US Unemployment Rate
As you can see from the chart below, the US unemployment rate has significantly recovered from last year‘s Covid shock. Still the rate remains higher than it had been in the few years leading up to the pandemic.
High Unemployment Rate
The unemployment rate continues to be stubbornly high at about 5%. This clearly continues to be a problem for the economy and it’s perplexing as many companies are finding it difficult to find workers.
There are a number of reasons why unemployment remains at a higher rate. The major reasons were outlined in a recent article that I thought you might find interesting.
Health risks associated with the ongoing Covid pandemic have clearly played a role in recent months, according to economists.
Job growth slowed in August and September, when caseloads were spiking due to the delta variant. (There were 366,000 and 194,000 new payrolls added those months, respectively, compared to 1.1 million in July and 962,000 in June.)
Early retirements have also reduced the pool of available workers.
Older adults are at higher risk of severe illness and death from Covid. They may have opted to start drawing Social Security and live off their nest egg instead of taking a risk at work, economists said. Grandparents may have also offered to watch their grandkids and ease childcare duties for working parents.
Compared to two years ago, there were 3.6 million more people out of the labor force in September who indicated they don’t want a job right now, Sojourner said, citing U.S. Bureau of Labor Statistics data. People age 55 and older account for 89% of the increase.
Care responsibilities have made it tough for some workers — especially those who can’t work from home — to come off the sidelines.
For example, many schools reopened for in-person learning for the new academic year, helping ease childcare constraints for parents. But Covid outbreaks have led to sporadic quarantine periods that may stress parents’ ability to hold or commit to a steady job.
Further, in September, there were 1.8 million more people not working due to caring for someone sick with Covid, relative to a year earlier, according to Sojourner, who analyzed data from the U.S. Census Bureau’s Household Pulse Survey.
Further, there were 336,000 more people who said they were mainly not working due to care for an elderly person, Sojourner said.
Households across the income scale have been able to amass higher savings relative to pre-pandemic levels.
Cash balances were up 50% for the typical household in July 2021 relative to two years earlier, according to the JPMorgan Chase Institute.
The federal government sent large amounts of cash to families to combat the Covid-fueled downturn, including stimulus checks, enhanced unemployment benefits and increased food-stamp benefits. Lawmakers also offered temporary relief to renters, homeowners and student-loan borrowers.
There may be near-record job openings — but that doesn’t necessarily mean businesses are paying a wage workers will accept.
Wages have risen more than $1 an hour, or 4.5%, in the past year across all private-sector jobs, according to the Bureau of Labor Statistics. Some sectors are up more — leisure and hospitality pay is up 11%, to $18.95 an hour, for example. The Bureau attributes the upward pressure on earnings to a rising demand for labor.
But that higher pay may still not be enough to attract workers from the sidelines, Sojourner said. That’s more likely to be the case if a job has deteriorated in quality, he said — whether because of health risks, increased hours or other inconveniences like dealing with unruly customers who oppose mask requirements. There may also be a competing priority like the cost of child care.
It will take time
It will also take a while to work out some of the frictions that have built up in the labor market in the past year and a half, economists said.
Jobless workers have had ample time during the pandemic to reassess their working lives and what they want from a job. Some may opt to switch careers. The available jobs may also not be in a worker’s prior occupational field or in their geographical area.
There’s also a mismatch between worker and company expectations. For example, between one-fourth and one-third of corporate chief financial officers expect their organization to return to in-person work full-time, which is fundamentally inconsistent with the flexibility workers want, according to Tim Glowa, a principal at Grant Thornton, citing company surveys.
Easing Next Year
We expect rates to slowly start trending down beginning next year. I think it’s important not to underestimate people reassessing their life’s path and making new judgments about where they want to work (rather than where they are forced to work for pay). That will settle as people have time to assess the direction for their work life.