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The initial phase of the pandemic saw the euro area and U.S unemployment rates behave quite differently, with the rate for the United States rising much more dramatically than the euro area rate. Two years on, the rates for both regions are back near pre-pandemic levels. A key difference, though, is that U.S. employment levels were down by 3.0 million jobs in 2021:Q4 relative to pre-pandemic levels, while the number of euro area jobs was up 600,000. A look at employment by industry shows that both regions had large shortfalls in the accommodation and food services industries, as expected. A key difference is the government sector, with the number of those jobs in the euro area up by 1.5 million, while the government sector in the United States shed 600,000.
Even before the start of the new year, businesses in the tri-state region were hampered by supply disruptions, rising input costs, and difficulty finding adequate staff. On top of these challenges, the Omicron wave dealt another setback to the regional economy. With infections running high, many businesses were forced to deal with a combination of reduced demand from customers and renewed absenteeism among workers. Indeed, our regional business surveys indicate that economic growth stalled in early 2022 as firms continued to struggle to find workers. Moreover, employee absenteeism was reported to be nearly three times its normal level. While the path of recovery remains highly uncertain, firms generally expect conditions to improve in the months ahead and many are still adding or planning to add staff.
Women’s labor force participation grew precipitously in the latter half of the 20th century, but by around the year 2000, that progress had stalled. In fact, the labor force participation rate for prime-age women (those aged 25 to 54) fell four percentage points between 2000 and 2015, breaking a decades-long trend. However, as the labor market gained traction in the aftermath of the Great Recession, more women were drawn into the labor force. In less than five years, between 2015 and early 2020, women’s labor force participation had recovered nearly all of the ground lost over the prior fifteen years. Then the pandemic hit, erasing these gains. In recent months, as the economy has begun to heal, women’s labor force participation has increased again, but there is much ground to be made up, especially for Black and Hispanic women. A strong labor market with rising wages, as was the case in the years leading up to the pandemic, will be instrumental in bringing more women back into the labor force.
Household saving has soared in the United States and other high-income countries during the COVID-19 pandemic, despite widespread declines in wages and other private income streams. This post highlights the role of fiscal policy in driving the saving boom, through stepped-up social benefits and other income support measures. Indeed, in the United States, Japan, and Canada, government assistance has pushed household income above its pre-pandemic trajectory. We argue that the larger scale of government assistance in these countries helps explain why saving in these countries has risen more strongly than in the euro area. Going forward, how freely households spend out of their newly accumulated savings will be a key factor determining the strength of economic recoveries.
Seasonal adjustment is a key statistical procedure underlying the creation of many economic series. Large economic shocks, such as the 2007-09 downturn, can generate lasting seasonal echoes in subsequent data. In this Liberty Street Economics post, we discuss the prospects for these echo effects after last year’s sharp economic contraction by focusing on the payroll employment series published by the U.S. Bureau of Labor Statistics (BLS). We note that seasonal echoes may lead the official numbers to overstate actual changes in payroll employment modestly between March and July of this year after which distortions flip the other way.
Business activity increased in the region’s manufacturing sector in recent weeks but continued to decline in the region’s service sector, continuing a divergent trend seen over the past several months, according to the Federal Reserve Bank of New York’s February regional business surveys. Looking ahead, however, businesses expressed widespread optimism about the near-term outlook, with service firms increasingly confident that the business climate will be better in six months. The surveys also found that supply disruptions were widespread, with manufacturing firms reporting longer delivery times and rising input costs, a likely consequence of such disruptions. Many firms also noted that minimum wage hikes implemented in January in both New York and New Jersey had affected their employment or compensation decisions.
David Dam, Meghana Gaur, Fatih Karahan, Laura Pilossoph, and Will Schirmer
The ongoing COVID-19 pandemic and the various measures put in place to contain it caused a rapid deterioration in labor market conditions for many workers and plunged the nation into recession. The unemployment rate increased dramatically during the COVID recession, rising from 3.5 percent in February to 14.8 percent in April, accompanied by an almost three percentage point decline in labor force participation. While the subsequent labor market recovery in the aggregate has exceeded even some of the most optimistic scenarios put forth soon after this dramatic rise, this recovery has been markedly weaker for the Black population. In this post, we document several striking differences in labor market outcomes by race and use Current Population Survey (CPS) data to better understand them.
Ruchi Avtar, Rajashri Chakrabarti, and Maxim Pinkovskiy
The introduction of numerous social distancing policies across the United States, combined with voluntary pullbacks in activity as responses to the COVID-19 outbreak, resulted in differences emerging in the types of work that were done from home and those that were not. Workers at businesses more likely to require in-person work—for example, some, but not all, workers in healthcare, retail, agriculture and construction—continued to come in on a regular basis. In contrast, workers in many other businesses, such as IT and finance, were generally better able to switch to working from home rather than commuting daily to work. In this post, we aim to understand whether following the onset of the pandemic there was a wedge in the incidence of commuting for work across income and race. And how did this difference, if any, change as the economy slowly recovered? We take advantage of a unique data source, SafeGraph cell phone data, to identify workers who continued to commute to work in low income versus higher income and majority-minority (MM) versus other counties.
Andreas I. Mueller, Johannes Spinnewijn, and Giorgio Topa
In addition to its terrible human toll, the COVID-19 pandemic has also caused massive disruption in labor markets. In the United States alone, more than 25 million people lost their jobs during the first wave of the pandemic. While many have returned to work since then, a large number have remained unemployed for a prolonged period of time. The number of long-term unemployed (defined as those jobless for twenty-seven weeks or longer) has surged from 1.1 million to almost 4 million. An important concern is that the long-term unemployed face worse employment prospects, but prior work has provided no consensus on what drives this decline in employment prospects. This post discusses new findings using data on elicited beliefs of unemployed job seekers to uncover the forces driving long-term unemployment.
Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
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