2021 has been a historically great year for jobs. So why didn’t he feel that way?
Short answers: economists were baffled. You were more attentive than usual. And months after a slew of headlines disappeared, the employment situation has quietly improved.
Confuses? Do not worry. Almost everyone is. We will guide you.
The big picture
The US labor market has experienced a whirlwind of a year in 2021. Apparently, every month of job gains missed economists’ forecasts. And record number of jobs available and workers resign made it even harder to keep track of what was really going on. In a few months, we even had the impression that the recovery was not going in the right direction at all.
But looking at 2021 in the rearview mirror, it turns out it was actually a record year. The US economy created jobs every month, not bad for what appeared to be a gloomy year.
âObviously the expectations were much higher, but when you look at 2021 as a whole, the president’s economic plan is working,â Labor Secretary Marty Walsh told CNN on Friday.
America added 6.4 million jobs in 2021, the highest number since records began in 1939.
Unemployment rate fell to 3.9% at the end of the year against 6.7% in December 2020, a new low in the pandemic era.
And Americans have returned to the workforce en masse: the labor force participation rate soared to 61.9% in November and held steady in the last month of the year, also marking a new pandemic high. This is a number that economists pay close attention to, as it indicates whether people are actively looking for work or so disillusioned that they stop looking for work altogether.
Women, who had dropped out of the labor market at alarming rates in 2020, in part due to childcare issues, also returned in 2021. The participation rate of women aged 20 and over rose to 57.8%, also a peak during a pandemic.
And companies’ frantic search for personnel meant workers received larger enrollment bonuses and paychecks, especially at the lower end of the income scale.
Forecasts and be wrong
Month after month, however, 2021 didn’t feel so good. That’s because economists consistently set high expectations for the Jobs report, only to be disappointed with a much lower than expected number.
So last year has been a bit disappointing, if only because the expectations were so high.
How can economists get the process wrong all the time? Ultimately, the pandemic made their jobs much more difficult.
Forecasting is tricky in normal times, but Covid threw a wrench into things: The nation has gone from a historic job loss so that millions of people are returning to work. And as demand skyrocketed, businesses continued to need more people than they could find, triggering the labor shortage that defined much of 2021.
“A lot of [economists’] models are always informed by the demand for labor and find it difficult to grasp that there are jobs there but not enough workers, âsaid Sarah House, economist at Wells Fargo, about the difficulty in predicting monthly job gains.
Economists are not bad at their jobs; they just have some unusual factors obscuring their crystal balls.
For example, the Employer Survey that is part of the Jobs Report repeatedly underestimated job growth over the past year, which is visible in the sometimes significant revisions that have been made over the past year. months later.
âThe challenges of seasonal adjustment and a relatively low response rate to the survey argue for another round of upward revisions in future reports,â Goldman Sachs economists said of the report. December released Friday.
Amid the difficulty of forecasting activity, it also didn’t help that the jobs report became a point of interest outside the economic community during the pandemic: we were paying more attention to it. narrow than usual, which exacerbated these bad feelings.
Not finished yet
But here’s the problem: Wall Street economists weren’t the only ones confused. Government economists extrapolating the data for the monthly jobs report have also been thrown on a loop.
Just about every month of 2021, the previous month and the previous month have been revised upwards. For example, on Friday the Department of Labor reported that the November jobs report was actually about 19% higher than previously reported – gaining a 102,000 additional jobs for this month.
December’s worst report of the year could also be revised upwards.
Yet, this is not all good news. The recovery is still not over – although 2021 has been a great year for jobs,
At the end of the year, the country was still down 3.6 million jobs from February 2020. And that doesn’t take into account jobs that would have been added in the past two years without Covid.
The participation rate remains 1.5 percentage points below the pre-pandemic level. Likewise, female participation is still 1.5 percentage points lower than the pre-Covid level, which puts her on par with a rate last seen in 1991.
There is still a lot of work to be done for the New Year. The highly infectious variant of Omicron could give this a rough start.
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