Business • Analysis
2021 shattered job market records, but it’s not as good as it looks
When placed in proper context, the massive job and wage gains of 2021 start to come back down to earth
By Andrew Van Dam
Reporter
Yesterday at 7:00 a.m. EST
While the labor market began 2021 in a deep hole, huge numbers of Americans found work amid the pandemic, with a record-breaking 6.4 million jobs added over the course of last year, eclipsing all expectations.
Rank-and-file workers’ hourly paychecks rose by $1.46 an hour, another record-breaking number. Gains were especially pronounced for those in lower-paying industries.
It was, by these measures and many others, the best year in labor-market history, ignited in part by aggressive stimulus spending that pushed consumer spending to stratospheric levels. But the numbers on their own can be downright misleading.
The 6.4 million jobs gained this year, while a record in absolute terms, represents only a 4.5 percent increase in the workforce. That’s smaller than the 5.0 percent growth seen in 1978, when a much smaller labor force added 4.3 million jobs. In fact, relative to the size of the workforce, it’s only the 11th best calendar year since record-keeping began in 1939.
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This year’s numbers are also distorted because the recovery isn’t complete. As a rule, the labor market has a much easier time regaining lost jobs than it does creating new ones. The economy lost 22.4 million jobs at the height of coronavirus lockdowns. When you account for the 12.3 million jobs regained in 2020 as businesses reopened, plus the 6.4 million added in 2021, the economy is still missing 3.6 million jobs (the numbers may not match perfectly due to rounding). And that would just bring it back to pre-recession levels.
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By Andrew Van Dam
Andrew Van Dam covers data and economics. He previously worked for the Wall Street Journal, the Boston Globe and the Idaho Press-Tribune. Twitter
https://twitter.com/andrewvandam
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