What to watch on jobs day: Signs of an improving labor market
Pursuing public health initiatives—including the production and distribution of the vaccine—is the most important priority for our health and economic well-being. Further, investments in state and local governments as well as direct assistance to workers and their families have been essential to their financial security and the economic recovery itself. Given advancements on both fronts in recent weeks and months, I expect the labor market recovery to finally pick up steam.
A year into the recession, the labor market is still down 9.5 million jobs from where it stood immediately before the COVID-19 shock. If we add in jobs that should have been created over that time to absorb new workers, we’re facing a jobs shortfall today of nearly 12 million jobs.
As the labor market finally picks up, the key indicators to watch are where the jobs are returning and for whom. The biggest deficit remains in leisure and hospitality, with 3.5 million fewer jobs relative to its February 2020 level. The economic pain caused by losses in this lowest-paying sector was enormous.
Meanwhile, public-sector employment—primarily education employment at the state and local level—remains 1.4 million jobs below pre-pandemic levels. I’m optimistic that the state and local relief that was part of the American Rescue Plan will provide tremendous support to this sector in terms of employment and the vital public services they provide.
In Friday’s jobs report, we also need to pay attention to the recovery for various demographic groups. Women have borne a heavier burden of job losses in the pandemic due in part to both occupational segregation (i.e., women disproportionately more likely to hold lower-wage service-sector jobs) and caretaking responsibilities (i.e., closed schools and day care options, and caregiving responsibilities for other family members in general). In the last employment situation report, Black workers experienced worsening—not improving—labor market opportunities. The Black unemployment rate is back up to 9.9%, just shy of the overall high-water mark in the Great Recession. I hope to see improvements for all historically disadvantaged groups as the labor market picks up.
It is certainly true that the pre-pandemic economy was decidedly better than the one we are in now. The labor market had been gaining strength after years of steady recovery from the Great Recession, but persistent disparities remained intact. The Black unemployment rate was twice as high as the white unemployment rate. Women’s labor force participation had been softening for years compared to our peer countries with better social investments in child care and paid family leave policies. Wage disparities were persistent, and in some cases widening. The pandemic both created and magnified harmful cracks in the labor market.
Now, we have an opportunity to not only reverse the devastation from the pandemic recession, but to do better. We can reach higher to meet the policy reforms that are desperately needed, from important investments in child care and health care to higher education and unemployment insurance. We should learn from the cracks the pandemic economy revealed and not be destined to repeat them. I hope that this recovery swiftly gets the labor market back to where we were before the pandemic hit and more.
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