The U.S. economy added just 266,000 jobs in April — a mere fraction of economists’ expectations of nearly a million, and unemployment ticked up instead of dropping as predicted. According to economists, this is a clear sign that there are still giant holes in America’s economic recovery and that the coronavirus remains in the driver’s seat.
With vaccination rates slowing even as local economies fully reopen, the job market is reorienting itself into a new normal that assumes the virus might linger for the foreseeable future — a shift that labor experts say requires investment in a wide swath of workers if their skills are to reflect this new reality.
The severity and duration of the pandemic has led to countless small business closures, leaving workers without a job to return to as the recovery takes hold.
“The questions are, can I go back to my old employer, and can the consumer go back to the old storefront?” said Jeff Strohl, director of research at the Georgetown University Center on Education and the Workforce.
He added that this has had a disproportionate impact on less-educated Americans, who tend to work in labor-intensive, low-wage service sectors.
“The idea of the rising tide lifting all boats — it’s not doing that equally,” Strohl said. “When we look at the impact of pandemic unemployment, it hit high-school-and-less the hardest. The recovery has lifted the college-educated the most strongly. We have a segregation.”
In taking analysts by surprise, the labor market’s stumble served as a stark reminder of the gap that persists between the bounce-back in economic activity and the recovery of the labor market. Last week, the Commerce Department reported that gross domestic product grew at an annualized rate of 6.4 percent in the first quarter of 2021. Many economists predict that a return to the Q4 2019 level of economic output could come as early as this quarter.
Those gains are unlikely to be shared by the labor market anytime soon: An analysis by the nonpartisan Congressional Budget Office found that employment won’t recover fully until 2024, when it predicts a jobless rate of 4.2 percent.
“The recovery and expansion phase of GDP began [but] we're still a long way from expansion in the labor market,” said Joseph LaVorgna, managing director and chief economist of the Americas at Natixis. “How quickly we have the jobs recovery will be a function of reopenings, how the virus evolves and vaccinations.”
Many economists’ calculations around current and future job gains don't account for the growth that would have taken place over the last 12 months if the pandemic hadn’t triggered a nationwide shutdown. The Economic Policy Institute, a left-leaning think tank, said nearly 3 million more jobs would have been added if the current pre-pandemic pace of job creation had continued uninterrupted. Starting from a February 2020 baseline of roughly 152.5 million jobs, the U.S. would have just over 155.1 million jobs as of last month. The actual total is roughly 144.1 million.
“The K-shaped recovery we have observed so far still threatens to persist as many Americans on Main Street don’t benefit much from the large-scale monetary stimulus initiatives,” and the market gains that has elicited, said Steve Rick, chief economist at CUNA Mutual Group.
For much of the missing service-sector jobs to return, Americans will have to be willing to eat out, get their hair cut, visit movie theaters and attend sporting events again.
“What happens there will dictate whether we will more quickly absorb or re-employ the people who have been displaced because of the virus,” LaVorgna said. “There’s still a tremendous amount of labor slack that’s out there,” he said.
If vaccine reticence leads to more virulent mutations that can put even the inoculated at risk, these jobs could be lost forever. Experts said the prospect of investing more in the nation’s workforce as laid out in President Joe Biden’s economic recovery plans is the country’s best shot at replacing some of those jobs and having a qualified pool of labor to fill them.
“In order to make the recovery more equitable and sustainable, prioritizing spending on healthcare, education, infrastructure and childcare will be crucial,” Rick said.
More money for education and training, experts said, could help speed the return of marginalized populations back into labor market.
“Skilling programs targeted to women and minorities remain essential to helping displaced workers qualify for new and in-demand roles,” said Karen Fichuk, CEO of staffing firm Randstad North America.
“The growth and excitement in this economy is really tilted towards those with a college education,” Strohl said. Getting these discouraged workers off the sidelines, he said, will take a massive retraining initiative to re-engage this pool of workers with the new economic reality. “We think what they really need to do is modernize the training system.”