The pandemic’s labor market myths

Remember the “she session”? What about the early retirement wave, or America’s army of silent retirees?

For economists and other forecasters, the pandemic and the post-pandemic economy have been a lesson in humility. Time and again, predictions of how the labor market has been permanently changed have proven to be temporary or even illusory.

Women lost their jobs early in the pandemic, but have returned in record numbers, making the female session a short-lived phenomenon. Retirements surged along with coronavirus deaths, but many older workers have returned to the workforce. Even the person credited with provoking a national conversation by posting a TikTok video about doing the bare minimum at your job has suggested that “quietly quitting”[ads1]; might not be the way of the future — he’s all about quitting loudly these days.

That doesn’t mean nothing has changed. In a historically strong labor market with very low unemployment, workers have much more power than usual, so they are winning better wages and new benefits. And a shift toward working from home for many white-collar jobs is still reshaping the economy in subtle but important ways.

But the big takeaway from the pandemic is simple: The US labor market was not permanently damaged by the blow it dealt. That reflects the aftermath of the 2008 recession, when economists were equally skeptical of the labor market’s ability to bounce back — and similarly proved wrong when the economy strengthened.

“The profession has not fully digested the lessons of the recovery from the Great Recession,” said Adam Ozimek, chief economist at the Economic Innovation Group, a research organization in Washington. One of those lessons, he said, “Don’t bet against the American worker.”

Here is an overview of the labor market stories that rose and fell during the pandemic.

Women lost their jobs heavily early in the pandemic, and people were worried that they would be permanently disadvantaged in the labor market – but that has not proven to be the case.

In the wake of the pandemic, employment has actually rebounded faster among women than men — so much so that, as of June, the employment rate for women in their prime working years, usually defined as 25 to 54, was the highest on record. (Employment among prime-age men is back to where it was before the pandemic, but remains shy of a record.)

Another frequent narrative early in the pandemic: It would lead to a wave of early retirement.

Historically, when people lose their jobs or leave them late in their working lives, they tend not to return to work—actually retire, whether they call it that or not. So when millions of Americans in their 50s and 60s left the workforce early in the pandemic, many economists were skeptical that they would ever return.

But the early retirement wave never really materialized. Americans between the ages of 55 and 64 returned to work as quickly as their younger peers and are now employed at a faster rate than before the pandemic. Some may have been forced back into work by inflation; others had always planned to return and did so as soon as it felt safe.

The pension story was not entirely wrong. Americans who have passed traditional retirement age – 65 and older – still haven’t returned to work in large numbers. That is helping to reduce the size of the overall labor force, especially because the number of Americans in their 60s and 70s is growing rapidly as more baby boomers reach retirement.

Technology layoffs at major companies have led to discussions of a low-stakes recession, or one that primarily affects wealthy technology and information workers. While these layoffs have undoubtedly been painful for those who experienced them, they have not featured prominently in aggregate employment data.

For now, it appears that the nation’s highly skilled employees are being shuffled into new and different jobs rather quickly. Unemployment is still very low for both information and professional and business services – characteristic of the white-collar industry that includes much of the technology sector. And layoffs in technology have decreased recently.

For a moment, it looked as if young and middle-aged men—those between 25 and 44—were not returning to the labor market as other demographics had been. In recent months, however, they have finally regained their pre-pandemic employment rate.

This recovery came much later than for some other groups: For example, 35- to 44-year-old men have yet to consistently hold onto employment rates matching the 2019 average, while women in that age group last year eclipsed pre-pandemic employment rates. But the recent progress suggests that while men take longer to recover, they make slow gains.

All of these narratives share a common thread: While some cautioned against jumping to conclusions, many labor market experts were skeptical that the labor market would fully recover from the shock of the pandemic, at least in the short term. Instead, the rise has been fast and broad, defying gloomy narratives.

This is not the first time economists have made this mistake. It is not even the first time this century. The crippling recession that ended in 2009 pushed millions of Americans out of the workforce, and many economists embraced so-called structural explanations for why they were slow to return. Perhaps workers’ skills or professional networks had eroded during their long periods of unemployment. Perhaps they were addicted to opioids, on disability benefits, or trapped in parts of the country with few job opportunities.

In the end, however, a much simpler explanation emerged. People were slow to go back to work because there weren’t enough jobs for them. As the economy healed and opportunities improved, employment rebounded among virtually every demographic.

The recovery from the pandemic recession has unfolded much more quickly than the one that took place after the 2008 downturn, which was exacerbated by a global financial explosion and a housing market collapse that left lasting scars. But the basic lesson is the same. When there are many jobs, most people will go to work.

“People want to adapt and people want to work: These things are generally true,” said Julia Coronado, the founder of MacroPolicy Perspectives, a research firm. She noted that the pool of available workers is expanding further with time and amid solid immigration. “People are resilient. They figure things out.”

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