Myths about the pandemic labor market

Remember “she-cesi”? What about the wave of early retirement or America’s army of silent quitters?

For economists and other forecasters, the pandemic and post-pandemic economy has been a lesson in humility. Predictions of the ways in which the labor market has permanently changed have time and again proven temporary or even illusory.

Women lost their jobs at the start of the pandemic but have returned in record numbers, so the she-cession is a short-term phenomenon. Retirements have risen along with coronavirus deaths, but many older workers have returned to the workforce. Even the man credited with sparking a national conversation by posting a TikTok video about doing the bare minimum at work has hinted that ‘quiet quitting’ may not be the way of the future – end out loud these days.

That doesn’t mean nothing has changed. In a historically strong labor market with very low unemployment, workers have far more power than usual, earning better wages and new benefits. And the shift toward working from home for many white-collar workers continues to reshape the economy in subtle but important ways.

But the main takeaway from the pandemic recovery is simple: America’s labor market has not been permanently damaged by the scar it has suffered. It reflects the aftermath of the 2008 recession, when economists were similarly skeptical of the labor market’s ability to bounce back — and similarly proved wrong once the economy strengthened.

“The profession has not fully digested the lessons of the recovery from the Great Recession,” said Adam Ozimek, chief economist at the Economic Innovation Group, a research organization in Washington. One of those lessons, he said, “Don’t bet against the American worker.”

Here’s a roundup of labor market stories that have risen and fallen during the pandemic recovery.

Women soon lost their jobs during the pandemic, and people feared they would be permanently abandoned worse on the labor market – but this did not prove to be the case.

In the wake of the pandemic, employment has actually increased faster for women than for men — so much so that as of June, the employment rate for women in their prime working years, commonly defined as 25 to 54, was the highest on record. (Prime-age male employment is back to where it was before the pandemic, but still short of records.)

Another common story early in the pandemic: It would cause a wave of early retirements.

Historically, when people lose their jobs or leave them late in their working lives, they tend not to return to work – they essentially retire, whether they label it that way or not. So when millions of Americans in their 50s and 60s left the workforce at the start of the pandemic, many economists were skeptical they would ever return.

But the wave of early retirement she never really materialized. Americans aged 55 to 64 returned to work as quickly as their younger peers and are now employed at higher rates than before the pandemic. Some may have been forced back to work by inflation; others always planned to return and did so as soon as they felt safe.

The retirement narrative wasn’t all bad. Americans who have passed the traditional retirement age – 65 and older – they still haven’t returned to work in large numbers. This is helping to shrink the size of the overall labor force, especially as the number of Americans in their 60s and 70s is growing rapidly as more baby boomers enter retirement.

Dismissal of technologies in large companies caused discussion among others white collar recessionor one that primarily relates to workers in the technology and information sector. While these layoffs were undoubtedly painful for those who experienced them, they did not show much in the overall employment figures.

Currently, highly skilled workers in the country seem to be moving very quickly to new and different jobs. Unemployment it remains very low for both information and professional and business services – the typical white-collar jobs that comprise much of the technology sector. And tech layoffs have slowed recently.

For a while, it looked like young and middle-aged men — between the ages of 25 and 44 — weren’t returning to the workforce the way other demographics were. However, over the past few months, they have finally recovered to their pre-pandemic employment rates.

This recovery came much later than some other groups: e.g. Men aged 35 to 44 must still consistently maintain an employment rate that matches their 2019 average, while last year women age group blacked out their employment rate before the pandemic. However, recent progress suggests that while men take longer to recover, they are slow to make gains.

All of these stories share a common thread: While some cautioned against jumping to conclusions, many labor market experts were skeptical that the labor market would fully recover from the shock of the pandemic, at least in the short term. Instead, the rebound was swift and wide, defying the grim stories.

This is not the first time economists have made this mistake. It’s not even the first time in this century. The crippling recession that ended in 2009 pushed millions of Americans out of the workforce, and many economists have embraced so-called structural explanations for why they have been slow to return. Perhaps workers’ skills or professional networks have eroded during long periods of unemployment. Maybe they were addicted to opioids or on disability benefits or trapped in parts of the country with few job opportunities.

In the end, however, a much simpler explanation turned out to be correct. People were slowly returning to work because there were not enough jobs for them. As the economy has recovered and opportunities have improved, employment has rebounded for nearly all demographics.

The rebound from the pandemic recession has happened much more quickly than the one that followed the 2008 downturn, which was exacerbated by the global financial implosion and the housing market collapse, which left long-lasting scars. But the basic lesson is the same. When there are enough jobs, most people will go to work.

“People want to adapt and people want to work: These things are generally true,” said Julia Coronado, founder of research firm MacroPolicy Perspectives. She noted that the pool of available workers continues to expand over time and amid solid immigration. “People are resilient. They figure things out.”

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