What’s Delaying the Jobs Recovery?

By Veronica Carrion

More than a year after the pandemic, states and cities are reopening and people are getting vaccinated. For many Americans, this means a return to normalcy. However, workers are not returning to the labor force as quickly as some expected. As of June, 9.5 million were unemployed, 5.7 million more than prior to the pandemic. The labor force participation rate, the measure of an economy’s active workforce, remained depressed at 61.6 percent.

So, what exactly is keeping people out of the workforce? The data show a complicated picture.

Family caregiving

Childcare remains a top concern for many not returning to work. Forty-five percent of parents with kids under 18 said they or their partners have changed work schedules to take care of their children and 17 percent said they or their partners stopped working altogether. Women and mothers experienced more severe employment effects.

Mothers are more likely to work in industries more severely impacted by the pandemic and are more likely to take on additional domestic household and childcare responsibilities. As of March 2021, 1.4 million fewer moms of school-aged children were actively working compared to February 2020.

Faced with limited day care options, many parents remain unable to return to work until schools resume in-person. While there may be a boost to labor force participation when kids return to school this fall, more than 700,000 mothers have decided to no longer work outside the home and some may never return to the workforce.

Enhanced unemployment benefits

Some observers believe enhanced benefits are also allowing many to stay home, challenging small businesses hiring. Currently, 3.6 million Americans receive unemployment benefits, the lowest since March 2020, but still greatly elevated compared to pre-COVID levels. For many lower wage workers and those in low-cost of living areas, expanded unemployment benefits more than replaced all lost income.

However, according to Census Household Pulse Survey data as of June 7, only 9 percent of households are using unemployment benefits to meet spending needs. A survey from the U.S. Chamber of Commerce found that only 16 percent of unemployed Americans (roughly 2.8 million) cite expanded benefits for “not worth pursuing a job.”

Other factors

Several other factors are also keeping the unemployed out of work. More than two-in-five (42.1 percent) of those unemployed in June had been out of work for 27 weeks or longer. Long-term unemployment can atrophy skills, making finding jobs more difficult.

Despite a record number of job postings, available positions require skills for which there is less need in today’s market. According to the NFIB Small Business Index, 57 percent (93 percent of those hiring or seeking to) of small business owners reported few or no “qualified” applicants for posted positions. Others stated that current job seekers in industries such as manufacturing, warehouse, sales, office and technology positions are over-assessing pay expectations based on skill levels.

Respondents who had recently turned down job offers, according to a survey by CNBC Morning Consult, cited multiple reasons, including too-low salary (76 percent of those offered a position said the pay was lower than their prior job) and lingering health concerns about the virus.

Expectations going forward

The ABA Economic Advisory Committee expects robust job gains over the short term as the economy revives. The bank economists expect the unemployment rate to fall to 5.0 percent at year-end and a return to full employment by the end of 2022. However, due to structural changes to the labor market and the long recovery ahead for severely hit sectors, such as leisure and hospitality, the committee does not expect the participation rate to return to pre-pandemic levels within the forecast horizon.

Veronica Carrion is an associate for economic research at ABA.