No, the jobs aren't all back yet – in any top U.S. industry
(Reuters) – No major U.S. industry has regained its pre-recession level of employment in the 16 months since COVID-19 torpedoed the labor market, a sobering reality check on the lasting mark of the pandemic as the nation heads into Independence Day weekend.
Labor Department data released Friday showed total employment across the 10 major nongovernment sectors ranged from between 87% and 99% of their levels in February 2020, with even those relatively unscarred by the pandemic yet to fully retrace their losses.
“We are an economy in transition,” Labor Secretary Marty Walsh said in an interview, adding that it will be a “few more months” before the economy gets to pre-pandemic numbers across the board.
“We need to focus on areas that might not be growing – is there something else happening? Lack of supply? Permitting? Who knows what it might be.”
Growing fastest is the leisure and hospitality sector, which added 343,000 jobs in June as restaurants and hotels hired at their fastest pace since February. Even so, employment in the industry – which at its low last year had shed roughly half its workers – has only recovered to about 87.1% of its pre-pandemic level.
By contrast, employment in the finance industry – one of the least pandemic-hit industries, as many workers were able to do their jobs from home – has nearly recovered, at 99.2% of its pre-crisis level. But that level has not changed in three months.
In construction, it’s 96.9% – also a figure that has shown no improvement since the end of winter. Construction employment, in fact, has fallen for three straight months during what is typically a hiring season for the industry, a lull officials say may be the result of building materials shortages.
Overall, in none of the major industries has employment breached February 2020 levels, when the U.S. economy was by most accounts firing on all cylinders.
One factor feeding in, economists say, is that millions of Americans appear to have left the workforce, whether for retirement or to take care of children or elderly parents, and it’s unclear when or even if they will return.
Labor force participation – a measure of how many workers are doing or seeking jobs – was stuck at 61.6% in June, Friday’s report showed, well below the 63.3% registered before the pandemic.
As factors constraining labor supply, including worries over health and childcare, recede, that figure should rise, said Kathy Bostjancic of Oxford Economics. She projects a return to about 63% by the end of next year.
But the jobs recovery may not be even across sectors, she said, with automation and other factors allowing some industries to permanently get by with fewer workers.
“The longer it takes for supply/demand balances to align better, perhaps the more employers rely on automation to fill the labor demand needs in certain sectors,” she said.
Such a development would mean higher productivity growth, if overall economic output stays on its blistering trajectory of well-above trend growth for this year and next. But it also suggests lower inflation, which all things equal moves opposite to productivity, falling when productivity growth rises.
That in turn could complicate matters for policymakers at the U.S. central bank, who have to figure out how to calibrate policy to engineer both maximum employment and stable inflation at 2%.
One bright spot in the June jobs report was the rise in labor force participation among those aged 25 to 54, a group unlikely to retire and in the prime of their working years. That jumped to 81.7%, from 81.3% in May, though is still down from the 82.9% level in February 2020.
“That bodes well for employment returning closer to or eventually above pre-pandemic levels if the increase continues, as I think it will,” said Roberto Perli of Cornerstone Macro, though extended unemployment benefits as well as automation and fear of infection could factor in, he said. “In the end, I’m sure that post-pandemic some sectors will perform a lot better than others in terms of jobs.”
With much of the job growth in lower-wage sectors like restaurants, the latest data may raise questions about the trajectory of household spending, a mainstay of the U.S. economy.
For now, that won’t matter much, given the high level of household savings accumulated from government aid and built-up savings among higher-income families who couldn’t use their money on travel and leisure while the pandemic was raging.
“It would be a drag on consumption later on, after excess savings are exhausted, if employment stayed below pre-pandemic for long,” Perli said.
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