US labor market made rapid progress in 2021, but employment rates remain depressed
The US economy added 199,000 jobs in December, a tepid end to a year of otherwise rapid employment growth as the economy recovered from the shock of COVID-19. Between December 2020 and 2021, jobs grew by 4.5 percent, a faster pace than expected and the seventh fastest year of job growth since the aftermath of World War II. However, there is room for improvement as the economy remains 4.4 million jobs and 2.7 million workers short of pre-pandemic projections.
Employment rates for prime-age workers fell during the pandemic and remain below their pre-pandemic levels. The December 2021 employment rate for workers aged 25-54 was 1.5 percentage point below the February 2020 rate. Men have suffered a slightly larger percentage point decline in their employment rates than women, but they were also employed at higher rates than women before the pandemic. Rates have fallen for every age group except 16- to 24-year-olds.
More time should help with the restoration of millions of jobs, but it remains uncertain whether all lost jobs will be replaced and how long the process will take. The effects of the Omicron COVID-19 variant on labor supply and demand, US fiscal policy, and the Federal Reserve's monetary policy stance will all influence how quickly the economy returns to, or can surpass, its pre-pandemic footing.
This PIIE Chart is based on Jason Furman and Wilson Powell III's blog, The US labor market recovered rapidly in 2021 but still fell short even before Omicron wave.