MNI INTERVIEW: US Job Market Unlikely to Recover by 2024 - ADP

The U.S. job market's recent stumble signals a recovery may take longer than the three years projected by officials including the Congressional Budget Office, ADP chief economist Nela Richardson told MNI.

"Every time we get a lackluster report, that timeline just stretches out and more people move from temporary to permanent" job loss, she said. Employment rose by just 49,000 in January after a December drop of 227,000, and unemployment that almost doubled to 10 million during the pandemic now includes 3.5 million permanent layoffs.

"Eventually, economic growth is going to be handicapped by the fact that ten million people aren't working," she said. "Unless that number comes down, we can expect economic growth to feel the pain of the jobs market recovery."

The wider economy won't surpass pre-pandemic levels until the job market catches up because mass unemployment will undermine productivity gains, she said. "We can get back to zero, but we can't go further without a jobs recovery."

JOB MARKET LACKING SPARK

The CBO forecasts the labor market won't return to its pre-pandemic state before 2024 despite seeing a broader rebound in mid-2021. Federal Reserve officials estimate that the unemployment rate will fall back to 3.7% in 2023, close to the record lows seen before Covid-19. Richardson said the CBO's labor market estimate is likely a bit optimistic, and the U.S. isn't poised to reach pre-pandemic employment in the next three years.

"For now, the trajectory is well short of what the jobs market needs to get to pre-pandemic levels of employment by then," she said. "That's a long time just to get back to where we were pre-Covid-19. At the current rate, it'll take even longer."

Monthly job growth won't get back on track without a faster Covid vaccine rollout or customers returning to personal service businesses, Richardson said, likening the situation to a car with a weak battery.

"Once you rev up the battery, or you replace the battery, the car can drive just fine," she said. "But it takes a trigger to get that battery sparked up again once it's been sitting for a while, and you can think of the jobs market gains in the same way."

Richardson said while she isn't anticipating another month of negative growth in February, momentum isn't set to return to the more than 500,000 jobs per month pace needed for a 2024 recovery. "We're still in this kind of interim period waiting for that trigger," she said.

MORE SMALL BUSINESS AID

More federal small business funding could also "change the trajectory pretty quickly," she said. Businesses eligible for loans under the Paycheck Protection Program increased employment by 3% during the height of the jobs recovery in the summertime, ADP data shows.

"Additional stimulus directed to small businesses could have a similar effect" now, she said.

More PPP funding was included in the USD900 billion relief package passed in December, and President Joe Biden's proposed USD1.9 trillion stimulus would continue the program. Fed Chair Jerome Powell on Wednesday also urged a broad movement including business and government to pull down an unofficial job rate that's more like 10%, while also noting a recent loss of momentum in job gains.

"We're concerned about disappearing workers-- but you need companies to hire workers," she said.