Analysis by Betsey Stevenson and Benny Docter
The Bureau of Labor Statistics announced Oct. 7 that an additional 263,000 jobs were added to the economy in September. The labor market has fully recovered the total number of jobs lost during the pandemic (as of August), however this recovery masks differences across sectors. The goods-producing sector has continued to outperform its pre-pandemic growth, while many parts of the service sector have yet to recover.
“The job growth in September came largely from industries that drove pre-pandemic job growth, but have struggled in the wake of the pandemic,” said Betsey Stevenson, economist at the University of Michigan’s Gerald R. Ford School of Public Policy.
U-M’s Rapid Insights Jobs Report analysis takes a closer look at what the recent employment revealed about the state of the labor market.
1. Employment growth remains strong but employment is well below the pre-pandemic trend
Job growth averaged 372,000 jobs a month over the past three months. While this is faster than any three month period in the 21st century prior to the pandemic, the growth continues to reflect recovery from the damage done to the labor market by the pandemic. The total number of jobs in the United States is now above the pre-pandemic peak of 152.5 million. However, the total number of jobs remains well below the pre-pandemic trend. If job growth had continued at its 2015 to 2019 pace, then there would be 5 million more jobs today. Instead, there were only 514 thousand jobs in the economy in September compared to February 2020. As the pace of job growth is now slowing, the gap between what might have happened without the pandemic if the pre-pandemic trend had continued and actual total employment is likely to narrow much more slowly.
2. Public sector employment has not recovered
The BLS reported a decline of 25,000 government sector jobs in September. This decline is part of an overall stagnation in public sector employment, particularly for men. Public sector employment was at 98% and 97% of the pre-pandemic level of government jobs for women and men, respectively. Women lost more government jobs than men, but have recovered government jobs at a faster rate. However, overall employment growth has stalled in the public sector over the past year, while the private sector has continued to enjoy strong job growth.
3. Education and health services and leisure and hospitality used to be engines of job growth
The job growth in September came largely from industries that drove pre-pandemic job growth, but have struggled in the wake of the pandemic.
One-third of the monthly job growth in September came from education and health services. The sector added 90,000 jobs in September. While this expansion marked a full recovery of the sector to pre-pandemic levels, prior to the pandemic more than half a million jobs were added per year (1.6 million in the three years prior to the pandemic). The pandemic halted the expansion of this sector, which has been the most reliable source of job growth in the United States for decades, expanding steadily prior to the pandemic including through the 2008 recession. This sector employs roughly 1 in 4 women in the labor force and served as the engine for women’s employment growth in the 21st century. The loss of a growing education and health sector has made employment recovery for women particularly challenging.
Leisure and hospitality contributed another one-third of September’s job growth, adding 83,000 jobs. This sector remains over a million jobs below its pre-pandemic level. In contrast, in the three years prior to the pandemic, the sector had been a driver of employment growth expanding by over a million jobs. The total number of jobs in the sector therefore remains at 2016 levels.
In contrast, professional and business services have continued to expand even more rapidly than prior to the pandemic, as has employment in information and transportation and warehousing. Retail trade, which was losing jobs in the three years prior to the pandemic, has recovered not only the jobs lost during the pandemic, but also from the jobs lost in the three years prior to the pandemic.
These shifts are impacting the types of jobs available and are therefore likely shaping who is getting jobs and which parts of the labor market are experiencing challenges in finding workers.
4. Labor force participation declined this month, but has largely recovered for prime-age workers
Labor force participation ticked down in September after rising in August, but the overall trend remains that labor force participation among prime-age women has fully recovered while labor force participation rates among younger and older workers remains below pre-pandemic levels. While a similar pattern is seen among men, it is much more muted. The labor force participation rate of prime-age men has not fully recovered, particularly among those who are 35 to 44 years old. While the labor force participation rate of older men has recovered much less than that of men at other ages, its overall decline was lower.
The relative strength of women’s employment as measured in the household survey (which interviews people about their labor market behavior) is not matched by the numbers in the employer survey (which surveys employers about the number of people on payroll). In the employer survey, men have recovered jobs faster than women have. The number of jobs held by women rose by 155,000 in September, bringing the total number of jobs held by women back to its pre-pandemic level. Among men, that milestone of recovery to the pre-pandemic level of jobs occurred in July. Of the 514,000 jobs gained since the pandemic began, 429,000 have been jobs held by men. Thus, the household measure shows a stronger recovery for women’s employment, while the employer measure shows a stronger recovery for men’s employment.
The explanation is likely a measurement issue. The gender disconnect seen between the household and employer surveys is part of a broader phenomena. Since the pandemic began, the survey of employers has consistently shown fewer jobs lost in the pandemic and a stronger recovery in job growth compared to the household survey (adjusted to be a comparable measure to the employer survey). This unusual gap suggests it is possible the labor market recovery has been weaker throughout the recovery than reported by the total number of jobs added. Alternatively, it may point to challenges in surveying households in the post-pandemic period. In all likelihood, the “truth” ultimately lies somewhere between the two measures.
About this project
The University of Michigan’s monthly Rapid Insights labor market analysis is conducted by Betsey Stevenson, economist at the Gerald R. Ford School of Public Policy; and Benny Docter, senior data and policy analyst at Poverty Solutions. The project is funded by the Robin Hood Foundation, with support from the Ford School and Poverty Solutions.