In a mid-March interview on ABC's "This Week" with George Stephanopoulos, Treasury Secretary Janet Yellen expressed optimism about the United States' economic outlook, based on passage of the American Rescue Plan. "I'm hopeful that if we defeat the pandemic, that we can have the economy back near full employment next year," she said.
Economists define the term "full unemployment" differently, but generally speaking, full employment means that as many people who want a job as possible have one without there being so much competition that employers have to hike up wages and risk causing inflation. Even an America enjoying what counts as full employment, then, would still have some level of unemployment.
Economists also differ on what that target unemployment figure would be, but they usually cite a share of between 2% and 4%.
Regardless of the term's exact definition, getting back to full employment by 2022 "seems very optimistic," says David Blanchflower, a professor of economics at Dartmouth College. Achieving that would mean the U.S. would have to not only recover its losses but also "get to the point of an even tighter labor market than we ever had."
Here are three reasons why economists think a return to full employment by 2022 is unlikely, and when they think full employment might actually be possible.
Between March 2020 and August 2020, 163,735 businesses on Yelp closed across the U.S., according to the review site's September 2020 Local Economic Impact Report. And "it's easier to close firms than it is to open new ones," says Blanchflower.
Take a gelato store near Dartmouth's campus, for example, whose business model was "from March through December, every night, the kids in the college would eat their dinner and walk out and line up outside the gelato shop and sit and eat gelatos." After students were sent home as a result of the pandemic, that business's owner told Blanchflower her model was "dead." Even if she reopened, the customer base she depended on likely won't be around for a while.
The tens of thousands of businesses that closed as a result of the pandemic would have taken some time to reopen regardless, but with the pandemic also changing how people behave, new businesses will have to rethink models altogether, delaying how long it takes for the economy to make up for those losses.
One population of potential workers that doesn't get counted in the current unemployment rate is those who have left the labor force altogether, and women make up a significant portion of them. There were 6 million fewer women working in October 2020 than there were in February 2020, and more than 2.6 million who'd left the labor force altogether, according to a Grow analysis of Bureau of Labor Statistics data. This, in part, is due to the fact that many mothers stopped working to take care of their children while schools and day cares shut down.
"That was one of the more tragic parts of Covid," says Samuel Rines, chief economist at investment advisory firm Avalon Advisors. "You had a very large and substantial portion of the female labor force either become discouraged or outright leave."
The newly expanded Child Tax Credit "actually allows for women who have left the workforce specifically due to family obligations to rejoin," says Rines. Families can opt to receive up to half of the credit as cash payments this year, which could help them better navigate child-care bills.
"There's plausible scenarios where you could have very good jobs numbers," says Rines, as more opportunities for people to work would open up, "but an increase in unemployment rate." That would reflect the number of women who would decide to rejoin the labor force and begin job hunting.
This, too, could delay the point when the U.S. gets to full employment.
"Some will need to have education in order to switch careers," says Rines, while others might simply need time to figure out their new direction. Whatever the case, workers looking for new careers may take some time to return to the labor force, too, delaying the time it takes the U.S. to reach full employment.
Rines says there are between 3 and 9 million such workers altogether.
"I do think we can get back to that 3.5% to 4% unemployment," says Rines. But likely it won't be next year: "I think you're talking late 2023, early 2024."
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