Visible Signs of U.S. Economic Recovery Emerge
Employment growth jumped in February, with 379,000 jobs added, a sign of a recovery emerging.
Job gains in February showed a significant improvement from prior months according to the latest report by the Bureau of Labor Statistics. The 379,000 jobs added in February is a sign of progress after weaker growth in previous months. The early momentum in recapturing lost jobs and the advancing COVID-19 vaccine availability and distribution are favorable indicators of the hiring wave LaborIQ® by ThinkWhy expects later this year.
Leisure and hospitality jobs posted a major increase after significant declines the previous two months. The industry gained 355,000 jobs after losing 523,000 jobs combined in December and January. Loosening restrictions in states across the country should propel hiring in the industry as we head into spring.
Optimism that a stronger recovery is around the corner is being fueled, at least in part, by what could be the beginning of the end of the pandemic. At a minimum, there appears to be light at the end of the tunnel. There is much still unknown about how the virus will continue to impact our lives and the economy in which we operate, but there are multiple signs indicating that we’re moving toward suppressing the virus.
Over the last week, the number of COVID-19 cases in the U.S. had dropped more than 70% from the peak, with many states showing even more significant declines. The pace of vaccine distribution has increased significantly from the beginning of 2021, reaching a peak of more than 1.6 million doses administered per day. The pace was disrupted temporarily by Winter Storm Uri, but the latest proclamation from the White House is that all adults will have access to one of the three approved vaccines by the end of May.
Given the suppressed virus counts, aggressive rollout of the vaccine and warmer weather ahead, improvements in the labor market could start to happen faster than originally expected. This is especially true in locations already lifting restrictions, which could give a faster boost to some of the hardest-hit industries.
The Talent Demand
While questions remain as to how fast our society will be comfortable returning to normal behaviors, or whether another spike in virus counts is on the horizon, many restaurants and entertainment venues should see a near-term ramp-up in demand where restrictions have been eased. Texas and Mississippi are the latest to join Iowa, Missouri and Florida in lifting restrictions. Expect to see a boost to leisure and hospitality jobs in these states over the coming months.
While the unemployment rate declined to 6.2% in February, the rate varies dramatically across occupations. Computer and Mathematical (2.4%), Community and Social Service (3.0%), Legal (3.3%), and Healthcare Practitioners and Technical occupations (1.6%) remain in extreme demand. The role of talent acquisition professionals remains vital and challenging as the supply of talent in those fields is very tight, and candidates are more hesitant to switch jobs during uncertain times.
At the other end of the spectrum, service roles in Food Preparation and Serving Related (13.3%) and Personal Care and Service (11.8%) continue to have elevated unemployment rates due to social distancing restrictions. Building and Grounds Cleaning and Maintenance occupations (11.4%) are, in part, impacted by fewer people traveling or going into the office. For states easing restrictions, unemployment rates in these categories could drop faster, meaning increased hiring demands for talent acquisition professionals. As a note, unemployment rates by occupation are not seasonally adjusted.
The Outlook | Why It Matters
With virus counts on a steady decline since the beginning of the year and increasing consumer demand pushing job gains in the right direction, LaborIQ® by ThinkWhy projects a significant acceleration of job growth in the second half of 2021. The first half of the year will be marked by the rollout of the vaccine and, if projections hold, dwindling virus counts will give way to economic expansion in the second half of the year. For business planning, knowing which locations and industries will accelerate first will be key, especially for those with flexibility on where, and to whom, they sell their products.
A Year of Full Recovery by U.S. Metro
The pace of recovery varies across the nation. By definition, a full recovery means today’s employment level is higher than pre-pandemic levels, suggesting company revenues are thriving.
Employment recovery in Financial Activities and Trade, Transportation and Utilities by year among the 20 largest U.S. metropolitan areas.
Financial Activities will be one of the first industries to recover; in fact, it already has in some places like Austin, Texas. While this industry is on the front end of the recovery for practically all major cities across the U.S., the blue dots represent areas where it is projected to take until at least 2022 to recover all jobs.
In Trade, Transportation and Utilities industry, the recovery timelines are varied based on local market conditions. A smaller number of leading markets recover earlier in the outlook, including:
These areas will lead recovery across multiple types of industries, suggesting stronger local economies in the near term. Consumer spending and hiring velocity could become more challenging because local talent supplies will start to deplete sooner.
Industry Movement & Recovery
2022 | Industries expected to return to pre-pandemic employment levels:
- Construction – Construction spending increased 1.7% in January from the month prior, according to data released March 1 by the Census Bureau. This estimate is higher than expected as the growth seen in the fourth quarter of 2020 continued into 2021. Private Residential Construction grew 2.5% from December’s estimate. The force behind this growth is most certainly the high demand for single-family homes. Low mortgage rates have strengthened the housing market, requiring new and faster development. The high volume is leading to material delays and overall higher costs - including rising lumber prices - contributing to higher spending. LaborIQ® expects Construction to lead the recovery as it currently needs more workers to meet demand.
- Financial Activities – This industry can be grouped into Finance and Insurance firms and Real Estate and Rental and Leasing Services. The recession has prompted two separate results. The former has recovered all jobs initially lost and has expanded slightly, while the latter is still down 5.5%.
Real estate credit firms grew 16.5% on an annual basis in January; they include mortgage companies and home equity lending. The pandemic has prompted a housing boom that led to a record $3.69 trillion in mortgage originations in 2020, according to The Wall Street Journal. In 2021, originations are expected to fall based on forecasts by FreddieMac and the Mortgage Bankers Association but will remain above normal totals. Conversely, rental and leasing demand will require a certain level of business operation resumption to drive expansion, especially for commercial real estate. Overall, the Financial Activities industry continues to show resilience to the economic downturn.
- Healthcare – According to CDC data released on March 4, 2021, more than 82.6 million vaccinations have been administered. Further, the two doses of the Pfizer and Moderna shots required for full vaccination have been administered to more than 27 million individuals. That takes provider coordination and staff levels to deliver. With news of Johnson & Johnson’s vaccination approval and the expectation that more doses will be delivered, will likely prompt providers to increase staff or, at a minimum, maintain current levels. Further, if virus cases continue to decline and as vaccinations increase, people may feel more confident to schedule that dental appointment or annual physical, prompting office operations to expand.
- Professional and Business Services – Businesses in this industry often include high-skilled occupations that have maintained relatively low unemployment rates. Professional and Related Occupations, for example, posted an unemployment rate of 3.1% in February. Within this group are Computer and Mathematics Occupations or technical-oriented jobs, which had an unemployment rate of 2.4% in February. Professional and Business Services is expected to be the strongest-performing sector by the end of 2022, based on forecasts by LaborIQ.
2023 | Industries expected to return to pre-pandemic employment levels:
- Manufacturing - The ISM manufacturing index, which measures order activity at U.S. factories, jumped to 60.8% in February. Readings above 50% imply the manufacturing sector is expanding; this is an increase from 58.7% in January. Eleven of the 18 manufacturing industries reported employment growth in February. The industry added 21,000 jobs in February according to the BLS; although, not without challenges. Supply chain and labor shortages are impacting material availability and driving up costs. Recent weather interruptions, particularly in Texas, have exacerbated bottlenecks in the supply chain. The manufacturing industry remains -4.1% down from pre-pandemic employment levels, for a total of 524,000 jobs lost.
- Trade, Transportation and Utilities - This industry is interconnected and exposed to multiple economic implications of the recession and pandemic. Material shortages can challenge resource allocation and increase costs that businesses may try to alter by increasing productivity. Labor shortages, influenced by health concerns and fiscal stimulus policy, make this difficult. The high demand for goods in the current economic climate has Warehousing and Storage, along with Couriers and Messengers, up 147,500 jobs from pre-pandemic levels, or 16.7%. Airline transportation remains down 15%. Recent weather occurrences have cost businesses time and money, extending lead times and instigating an immediate need for staff in order to boost productivity.
2024 | Industries expected to return to pre-pandemic employment levels:
- Government – The new stimulus package (currently in the Senate) has allocated $350 billion in federal aid to state and local governments. In 2020, tax revenues for local and state government dropped 16% from the same point in 2019, according to the Census Bureau. Despite the aid and improving tax revenue from business activity, many states expect to face budget deficits, and as a result of compounding challenges from the pandemic, will likely result in thinner payrolls and services.
- Information – – A revenue stream in this industry evaporated as social distancing closed production sets. In 2020, box office revenues fell 8 1.6% from the year prior, according to IMDbPro. In 2021, muted revenue has persisted and will likely continue until studios can return to fully staffed sets and production resumes.
- Mining and Logging – Industry experts have predicted that pre-pandemic oil demand will return by mid-year, pushing the price per barrel upward, favoring oil companies that have recently reported record revenue losses and job cuts. Oil prices have rebounded since plummeting at the beginning of the pandemic. Improving public health and economic conditions are will inevitably increase demand. Baker Hughes, a provider of weekly survey counts of rigs actively exploring or drilling for oil or natural gas, reported that the number increased throughout February, but was still off nearly 400 from the same week last year. The debate on climate policy will heat up in Washington, D.C., and the future of clean energy jobs will continue to be a hot topic within the industry.
2025 | Industries expected to return to pre-pandemic employment levels:
- Leisure and Hospitality – A demand surge for services in this sector appears to be heating up, based on recent data from the Bureau of Economic Analysis and the Federal Reserve. Consumers have the cash, largely because of government stimulus but also due to high-earning households unable to spend on items that would typically absorb disposable income, such as travel and dining out. The personal savings rate was 20.5% in January, according to the Commerce Department. In the year prior to the pandemic, the savings rate averaged 7.5%. Another round of stimulus will add to the stockpile. This does not mean an immediate return to normal operations, but it does indicate that consumers are able and want to venture out after a year-long hiatus. More real-time indicators, including Open Table reservation data, also point toward increasing demand despite lingering virus cases.
There should be a noticeable increase in demand in locations where restrictions are being laxed first. Daily traveler throughput at the nation’s airports was down 60% on average in January, compared to the same period in 2020. Hotel occupancy hovered at 48% for the week ending Feb. 20, according to Hotel News Resource. New data gives hope for consumers’ ability to drive a recovery in the months to come, but, currently, the overall Leisure and Hospitality industry remains down almost 3.4 million jobs since its economic peak a year ago.
LaborIQ by ThinkWhy reports, forecasts and advises on employment conditions and the impact to jobs, industries and businesses across all U.S. cities.