This could be the best year on record for job growth4 min read . Updated: 11 Jan 2021, 02:03 PM IST
- Gains to be driven by a re-emerging economy but won’t offset all pandemic losses
The U.S. economy is poised to add more jobs this year than any other on records dating back to 1939—though the expected gain is unlikely to fully replace losses last spring, when the coronavirus pandemic first took hold.
U.S. nonfarm payrolls will increase by 6.7 million by December 2021, from last month, according to data firm IHS Markit. Economic forecasting firm Oxford Economics predicts 5.8 million jobs. Economists at the University of Michigan forecast 5.3 million. All would put 2021 well ahead of the 4.3 million jobs created in 1946, at the start of the post-World War II expansion, for the best year on record. It would be much less in percentage terms, though, 5% versus 11% in 1946.
Such gains would be a dramatic turnaround from 2020’s net job loss of 9.4 million, according to the Labor Department’s jobs report Friday. The loss largely occurred in March and April, when employers shed 22 million jobs as states restricted activity to control the spread of the virus. Jobs grew in subsequent months, but the pace eased after June then turned negative in December.
Economists expect hiring to start slowly and gain momentum later in 2021, as the Covid-19 vaccine becomes widely available and consumers resume activities such as dining out and travel. The $900 billion in enhanced unemployment benefits, aid to businesses and other relief enacted late last month is also projected to boost the economy.
The speed of the recovery would be far faster than after the two previous recessions this century, which mostly reflects the severe and sudden nature of last year’s downturn and the unusual factors at work now in confronting a simultaneous health and economic crisis.
“We have fiscal stimulus in place and we have the assumption of a successful inoculation campaign that will rescue us from Covid and unlock consumer demand," said Joel Prakken, chief U.S. economist at IHS Markit. That will result in economic growth accelerating to above a 5% annual growth pace late this year, roughly double the average growth in the decade before the pandemic, he said. “That’s fast enough to put considerable downward pressure on the unemployment rate and give hiring a really good boost."
Gregory Daco, Oxford Economics’ chief U.S. economist, expects a boom in consumer-services employment later in the year, including in hospitality and retail. He said job creation could slow in construction, which had benefited from recent growth in home construction and the public sector.
However, even after robust hiring this year, Mr. Daco said the economy will still be about 4 million jobs short of its pre-pandemic level. “We’ve permanently lost some businesses and are likely to lose a few more this winter," he said. “And for people who are now long-term unemployed, they may struggle to re-enter the workforce."
It could take yet another year of job growth or more to make up those losses, Mr. Daco said, which is significant because he expects economic output to fully recover by the middle of this year. He said that is a result of pandemic aid largely being delivered through unemployment programs. That gave consumers without jobs money to spend. With the recently approved $300 weekly supplement, some unemployed, lower-wage workers are again earning more in benefits than at prior jobs.
Economists have somewhat varied views on another key measure of the labor market: the unemployment rate.
IHS Markit forecasts the rate to fall to 4.3% by the end of this year, while other economists expect the rate to stay closer to 6%. The rate was 6.7% in December, according to the Labor Department and had reached a 50-year low of 3.5% just before the pandemic.
Mr. Prakken, of IHS Markit, said his forecast for an unusually quick fall in the unemployment rate, from a peak of 14.8% in April 2020, is driven by expectations for strong hiring and changes to the labor force.
He expects labor-force participation—the share of Americans working or looking for work—to remain subdued. During the pandemic many baby boomers and parents of young children left the workforce, depressing the official unemployment rate, and they might not return this year. And pandemic-related restrictions and Trump administration policies have limited recent immigration into the U.S., also reducing the labor force.
Not all economists are as optimistic. Belinda Román, lead economist for Román Economics and professor at St. Mary’s University in Texas, projects the jobless rate to fall modestly this year, to 6%, and employment to grow just 900,000 this year, less than half of 2019’s pre-pandemic job-growth rate.
“I don’t see the economy returning to pre-Covid trends for several years," she said. Many small businesses, especially restaurants, have closed permanently, so adding jobs won’t be as simple as lifting restrictions, she said. She added that she is concerned with the pace of the vaccine rollout and worries the recently passed stimulus won’t provide enough of a bridge to when society has wider immunity.
“I think it will be a steady-as-you-go improvement," Ms. Román said. “There is a lot of scarring to overcome."
This story has been published from a wire agency feed without modifications to the text.