce activity among hourly\nemployees at a lower<\/em> rate of growth relative to states that continued\nthe additional benefit. The extension of unemployment benefits was not the\nprimary reason that people did not return to the workforce. <\/p>\n\n\n\n

Job Openings<\/h4>\n\n\n\n

As the economy recovered in 2021, the\nnumber of U.S. job openings skyrocketed. <\/p>\n\n\n\n

The chart below shows the number of\nU.S. monthly job openings since 2000. Looking at the number of U.S. monthly job\nopenings since 2000 provides a picture of how significant the number of job\nopenings has been recently. Prior to 2014, the number of monthly job openings\nwas generally below 5 million. Following the end of the financial crisis in\n2009 an expanding economy contributed to monthly job openings gradually\nincreasing from approximately 2.2 million in July 2009 to a pre-COVID peak of\nnearly 7.6 million in October 2018. As economic growth slowed in 2019 the\nnumber of monthly job openings declined consistently to a yearly low of 6.7\nmillion in December. The number of monthly openings dropped precipitously in\nearly 2020 due to COVID to a low of 4.6 million in April 2020 before increasing\nlater in the year. By December 2020, the number job openings was approximately\nequal to the number of job openings one year earlier. The number of job\nopenings had increased by over 2 million from a COVID low of 4.6 million in\nApril 2020 to over 6.7 million in December. <\/p>\n\n\n\n

However, in 2021 the number of\nmonthly job openings exploded to record levels. The number of job openings in\nJuly 2021 was slightly greater than 11.0 million, an increase of 4.3 million\njob openings (64%) from the December 2020 level. Although the number of job\nopenings slightly declined after July, the number of job openings remained\nstrong.  The number of job openings\ntotaled just under 10.5 million in September, down from the record high 11.0\nmillion in July. This compares to a pre-COVID high of 7.6 million job openings\nin November 2018. <\/p>\n\n\n\n

U.S. Monthly Job Openings 2000 through September 2021<\/strong> (thousands)<\/strong><\/p>\n\n\n\n

\"U.S.
Source: U.S. Bureau of Labor Statistics<\/em><\/figcaption><\/figure>\n\n\n\n

The record level of job openings contributed\nto the \u201clabor shortage\u201d. The number was more than twice the level of job openings\nthat occurred in any year between 2000 and 2014, and approximately 40% greater\nthan the peak of job openings that occurred during 2018 before the pandemic. <\/strong><\/p>\n\n\n\n

The Quit Rate<\/h4>\n\n\n\n

Record levels of job\nopenings?  \u201cHold my beer\u201d replies the 2021 quit rate. The graph below\nshows the quit rate for the United States since the turn of the century through\nSeptember 2021. The quit rate is the number of people quitting jobs during the\nentire month as a percent of total employment. That rate reached a record high 3.0%\nin September 2021. For seven consecutive months, from March 2021 through September\n2021, the quit rate was higher than any month this century prior to March 2021.\nMore Americans had it with their job and called it quits in 2021 than at any\nother time. <\/p>\n\n\n\n

There were likely a myriad of\nfactors contributing to the high quit rate, including:<\/p>\n\n\n\n