4 reasons it will take more than a year for the US to get back to full employment, according to Fitch

Job fair coronavirus
A man seeking employment speaks to a recruiter at the 25th annual Central Florida Employment Council Job Fair at the Central Florida Fairgrounds

  • The US won’t return to full employment until the fourth quarter of 2022, Fitch Ratings said Wednesday.
  • Matching workers’ skills with new jobs will take time, as will a rebound in workforce participation.
  • Some workers – particularly older Americans – are likely permanently discouraged from work, Fitch added.
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The good news: The US labor market is well on its way to a full recovery.

The bad news: It’s going to take a while to get there.

After improving steadily through 2021, the disappointing April jobs report signaled the labor market’s rebound wouldn’t be as smooth as most hoped. With labor shortages and supply bottlenecks now dragging on the broader recovery, economists are updating their employment projections to account for numerous new hurdles.

Fitch Ratings economists joined the crowd on Wednesday. The team led by Brian Coulton sees a return to full employment arriving in the fourth quarter of 2022, about 15 months from today. The unemployment rate will fall to 4.3% from the April reading of 6.1%, and the employment-to-population ratio will return to a steady state, the team added.

Filling the hole in the labor market requires creating 7 million jobs, but a handful hurdles stand in the way of such an achievement, according to the team.

(1) The dangers of long-term unemployment

Bringing Americans back into the workforce is crucial to bringing about a full recovery, and those who’ve been out of it the longest present a significant challenge.

Almost 30% of unemployed Americans have been out of the labor force for more than a year, and that share is growing, Fitch said in a note to clients.

Bouts of unemployment lasting more than a year are far more likely to turn into permanent detachment from the workforce. Bringing the country to full employment will hinge on bringing the long-term unemployment rate from its latest reading of 1.8% closer to its pre-pandemic norm of 0.5%, the team said.

(2) Matching workers’ skills with the right job

Various economists and officials have warned that, while the economy will fully rebound, it won’t look the same as it did in early 2020.

Some jobs will be permanently erased, and others will crop up elsewhere as the post-pandemic economy takes form. Those structural shifts in where labor is in demand will force some unemployed Americans to either move or change their skillsets entirely.

“Rapid changes in the sectoral demand for labor can lead to lasting increases in unemployment if workers made unemployed in shrinking industries are unable to move into other sectors,” the economists said.

(3) Some participation won’t return until well after reopening

The labor force participation rate took on new relevance during the pandemic as millions of Americans who lost their jobs didn’t look for new roles and dropped out of the workforce entirely.

The rate sank from 63.4% in January 2020 to a pandemic low of 60.2% in April of last year. Yet after $5 trillion in stimulus, vaccine distribution, and progress toward a full reopening, labor force participation stood at 61.7% last month.

“While we believe a large share of the fall will be reversed as the economy opens up there is also a likelihood that some people have permanently left the workforce,” Fitch said. Such a dynamic would persistently drag on the labor market until more Americans join the workforce.

(4) Many older workers are out for good

The participation rate for Americans aged 55 and older shows a particularly concerning trend.

The rate dove to 38.4% at the peak of the pandemic’s onset and sat even lower, at 38.3%, last month. That contrasts sharply from rates for other age groups, which have retraced at least half of their pandemic-era declines.

The trend is also unlikely to be linked to early retirement, Fitch said. The number of retirees rose by 1.24 million in 2020, according to social security data. That’s less than the 1.37 million jump seen the year prior.

If the trend continues throughout reopening, it “could signal permanent discouragement from the labor force among older workers,” the team said.

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Stimulus and COVID fears are keeping millions of Americans from rejoining the labor market, BofA says

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  • Some 2.5 million Americans won’t rejoin the labor force until late 2021, Bank of America said.
  • Virus fears and boosted unemployment benefits are keeping them from seeking work, the bank added.
  • Retirements and COVID-19 deaths will leave a more permanent drag on participation, BofA said.
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The rapidly accelerating economic recovery is running up against labor shortages. The snags are temporary, but they hint at permanent changes to the US job market because of the coronavirus pandemic, according to Bank of America economists.

Stimulus, COVID-19 vaccinations, and reopening all helped hiring rebound in recent months. March job additions were the strongest since August, and consumer spending gauges suggest healthy demand will keep payroll growth robust into the summer. Yet as businesses rehire in preparation for a pickup in demand, some are reporting difficulties in finding workers.

While some 9.7 million Americans are officially tallied in the government’s unemployment gauges, another 4.6 million workers exited the labor force during the pandemic, the team led by Joseph Song said in a note to clients. More than half of those workers will likely rejoin the labor force by the end of the year, but face a few obstacles before they do so.

For one, fears of catching COVID-19 and its more contagious variants still loom large. Those concerns are likely playing a role inkeeping Americans from rejoining the workforce and looking for jobs, the economists said.

Low-income Americans might also hold off on seeking work because of stimulus’s disincentive effects, the bank added. The Biden administration’s $1.9 trillion support package included a $300-per-week expansion to unemployment insurance through September. While smaller than the CARES Act benefit, the latest boost could be leading some Americans to stay on the sidelines for now, Bank of America said.

“Our estimates suggest that those who previously made less than $32,000 would be better off in the near term to collect UI benefits than work,” the team added.

Still, Bank of America expects those 2.5 million Americans will rejoin the workforce by the fall as vaccination continues and the stimulus benefit fades. The remaining 2.1 million will take much longer to join the job market, or may not rejoin at all.

About 700,000 Americans are expected to have left the workforce due to a mismatch between their skills and available job openings. Training programs can help close the gap but bringing those workers back will take some time, the economists said.

Separately, 1.2 million workers retired during the health crisis and are unlikely to seek work once the country fully reopens. Another 140,000 workers have been lost due to COVID-19 deaths, the team estimated.

These longer-term worker shortfalls will influence economic data in two ways. At first, accelerated hiring will see the unemployment rate fall throughout the year. Tighter labor-market conditions will then lead to faster wage growth as businesses pay more to fill their openings.

Source: Bank of America Global Research

Yet those encouraging readings will rest on a less optimistic foundation. The millions of Americans that are unlikely to rejoin the workforce until the fall will leave the labor force participation rate well below its pre-pandemic level.

There is a “high risk” the participation rate doesn’t fully recover, and demographic trends could drag participation steadily lower over the next decade, the economists said.

Bank of America reiterated its forecast for the unemployment rate to fall to 4.2% by the end of the year. The benchmark will then return to its pre-pandemic low of 3.5% by the end of 2022, the team said.

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Women saw a big increase in jobs in March but there’s still a long way to go

  • Women gained 315,000 jobs in March, about half of men’s monthly employment gain.
  • NWLC wrote it would take roughly 15 months to get back to women’s pre-pandemic employment at this rate.
  • Measures like raising the minimum wage and implementing universal childcare could help.
  • See more stories on Insider’s business page.

The March jobs report brought something relatively new to the story of pandemic unemployment: a touch of optimism.

Based on the report from the Bureau of Labor Statistics, 916,000 nonfarm payroll jobs were added. That is the highest monthly gain so far this year. If the US continues to add jobs each month at that rate, employment can reach February 2020 levels in just around 10 months.

But, as always, there’s more to the story, especially when it comes to one group who’s continually been disproportionately impacted by the pandemic’s economic devastation: women.

Women’s nonfarm payroll employment increased by 315,000 last month while men saw a gain of 601,000 jobs according to the National Women’s Law Center‘s calculation. The NWLC wrote that this rate translates to taking about 15 months to get women’s employment back to February 2020’s level of 76.3 million. For men, it will take a little over six months.

“At this point we’re moving in the right direction, but there’s still a long way to go,” Jasmine Tucker, the NWLC’s director of research, told Insider.

Still, there was a large increase in the net number of women who are at least 20 years old entering the labor force in March. However, March was another month of men exiting the labor force. The following chart highlights the monthly change in civilian labor force participation for men and women from the past several months:

Based on the chart, 495,000 women age 20 and over joined the labor force last month. This is much higher than the 26,000 that entered the labor force in February 2021. On the other hand, 117,000 men age 20 and over left the labor force last month, almost 40,000 higher than the 78,000 men who left a month earlier.

One concern, however, is the quality of the jobs that those women are taking, especially with a surge in leisure and hospitality employment.

“I think there’s a lot of people right now who are taking anything they can get,” Tucker said. Women moving into those jobs could lead to the wage gap widening later on.

With the uptick in women entering the labor force, their labor force participation rate has also slightly increased. The rate for women 20 years and over was 57.4% in March, 0.4 percentage points higher than February. Men’s rate continues to be much higher than women, although the rate ticked down by 0.1 percentage points to 69.5%. The following chart highlights the labor force participation rate for men and women over the past year:

Both women’s and men’s unemployment rates have declined from their pandemic peaks in April 2020 but are still higher than their pre-pandemic rates. The gap between the unemployment rates has narrowed and is now only a difference of 0.1 percentage point for people who are at least 20 years old. The following chart highlights the unemployment rate for men and women over the course of the pandemic:

“If we added all of the 1.8 million women who’ve dropped out of the labor force and added them to the ranks of the unemployed, women’s unemployment rate would have been 8% and men’s would have been 8% too – if we count the millions of men who’ve dropped out,” Tucker said.

She added: “Black women would have been 13.4%, and Latinas would have been 11.1%. These are crisis levels. We are, I think, still in a crisis here.”

Tucker said that measures like raising the minimum wage and implementing universal childcare will be key in creating a more equitable recovery.

“You can’t go to work if you don’t have a road to get there. You can’t go to work if you don’t have a safe place for your kid. Right. These are like synonymous things. Childcare is infrastructure and we need to treat it that way.”

A tale of two pandemics, even for women

The economic impact on women has also been bifurcated, depending on what profession they’re in, according to Saru Jayaraman, the president of One Fair Wage. It’s not just a story of employment, or lack thereof.

“It’s important to understand that for low wage workers, it’s less of a a loss in terms of employment and jobs and more of an income loss,” Jayaraman said.

She said that conditions for workers in those jobs have been worsening, all while risk increases. Recent research from One Fair Wage found that, during the pandemic, female tipped workers reported tips were down, but harassment was up.

And so the recovery numbers – especially in the restaurant sector – may not tell the whole story. While jobs may be recovering there, with funding pouring in from the American Rescue Plan, the devastation for women working in the industry is “incomprehensible.”

On a policy level, the top priority should be raising the minimum wage, according to Jayaraman; 59% of the workers who would benefit from a $15 minimum wage are women.

“Last year, we started a relief fund for service workers; 240,000 workers applied for relief. And I can’t tell you the number of women waitresses who wrote to us and said, ‘I can no longer feed my children. The lines are too long at the food banks. I am now resorting to stealing food because I have no choice,'”Jayaraman said.

“Some of them wrote and said, ‘I can’t pay the electricity bill, so we don’t know how much longer we can be in touch with you.'”

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33-year low in female labor participation rate requires new childcare and paid-leave policies, JPMorgan says

Woman working in cafe
A woman works on a laptop at a restaurant’s outdoor seating as temperatures reached close to 70 degrees on March 11, 2021 in New York City.

  • Federal family-leave and childcare support policies can help close gender gaps, JPMorgan said.
  • Female labor participation sits at 33-year lows and well below mens’ level due to COVID-19 fallout.
  • Gender-responsive policies can counter the disproportionate hit women faced during the pandemic.
  • See more stories on Insider’s business page.

Full economic recovery in the US might not be enough to close gender gaps exacerbated by the pandemic, JPMorgan researchers said.

The coronavirus and its economic fallout disproportionately slammed American women, with female-dominated sectors like hospitality and education hit the hardest by lockdowns. The greater share of domestic work that women perform in American society also prompted many to leave work and focus on caretaking. Where men made up the bulk of job losses seen during the financial crisis, the current recession has seen job losses land more equally.

Women aren’t just losing or leaving their jobs, either; they’re exiting the labor force entirely. The female labor participation rate, while up from its pandemic lows, still sits at its lowest level in 33 years. More than 2.3 million women have left the US labor force since the pandemic began, versus nearly 1.8 million men exiting the workforce.

Reviving the broader economy should pull some women back into the labor force, the team led by Joyce Chang said in a note to clients, adding Congress can and should do more to close the gap. Federal paid-leave policies for mothers can alleviate the burdens of balancing work with early child care, as can federally guaranteed family leave. Public child care and education programs can also incentivize women to stay employed, according to the team.

The nation’s gender pay gap held at roughly 18% for the past decade, and that spread could widen by another five percentage points if the pandemic’s effects aren’t reversed, according to a National Bureau of Economic Research paper cited by JPMorgan. Recessions historically fuel a 2-point narrowing of the wage gap.

Closing the gender wage gap is good for growth, nevermind society

Promoting workplace equality also has a tangible effect on economic growth. Narrowing the labor-participation gap between men and women by just 25% could lift US gross domestic product by 2%, according to the International Labor Organization. Fully closing the gap would boost GDP by 5%, the International Monetary Fund said.

“Continued focus on gender-responsive policies is required to counter the disproportionate burden women face in the current crisis – and more importantly, to prevent the economic damage from outlasting the virus itself,” JPMorgan’s researchers said.

Some steps have already been taken to help working women. Democrats’ latest stimulus plan includes a child-tax-credit program that will give families with children under the age of 5 up to $3,600 per child over the course of 2021. Those with children aged 6 to 17 can receive up to $3,000 per child.

The package also includes $40 billion for child-care assistance. The average US household spends nearly 23% of its income on child-care costs, according to JPMorgan. The stimulus’ inclusion of a child tax credit and direct relief for care providers helps lower the burden for mothers hoping to keep their jobs while raising children.

Erasing such inequality stands to build a more robust economy after the pandemic, the researchers said. The coronavirus crisis has prompted discussions around family support and flexible work arrangements “that could yield steps forward in the future,” they added.

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Biden describes closed schools and women leaving the workforce as ‘a national emergency’

Joe biden
President Joe Biden speaks before signing executive orders on his first day in White House on January 21, 2021.

  • President Biden described school closures and women leaving the workforce as “a national emergency.”
  • “I think it’s time for schools to reopen safely,” he said during a CBS interview.
  • Biden voiced concern about the mental health crisis that has been accelerated by the pandemic.
  • Visit the Business section of Insider for more stories.

President Joe Biden said in an interview that aired on Sunday that long-term school closures and women leaving the workforce during the coronavirus pandemic are “a national emergency.”

While speaking with “CBS Evening News” anchor Norah O’Donnell at the White House, Biden also voiced concern about the mental health crisis that has been accelerated by the COVID-19 pandemic.

O’Donnell noted that roughly 20 million schoolchildren have been out of the classroom since for almost a year, and a recent CBS News report showed that nearly 3 million women have dropped out of the labor force since last year.

“It is a national emergency,” Biden said of all three issues. “It genuinely is a national emergency.”

When asked if schools should reopen, Biden stressed that they should reopen cautiously.

“I think it’s time for schools to reopen safely,” he said. “Safely. You have to have fewer people in the classroom. You have to have ventilation systems that have been reworked.”

“Our CDC commissioner [Rochelle Walensky] is going to be coming out with science-based judgment, within I think as early as Wednesday as to lay out what the minimum requirements are,” the president added.

Read more: Inside the 7-minute virtual workouts the Biden transition team used to stay connected as staffers prepared to demolish Trump’s policies

Last month, Biden signed an executive order for the Departments of Education and Health and Human Services to devise guidelines to reopen schools safely within his first 100 days in office.

Biden said that he and his staff have had to get a handle on the work left by former President Donald Trump’s administration when it came to the rollout of vaccines.

Dr. Anthony Fauci, the top US infectious-disease expert, said, in order to reach herd immunity, about 75% of Americans will need to be vaccinated.

O’Donnell said CBS News calculated that it would take until the end of 2021 to reach that level at the current vaccination rate of 1.3 million doses a day.

“We can’t wait that long,” Biden said. “One of the disappointments was when we came into office is the circumstance relating to how the administration was handling COVID was even more dire than we thought. We thought that indicated there was a lot more vaccine available, and that didn’t turn out to be the case. That’s why we’ve ramped up everywhere we can.”

He added: “But the idea that this can be done and we can get to herd immunity much before the end of this summer is very difficult.”

Since the pandemic began in the US, nearly 27 million people have been infected and over 463,000 people have died, according to the latest data compiled by Johns Hopkins University.

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