08 October 2021

What September 2021 Job Numbers Suggest About the Recovery to Follow

Last month (Sep-2021) the economy created less than 200k jobs, which is far short of what's needed. The good news is that monthly variation is high and with adjustments to prior months, the American economy is still averaging 561k jobs per month this year. This one month dip is less likely a sign of things to come than normal variation within this very weird year.

Unemployment is down sharply for the month, dropping from 5.2% to 4.8%. 

We are still down 5 million jobs from pre-pandemic peak. The breakdown of those jobs raises some questions.

Leisure and hospitality jobs are down 1.6 million. This is for obvious reasons and one can hope that as COVID cases subside so will this number. Meanwhile, tip your server generously.

Health care employment is down 524,00 . About 400,000 of those jobs are in nursing and residential care facilities. My question? How much of this reflects the population drop in these places due to COVID? Between hesitancy to live in such places and the drop in elderly population (official count is 700,000 dead in the US and the Economist estimates this misses about 30% of COVID related fatalities, which would put the total at about 900,000), there is less demand for these services. Given 24 hour, 7-days a week care in these facilities, there is about one job for every 3 residents. The COVID death toll alone could account for 300,000 of those 400,000 jobs lost in nursing and residential care facilities. 

Those nursing home jobs may not be coming back for some time.

Another big source of job loss is in education. Here, jobs are down 676,000 from their pre-pandemic peak. Given the Delta variant is so contagious and that kids are both unvaccinated and coming back into the classroom in large numbers, there is a COVID outbreak among school-age children right now. Some parents seem to be choosing to simply keep their kids at home. It's not obvious what is happening with those kids (private education employment is down about as much as public education). If elderly are not going into nursing homes they may be staying with their children who have school-age children; I'm sure a number of kids are being kept out of school to protect grandparents. Studies suggest about 3 million kids have "disenrolled" from school. Presumably the kids will come back at some point and these jobs in education will be restored. Timing seems like a huge question.

The only sector with higher employment than the pre-pandemic peak is transportation and warehousing, where there are 72,000 more jobs than there were last February. This sounds negligible. And as a portion of the workforce it is. But those supplies that they are shipping and storing flow into factories and retail stores, representing downstream jobs in manufacturing (which is now down 353,000) and retail (now down 202,000). The growth in transportation could be prelude for more general growth in employment. Every one of my clients of late complains about how delays in supply chains is impacting their ability to make product they can then sell; as that problem is addressed, it could mean great things for downstream sectors and employment. It makes sense that transportation and warehousing would lead a recovery.

Meanwhile, it looks like we won't hit something akin to full recovery until next year. The unemployment rate, though, is rapidly dropping as befits an economy creating an average of half a million jobs per month.

Finally, the unemployment rate is so much higher for those with less education. Market forces are less likely to address this than is legislation to fund infrastructure projects and subsidize sectors like childcare, for instance. Funding jobs for less educated people is better in dozens of ways than either ignoring their plight or giving them welfare rather than work.

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