In the middle of last year the US economy was something of a marvel: an economy which was creating jobs at an unprecedented rate, as other economies around the world remained in the deep freeze. Having shed jobs by the million in March, by May it looked as if the jobs market would be back to its pre-Covid position in months. But what has happened?
Bureau of Labor figures published today show that once again, job creation for the month of May came in lower than expectations — with an extra 559,000 people on non-farm payrolls. It was better than April, when 278,000 new jobs were created — which was little more than half what many people had expected. Unemployment, at 5.8 per cent, remains far above the 3.5 per cent rate measured in February 2020, just before the pandemic.
Job creation was strongest in May in the food and drink sector as bars and restaurants reopened. In spite of employers complaining of recruitment problems, the sector still succeeded in hiring an extra 292,000 people. But then these are jobs which are not so much being created as being recreated, as businesses remove the shutters from their doors. Worryingly, the construction industry actually shed 20,000 jobs last month.
The drift back to offices continues but not at a rapid rate. In May 16.6 per cent of employees reported that they were still teleworking — down from 18.3 per cent in April. The slowness of the drift back to the office will please those who see the future as one where more people will work permanently from their own home. It might also be interpreted as a sign that the economy is going to take a bit longer to recover than previously believed.
One thing which stands out from the figures is the rise in long-term unemployment. In February 2020 1.2 million people had been out of work for 27 weeks or more. This has now risen to 3.8 million. The longer someone has been out of work, the harder it might be for them to get back into the habit of working. Things may change over the next couple of months, however. In the next few weeks, half of all states will discontinue the $300 a week enhanced unemployment assistance which many blame for discouraging people from getting back into the workplace — why sign up for a low-paying job when the state will pay you to sit around at home?
Yet there is another interpretation to the lukewarm jobs figures: that the US economy, like all economies, has been more ravaged by Covid than many people like to hope. Jobs in businesses which have been driven to the wall by Covid-enforced closures cannot instantly be replaced by jobs in technology businesses which had benefited from stay-at-home orders.
The early stages of the recovery saw a rapid bounce; but like a bouncing ball, the economy hasn’t gotten back to the height it fell from. Look at the stock market and you might think we were in boom conditions, but in the real economy things are much tougher.
The US is better placed for recovery than most economies, yet at the current rate of recovery in the jobs market, we are not going to be back to where we were before the pandemic for another couple of years. It was foolish ever to think it would be any different.