Economic Indicators | Jobs and Unemployment

News from EPI The U.S. labor market remains 9.9 million jobs below pre-pandemic levels

Today, the Bureau of Labor Statistics (BLS) released the first jobs report of 2021, showing that jobs rose by a modest 49,000 in January after falling 227,000 in December (revised down from the originally reported 140,000 loss).

These swings are partly due to seasonal adjustments. Every December, there are expectations of ramped up holiday hiring followed by cutbacks in January. Usually, the seasonal adjustment tempers those effects so comparisons between months are more reliable. Because hiring didn’t ramp up in December to then experience the losses in January, I recommend taking an average of December and January to get a better sense of current labor market momentum. The average job change of the last two months is -89,000, a troubling sign for an economy that desperately needs more life.

Overall, the labor market is down 9.9 million jobs since February 2020. And, if we count how many jobs may have been created if the recession hadn’t hit—a more appropriate counterfactual for the current hole we are in might be average job growth over the 12 months before the recession (202,000)—we are now short 12.1 million jobs since February. Policymakers need to go big to solve this crisis.

In today’s report, the BLS discussed the fact that seasonal adjustments also distorted the numbers on state and local government jobs. Therefore, little attention should be paid to what appears to be an increase in public-sector employment. State and local government employment is down 1.3 million jobs since February 2020. The vast majority of these job losses (nearly 1 million) are in state and local education employment, which remains 9.0% below its February level. Because of the economic crises, states and localities are facing huge revenue shortfalls, which must be relieved with more federal aid. What we know from the last recession is that states that preserved or grew their public-sector workforce fared better, with fewer job losses overall, fewer private-sector job cuts, less growth in unemployment, and faster job growth. Without significant federal investment, it will be impossible for state and local governments to avoid further cuts and return to their pre-pandemic employment levels in the near future.

Turning to the household survey, the latest data indicate that the unemployment rate fell 0.4 percentage points to 6.3% in January. The decline was primarily among workers experiencing shorter spells of unemployment. The number of long-term unemployed—those unemployed for 27 weeks or more—held steady at 4.0 million.

As bad as these numbers are, they understate the economic pain. These counts of the unemployed do not take into account the millions of workers who have left the labor force or were misclassified as employed but not at work or had their hours cut. Taking all those workers into account, a total of 25.5 million workers—15.0% of the workforce—were directly hurt by the COVID downturn in January. This proves essential the need for extensions to unemployment insurance to provide a necessary lifeline to those workers and their families.

The overall unemployment rate also misses the fact that the pandemic recession and recovery, such as it is, is not hitting all workers equally. In January, white, Black, and Hispanic unemployment rates dropped, while the Asian American unemployment rate rose. The largest gap in unemployment still remains between white workers with an unemployment rate of 5.7% and Black workers at 9.2%.

The data also show that it is far from true that “everyone” is working from home because of the pandemic. Only 23.2% of employed people report having teleworked or worked at home in the last four weeks because of the pandemic—less than one in four workers.

Today’s jobs day report reinforces the need for Congress to take bold action in passing crucial relief measures through reconciliation.


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