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The labor market bounced back in October, as Delta variant cases decreased. The economy added 531,000 new positions, at the upper end of the range of estimates, and revisions to the two previous months added an additional 235,000 than previously reported. The October hiring, which was broad-based across most sectors, brings average monthly job gains to 582,000 in 2021, for a total of 5.8 million jobs this year.
A total of 18.2 million jobs have been added since April 2020, when the market bottomed. However, the financial fallout from the pandemic is not over: there are currently 4.2 million fewer jobs (and 4.7 million fewer people working) than there were in February 2020, before the pandemic hit with great force.
The October report made me think about two of my favorite characters from A.A. Milne’s Winne the Pooh: Tigger and Eeyore. I know that Pooh, the honey-loving namesake of the book, garners the limelight, but the wildly upbeat Tigger the tiger and the downcast donkey Eeyore exemplify the feelings that many economists have felt about the labor market over the past six months. (For fun, check out this academic paper that outlines the emotional disorders that each Pooh character represents. Spoiler: Eeyore is depressed, and Tigger has ADHD.)
Okay, so back to the labor market. As the economy opened in the spring, the optimistic Tigger was ready for his close-up: a massive 1 million new jobs were created in both June and in July. Then as the Delta variant escalated, hiring slowed down and Eeyore was ready to proclaim that the end of the recovery was nigh. Neither character tells the whole story of the labor market, because for every upbeat assessment, there are also lingering effects of the pandemic, just as you would expect.
For instance, the unemployment rate, which is calculated based on the number of people working or actively seeking employment, dropped two-tenths of a percent to a pandemic low of 4.6 percent. That sounds great, except when you factor in that the labor force increased by just 104,000, which is not enough to keep pace with population growth.
And labor force participation, which is the share of adults working or seeking work, has held at or below 61.7 percent since June 2020, that’s down from 63.4 percent in January 2020. In other words, the Great Resignation, and a jump in early retirements, persists. The smaller number of people working explains why there are labor shortages, which are in turn pushing up wages. Average hourly earnings are up 4.9 percent on a year-over-year basis, but those increases are necessary as Americans contend with higher prices.
As economist Joel Naroff put it: “This report is a clear, unambiguous reminder that you should not judge the economy on one month’s number.” One month it could be Tigger, another month it could be Eeyore, but over the course of many months, the hope is that all of the animals that dwell in the Hundred Acre Wood are able to enjoy that pot of honey, with you-know-who.