Are we there yet?

Kids on car trips aren’t the only creatures who ask “Are we there yet?” Economists ask the same question, and in a variety of contexts.

In recent months, the context has been the labor market, where “Are we there yet?” has meant “Is the U.S. labor market back to where it was before the pandemic?”

Economists now have two good answers to that version of “Are we there yet?” One is: no. The other: yes. 

Before you vow never to listen to an economist again, allow me to explain.

No is a good answer to the question “Is the U.S. labor market back to where it was before the pandemic?” because capitalist economies change constantly. Change is fundamental to their nature. There is no “going back to where we were” in capitalism.

Further, the pandemic induced changes in technology, the way production is organized, and people’s perspectives on work and life that cannot be erased. The response to the pandemic shifted future economic growth and development to a different path.

To people who pore over labor market statistics, however, Yes – with a few qualifications – is a good answer to the “Is the labor market back to where it was” question.

Consider. In February 2020, the month before the pandemic hit, the U.S. labor force totaled 164,583,000, employment totaled 158,866,000, the unemployment rate was 3.5 percent, and the labor force participation rate was 63.4 percent.

Current figures show the U.S. labor force at 164,746,000, employment at 158,732,000, the unemployment rate at 3.7 percent (it was 3.5 percent in July) and the labor force participation rate at 62.4 percent.

The current figures are remarkably close to the pre-pandemic figures.

Two age groups account for the bulk of the percentage point difference in the labor force participation rate: 55 to 64-year-olds and 20 to 24-year-olds. The participation rate for men age 55 to 64 years is currently 70.3 percent, down from 71.8 percent in February 2020; the rate for women age 55 to 64 years is currently 59 percent, down from 59.7 percent in February 2020.  The participation rate for men age 20 to 24 years is currently 72.1 percent, down from 75 percent in February 2020; the rate for women age 20 to 24 years is currently 68.6 percent, down from 71.4 percent in February 2020.    

Lower participation of 55 to 64-year-olds is quite likely pandemic-induced: early retirement, lingering effects of the illness, cutting risk. Lower participation of 20 to 24-year-olds might be the result of people returning to college.

Supporting the “yes, the labor market is back to where it was” case is this significant fact: current labor force participation rates for women age 25 to 34 years, 35 to 44 years and 45 to 54 years are either the same as or higher than February 2020 participation rates.

Also supporting the “yes” case is private sector employment: 129,625,000 in February 2020; 130,510,000 currently.

The composition of private sector employment shows two major shifts, however.

Current employment exceeds February 2020 employment in nine of eleven major industries.  The gains are modest, with one exception: employment in transportation and warehousing has jumped by 13 percent since February 2020.

Health services and leisure and hospitality are the two industries with employment losses since February 2020. The employment loss in health services is modest: 0.4 percent. The loss in leisure and hospitality is not modest: 7.2 percent.

In accommodation, an industry within leisure and hospitality, the employment loss since February 2020 is 18.8 percent.

If hotel workers seem a bit frazzled these days, that last figure may have something to do with it.