US labor market may fully recover pandemic losses in 7 months

Labor Department reports show a good pace of decline in unemployment and recovery in American employment. Economists see clear preconditions for a full recovery of the “pandemic” indicators of the US labor market in the coming months.

Market analysts believe that there are enough significant factors to justify forecasts of a rapid recovery of the US labor market.

1. Recent reports from the Ministry of Labor show a strong trend:

  • The number of jobs outside agriculture has been growing for the last three months in a row: by 269 thousand vacancies in April, 583 thousand in May and 850 thousand in June – higher than the economists’ estimate of 706 thousand.

  • unemployment rate – the number of weekly initial jobless claims has also declined steadily, exceeding market expectations.

The graphs of the US Department of Labor below clearly show the dynamics of the decrease in the number of applications for benefits (the first is statistics from the beginning of 2020, the second – from the beginning of 2021).

2. The absence of additional unemployment benefits will stimulate Americans to go to work.

The $ 300 per week supplemental unemployment benefit expires in September. In addition, fifteen US states began cutting benefits in June, and jobless claims data show the move is working.

Unemployment insurance claims fell the most since early May last week and hit a new pandemic low.

3. Fed Chairman Jerome Powell said at a June 22 congressional hearing that the US expects “a really strong rate of new jobs” starting in July as Thanks to mass vaccinations, fears of the coronavirus pandemic disappear and schools reopen

According to the latest forecasts by the Federal Open Market Committee, the unemployment rate will fall to 3.8% by the end of next year, which is comparable to the “pre-pandemic” low of 3.5%.

4. Rapid wage growth in the United States

The Congressional Budget Office also said last week that the labor market should return to pre-crisis wages by mid-2022.

Business executives in various industries in the United States have spoken out about the shortage of employees amid the recovery of the tourism, restaurant industry and the increase in the pace of growth in others. Many took a step to increase hourly wages in order to attract workers. The imbalance between the supply of workers and the demand from the business side could lead to the fact that wages in the United States will grow at the fastest pace in decades.

According to Insider analysts, if the June pace of adding jobs continues, this will lead to the fact that by February 2022, the total number of jobs will return to the level before the start of the pandemic. Below is a graph of the forecast for US job growth.

Improvements in the labor market will benefit the entire United States economy, and improved performance is reflected favorably in the stock market by rising stocks.

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