US poised to escape curse of rising unemployment if vaccines work


(Bloomberg) – It’s a bold forecast that some say borders on fantasy: Wall Street banks and Federal Reserve officials are seeing strong job gains over the next three years that escape the curse of past recessions. re-enter the labor market as soon as the coronavirus vaccines are deployed. If wrong, the United States is entering another so-called jobless recovery where wage bill gains lag behind the resumption of economic growth and production.

Optimists, including Federal Reserve Vice Chairman Richard Clarida, say this economic crisis is different because it was caused by something that looks more like a natural disaster than a financial shock. Once the pandemic subsides, pent-up demand for services, entertainment and even travel will be unleashed and businesses will either hire or re-hire.

“The economy has proven to be more resilient in adapting to the virus,” Clarida said in an address to the Council on Foreign Relations on Jan.8. “Most of my colleagues and I have revised our medium-term economic outlook. . “

Pessimists are more cautious and point out that this time around, many workers are at risk of leaving the workforce and that many of the jobs lost will never come back. This will force many people to requalify or relocate, which can take years as the transition is more difficult for those with less income and education.

Low-wage workers are particularly at risk of being left behind, especially if they live in more rural areas, says Harvard professor Raj Chetty.

“There are early signs of a possible jobless recovery from this recession which could be quite persistent geographically,” Chetty said at a conference earlier this month.

Employment data

Friday’s latest jobs report shows how important controlling the virus is for future job gains. The non-farm payroll fell by 140,000 from the previous month, while the unemployment rate remained at 6.7%.

The weakness was concentrated in restaurants, bars and other businesses hit hard by new restrictions in the event of a pandemic. Many of the 3.9 million long-term unemployed – those without a job for at least 27 weeks in December – are in these industries. The leisure and hospitality industry, for example, accounts for 22.6% of total long-term unemployment.

There is reason to be hopeful in this grim data, said Julia Coronado, founding partner of MacroPolicy Perspectives LLC.

“There is a lot of evidence here that if we can get the virus under control and start reopening, many of these jobs can come back,” she said, adding that she was also concerned that the changes in business strategy would have an impact. lasting impact on certain jobs in the service sector. “The idea that we’re going to flip a switch and have a frictionless recovery in the workforce seems highly unlikely.”

Fed Outlook

US central bankers expect the unemployment rate to fall to 5% by the end of this year, 4.2% in 2022, and 3.7% by the end of 2023. This is on would bring February’s unemployment rate – of 3.5% – to around the neighborhood before the virus appeared. Goldman Sachs Group Inc (NYSE :). economists are also positive about employment prospects. They predict the unemployment rate will drop to 4.8% by the end of 2021 and be around pre-pandemic lows by the end of 2023.

One of the things they point out is the prospect of further government support from President-elect Joe Biden’s new administration. He’s set to release his proposals on Thursday, and broad lines suggest that could provide a positive wind for job gains.

Yet what’s unusual about this outlook is that it just hasn’t happened that way in recent recoveries. Take the financial crisis of 2008-2009. It took about eight years for the job market to heal. After the 2001 recession, it took almost six years for the unemployment rate to return to previous levels.


The unemployment rate is only one measure of the health of the labor market and its decline may not be a sign of a full recovery.

The pandemic has reduced participation in the labor market, the share of the working-age population looking for or having a job. People leave the workforce to take care of their families, get more education or because their skills do not match the needs of employers.

These decisions are “sticky,” notes Stephanie Aaronson, head of economic studies at the Brookings Institution, which means they are not overturned quickly.

Chris Fryett is an example. He worked as a software developer for International Business Machines (NYSE 🙂 Corp. for 15 years before being dismissed in June as part of a reorganization. He thought he would get a job quickly.

But “the employers weren’t really talking,” he says, so he decided to go back to school for a four-year degree in biology.

Fryett, 51, and many Americans like him, are no longer in the workforce, and one of the big questions is when will they be back?

Back to normal

The answer to this depends on the enormous uncertainty about whether the pandemic has changed businesses temporarily – or for good. Ashok Bajaj, a well-known restaurateur from Washington, DC, is one such business owner who says it could take years for consumers to feel safe again, even with a vaccine.

Bajaj had to close one of its 10 restaurants and let go about 250 staff. He doesn’t expect to put the same number of seats in his restaurants when it reopens.

“People will gradually return to their old ways,” he said. “Is this going to happen in 2021? No, this is not the case.

Claudia Sahm, a former Fed forecaster who now runs her own business, says the policy should aim for a strong labor market recovery – but it won’t be easy. “You can’t be unwell that long – we’re always down. 10 million jobs since February – and expect it to happen just as quickly, ”she said. “It’s a very different recession and there is huge uncertainty around everyone’s forecast.”

© 2021 Bloomberg L.P.


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