The economy is getting better, but the rest of 2021 will be far from normal

Job fair Florida
A man hands his resume to an employer at the 25th annual Central Florida Employment Council Job Fair at the Central Florida Fairgrounds.

  • The 2021 economy has been a wild ride with reopenings, people quitting jobs, and firms desperate to hire.
  • Economic data points to improvements in the second half of the year as wages rise and jobs increase.
  • But not for everyone. Unemployment for teenagers and Black and Hispanic workers is still high.
  • See more stories on Insider’s business page.

Halfway through 2021, the June jobs report signals a good step forward, but let’s not call this economy “normal” just yet. Things are still kinda weird.

The US added 850,000 jobs last month, beating estimates and showing a strong acceleration in the labor market’s recovery. It was the largest one-month jump since August and the sixth straight month of gains. After a bumpy six months for the labor market’s recovery, it’s starting to look like smoother sailing.

But it’s still choppy. While the sectors that transitioned to remote work have regained almost all lost jobs, those hit hardest remain far from healed. And while pandemic lockdowns have reversed, businesses will have to rehire in a wholly new environment.

The first strange signs for the economy came in April, when vaccinations were running ahead of schedule and reopening started in earnest. The jobs report that month was expected to show 1 million payrolls added, but it was a paltry quarter of that figure. Job openings sat at record highs, but factors ranging from virus fears to childcare costs kept workers on the sidelines. It was better than fears of a double-dip recession – when jobs unexpectedly dropped in December – but it was decidedly abnormal.

As the country reopens, the post-pandemic labor market is taking shape. It has little in common with the one left behind in early 2020.

An early look at the new job market

Working from home redefined employment, real estate, even culture in 2020. It’s shrinking back from its widespread adoption, but it may be here to stay. Despite many state and local governments reversing their strictest economic restrictions, roughly 14% of Americans still telecommuted in June.

The labor shortage remains an obstacle for businesses looking to hire, and it’s having an effect on workers’ pay. Average earnings climbed again in June. Pay grew the most in the leisure and hospitality sector, suggesting higher pay helped businesses hire more workers.

On the other end of the market, only 10% of job seekers are urgently looking for work, according to hiring giant Indeed. Most are taking a more leisurely approach, citing virus fears and financial cushions. June data reflects that relaxed pace; the number of people actively looking for a job was flat and the unemployment rate edged higher to 5.9%.

And while job growth broadly improved in June, the recovery is still leaving several groups behind. Despite a hiring bonanza for low-wage jobs, unemployment among teenagers rose to 9.9% from 9.6%. Unemployment among Latinos rose 0.1 point to 7.4%, while Black unemployment gained to 9.2% from 9.1%. That compares to the 5.2% unemployment rate seen among whites.

Relief programs for unemployment and student loans are about to end

There’s reason to believe Americans will take more jobs in the months ahead.

Several states are just starting to end the federal boost to unemployment insurance (UI) ahead of its September expiration. Twenty-six states in total – all but one are Republican-led – are set to end the benefit early in an effort to spur hiring. And jobless claims data suggests the effort is working. Filings for UI fell to a new pandemic-era low last week.

Other government relief programs, including the student-loan freeze, are also set to lapse in the fall. Economists refer to the deadline as a “fiscal cliff” and expect it to drive more Americans into the workforce.

Continued vaccinations, school reopenings, and reskilling should have a similar effect, Federal Reserve Chair Jerome Powell said in a June 16 press conference. Childcare costs and virus fears kept countless Americans at home, unable to find work. As those pressures diminish in the coming months, it’s likely worker supply will more closely match labor demand, Powell said.

“I think it’s clear, and I am confident, that we are on a path to a very strong labor market,” he added. “I would expect that we would see strong job creation building up over the summer and going into the fall.”

Read the original article on Business Insider