The COVID-19 pandemic has thrown the labor market into crisis.
In the spring of 2020, as the virus was declared a global health emergency, work essentially stopped for many people, the number of unemployed increased to 23 million and the unemployment rate reached 14.7%. Many people subsequently turned to remote work, and the workforce recovered, but only remained immersed in an incredibly tight labor market for three years.
Today, the unemployment rate is 3.9% after increasing in October from the previous month’s level of 3.8%, and the labor market is considered very strong by most measures. The balance between labor supply and demand from employers has returned to normal levels, although shortages remain in some industries and certain demographic groups.
“It looks like the labor market is getting a little more balanced,” says Gene Tannuzzo, global head of fixed income at Columbia Threadneedle Investments.
That’s the big picture, but a look under the hood shows how the labor market has changed — mostly for the better — in the more than three years since the great disruption caused by the pandemic.
On top of that, the labor market has defied most predictions and shown a level of flexibility and adaptability that has surprised many observers.
“I’m not surprised at how it’s bounced back,” says Bill Armstrong, president of recruiting for Safeguard Global, an international workforce firm. “But I’m a little surprised by how flexible it is. “Some of the changes are here to stay.”
Chief among those changes are the prevalence of remote work, the use of technology in hiring, and greater flexibility to accommodate workers’ needs and desires.
Remote work is here to stay
Perhaps the signature change of the pandemic, the percentage of workers working fully remotely is estimated by the government at around 13%. However, private surveys suggest the number is much higher, closer to one-third, while the number of those working a hybrid schedule with part of the work week at home has been found to be above 50%. Before the pandemic, 17% of employees were remote five days a week.
While many companies have enacted return-to-work policies, a large percentage of workers surveyed say they want the option to work remotely to some degree. Even as people return to offices and other work spaces, human resources firms say they expect about 20% of the workforce will still be fully remote in the coming years.
Technology workers dominate the remote work environment, followed by sales, marketing, and finance jobs. At the other end of the spectrum are jobs that require face-to-face presence, primarily in service industries such as hospitality and health care. Young workers ages 24 to 35 are more likely to report working remotely full-time.
There is a misconception about youth and their work ethic. Indeed, this year has seen the strongest improvement in teen employment, with the employment-to-population ratio for those aged 16-17 and 18-19 rising to 23.6% and 43.6% respectively. This is up from 20.1% and 42.4% in the first 10 months of 2019.
“We have seen a remarkable surge in teen employment,” says Guy Berger, former chief economist at LinkedIn. “The 16- to 17-year-old group has seen a larger increase in their employment/population ratio than any other age group.” !”
Economists aren’t exactly sure why more teens are finding employment, but a possible explanation is that the post-pandemic period has seen more jobs available in sectors such as hospitality, warehousing and transportation, and in industries where young workers are employed. are more common. Higher wages may also contribute to growth as many companies now offer higher hourly wages.
A college degree is not that important.
At online job firm Adzuna, there are a growing number of positions that require skills, not specifically a college degree, and many of them have high salaries. The company says there are more than 10,000 job vacancies offering salaries above $200,000 and they don’t require a four-year degree.
“Emerging technologies are growing rapidly, making degrees less valuable than practical experience and knowledge,” said James Neave, head of data science at Adzuna. “We are seeing that workplaces are making a shift to recognize skills in the same way they traditionally recognize degrees.”
Neave said there were about 6,000 job advertisements in the logistics and warehouse sector in September offering pay checks of about $200,000. And some of the largest employers are removing the requirement that applicants have a degree.
“Large American employers, including Walmart, General Motors and Google, are eliminating college degree requirements for some corporate jobs,” Neave said. “Additionally, Minnesota joins the growing list of states eliminating four-year degree requirements for most state government jobs.”
“As this year progresses, we expect businesses to continue to prioritize skills over degrees to fill open roles, including top-paying roles,” Neave said.
There is no doubt that women have fared poorly during the pandemic. Many people had to stay home, or cut back on work, to care for children whose schools were closed as well as perhaps caring for elderly relatives. Sectors where women have traditionally been employed at higher rates – such as health care, education and hospitality – have been hardest hit by the lockdown.
But that’s in the past. Today, the employment-to-population ratio for women stands at a record 75.3%. But there are interesting dynamics within the working female population.
“The largest increases in employment have been among women without a high school diploma,” says Berger. ‘Like teenagers, these women without diplomas have been beneficiaries of severe labor shortages in some industries.’
Berger says the second-best performing group is women with a bachelor’s degree or higher, while a middle group—those who graduated from high school and also have some college but do not have a four-year degree—has Overall the women’s group has performed less.
“It was really surprising to see the significant increase in participation among women with young children,” says Sarah House, senior economist and managing director of Wells Fargo’s corporate and investment banking group. Despite the barriers to child care, “these women are finding ways to contribute to the labor market.”
Men are doing better but still lack historical strength
For men, it’s a case of the glass half full or half empty. Men’s employment has recovered from the early days of the pandemic, with their employment-to-population level now at 85.9%. But that’s still down from the pre-pandemic rate of 86%. And if you go back to the 1970s, that ratio was 90% or better.
Much of this reflects the overall improvement in women’s participation in the workplace. But it’s also the changing nature of work and the economy, with a shift from manufacturing to technology and services, jobs that typically take place in an office or behind a desk. Growth in industries such as health care and leisure and hospitality, traditionally a stronghold of female workers, is also responsible for the shift.
Retired people are still retired
At the peak of the pandemic, the number of retired Americans who otherwise could have been in the workforce was nearly 3 million or more. It was “excess retirement” that was making the labor market exceptionally tight. These were often employees who were at prime earning levels with years of valuable experience.
Economists cite several reasons for the shortage of available, experienced workers. Understandably, COVID-19 proved to be a greater health threat to older workers, and many chose to retire or otherwise remain out of the workforce. Then, rising home prices and a strong stock market enabled some of these workers to stop working earlier than planned.
Some, but not all, of those who left the workforce have returned. But, according to data from the St. Louis Federal Reserve Bank, the shortfall is still nearly 2 million workers.
But, as with women’s return to the workforce, there are some interesting nuances within the over-55 group, notes Berger. The younger group has seen almost the same recovery as workers aged 25 to 54. But older retirees haven’t come back that much.
For the 10-month period this year, the employment-to-population ratio of people aged 55 to 59 increased to 71.9% from 70.9% in 2019. But for people 60-64, the proportion has increased from 55.9 to 56.6%. % four years ago.
Those aged 65-69 or 70-74 have not fared too well, with the employment-to-population ratio of the former actually falling to 32.4%, from 33.2% and 19% to 18.5% respectively.
For the younger group, Berger says, “the pandemic was just a temporary disruption in their careers. “For older people, there is a mix of factors: interrupted careers leading to early retirement, rising property prices, and perhaps a lingering COVID impact.”
While the labor market has demonstrated a strong cyclical recovery from its most disruptive hit yet, there are structural forces that could keep the balance between labor supply and demand strong in the years to come. These include an aging population, low birth rates, and political opposition to immigration. This means that some of the gains seen over the past three years may prove to be long-lasting.
“Demographic trends, fertility trends, attitudes on immigration, all of these point to you having a structurally tight labor market,” House says.
