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Mark O' Donnell
 · 
Research Analyst
April 8, 2022
 · 

Has the US recovered the 20 million jobs it lost in 2020?

The COVID-19 pandemic has dealt a significant blow to the jobs market globally in 2020 at the height of lockdowns and border restrictions. In the US, the world’s largest economy, employment figures have yet to return to their pre-COVID-19 level since the start of the pandemic over two years ago.

Latest government data in the US showed that employers added 431,000 Non Farm Payrolls (NFP) jobs in March, down from the market’s forecast for 490,000 new NFP jobs. The increase in March followed a better-than-expected gain of 750,000 new jobs in February, which further pushed the labor market near the Federal Reserve’s “maximum employment” goal.

With the easing of movement restrictions in the US as vaccinations progress and as COVID-19 cases continue to decrease, customer-facing sectors beefed up their hiring activity in March. The Bureau of Labor Statistics noted the strong gains in leisure and hospitality, professional and business services, retail trade, and manufacturing sectors last month.

US Non Farm Payrolls

Unemployment higher and participation lower than pre-pandemic levels

The US jobless rate in March 2022 narrowed further to 3.6% from 3.8% in February as the number of unemployed people fell by 318,000 to 6 million. However, unemployment remains higher than the 5.7 million recorded in February 2020, at the onset of the pandemic.

Both the labor participation rate and employment-population ratio remained below pre-pandemic levels in March.

United States Labor Force Participation Rate

Growing labor shortage

Last week, the latest Jobs Opening and Labor Turnover Survey report showed that the number of job vacancies in the US was little changed at 11.3 million on the last business day of February. ING Bank economists said there is no issue with demand, but the lack of supply of workers is holding back the economy.

United States Job Openings

The growth in NFP jobs remained strong despite a number of challenges in the labor market including skyrocketing inflation that soared by the most in 40 years in February.

Inflation pushes wages higher

As inflation takes a bigger bite out of workers’ salaries, companies have raised wages in March, with average hourly earnings rising by 13 cents, or 0.4%, to $31.73 in March after the upwardly revised 0.1% growth in February that was virtually flat. On a year-over-year basis, wages climbed 5.6%, the fastest rate of jump since May 2020.

United States Average Hourly Earnings YoY

Still, with US inflation rate at 7.9% in February, soaring consumer prices outweighed pay hikes in March, dampening consumer demand and threatening a wage-price spiral. It could prompt employees to ask for a raise to keep up with the higher prices of consumer goods.

Justifying Fed’s aggressive tightening

With annual wage growth rising over 5% in four of the past five months, it further justifies the US Federal Reserve’s urgency to hike interest rates in its remaining policy meetings this year. Investors might expect 50 basis-point Fed hikes in May, June, and July before easing to 25bp as quantitative tightening starts.

In its recent policy meeting, the Fed acknowledged the strength in job gains in recent months and the demand imbalances due to the lingering pandemic, higher energy prices and broader price pressures. It kept its unemployment rate projection at 3.5% for this year and in 2023.

Job market outlook

By 2030, the US expects total employment to grow to 165.4 million from 153.5 million in 2020 when the pandemic battered labor markets and led to substantial declines in economic output and employment.

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