Economy has recovered lost jobs, but there’s more to be done

Good news, readers! Today is the day we can finally retire the chart once known as the Scariest Jobs Chart You’ll See Today. That’s because the U.S. economy has recovered all the jobs that were lost at the beginning of the pandemic, according to the Bureau of Labor Statistics report released Friday.

Employment plummeted by unprecedented numbers in the spring of 2020. Predictions were dire about how long it might take to fill in the jobs hole — particularly after the long, drawn-out recovery that followed the Great Recession. But the job market has bounced back remarkably quickly in the past two years.

The unemployment rate, which is based on a different survey, has also returned to its pre-pandemic low of 3.5%.

To be clear: The jobs lost in early 2020 are not precisely the same ones that have been added since then. Overall employment is back where it was, but there have been winners and losers among industries. To put it another way: There’s been a Great Reallocation of talent.

Many people quit their jobs, or were laid off, and many of them have since gotten jobs in very different sectors.

Some industries have expanded massively. Those include construction, information (data processing, publishing, motion pictures, etc.), transportation and warehousing, and professional and business services.

But some industries remain a shell of their pre-pandemic selves. For example, local governments have 555,000 fewer filled jobs, a decrease of 3.8%, with the losses divided between education and noneducation jobs.

Leisure and hospitality (a category that includes restaurants and hotels) is still down by 1.2 million jobs on net, or 7.1%. How and when this sector will recover to its former size — assuming that’s even in the cards — is unclear. We might continue to see major restructuring in the years ahead, and the pre-pandemic, low-wage, labor-intensive business model many restaurants and hotels relied on may have to adapt.

It’s obviously great for workers that there are as many jobs on net today as there were before COVID-19 hit. And the fact that we added 528,000 positions in July alone, which is well more than forecast and faster than any of the prior four months, should allay fears that we’re already in recession.

Less than ideal: We really should have more jobs today than what existed pre-pandemic, as the working-age population has grown. Also, it looks likely that wage growth — at 5.2% year over year — was again outpaced by inflation in July. (We’ll know for sure next week, when the consumer price index data is released.) And unless inflation suddenly tempers, the Federal Reserve is likely to keep ratcheting up interest rates.

This means a recession might still loom in the coming months or year.

Additionally, the reasons that the unemployment rate dropped to 3.5% in July were not entirely good: It’s partly because the labor force participation rate declined slightly, and people have to be actively participating in the labor force (i.e., working or looking for work) to get factored into the standard calculation of unemployment. A strong economy should be drawing more people into the labor market, not fewer.

Bottom line: There’s more work ahead.