What the US Recovery Is Missing
Although the US economy has recovered faster than many others around the world, persistent labor-market problems lurk beneath the surface. The deep class-, race-, and gender-based inequalities laid bare by the pandemic are getting worse, demanding concerted action by policymakers.
BERKELEY – The expiration of enhanced unemployment benefits in the United States has come and gone with no noticeable impact on the number of Americans seeking work. This should come as no surprise. Arguments made by uninformed and self-interested low-wage employers who blamed the pandemic-era safety net for their inability to fill open positions never held water. Research from the US Federal Reserve Bank of San Francisco has shown that early suspension of benefits in some states had no noticeable impact on their unemployment rates.
The challenge of employing more than eight million jobless Americans will not be solved by cutting benefits. Rather, we need a more substantial change in our social contract, particularly to support jobs in the care economy. Before the pandemic, the US economy was close to full employment (as traditionally defined), with an unemployment rate of 3.5% in February 2020. The economy had added more than two million jobs over the previous year, in what had been the longest economic expansion in US history. But COVID-19 – and the lockdowns used to combat it – changed that almost overnight. Within the space of a month, 20.5 million US jobs were lost, and the unemployment rate peaked at almost 15%.
Rapid action by the US Federal Reserve and an unprecedented fiscal response through the American Rescue Plan and the Coronavirus Aid, Relief, and Economic Security (CARES) Act stemmed the tide. Many jobs switched to remote work, and the economy was stabilized until vaccines arrived, allowing for a reopening. By September 2021, employment had increased by 17.4 million jobs from its previous trough, and the unemployment rate had dropped to 4.8%. At the end of the month, there were more job openings (ten million) than people seeking work (8.4 million). The Fed is expected to start tapering its support for the economy in the next couple of quarters.