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How Soon Will the Labor Market Recover?
March 8, 2021
Strong job numbers in February and the promise of a strong economic rebound, fueled by stimulus and the lifting of covid restrictions, ahead has some economists upping their expectations for the labor market. A hiring boom could bring unemployment nearly to its pre-pandemic level, according to a recent forecast from Goldman Sachs.
The firm projects an unemployment rate of 4.1% by year’s end, with the potential that it could fall even lower. Reopening businesses, fiscal stimulus, and pent-up savings could drive strong demand, and economists from Goldman Sachs note that unemployment could fall as low as the mid-3s this year.
In February 2020, just before the pandemic hit, the unemployment rate was at 3.5%, the lowest level in decades. The rate saw its pandemic peak in April at 14.8% and has since slowly fallen to 6.2% as of last month.
While returning to full employment would undoubtedly be positive, there is some concern that it would cause the Federal Reserve to reconsider its current commitment to asset purchases and near-zero rates, potentially upending the economy as it is still getting back on its feet.
