When the pandemic arrived last March, businesses nationally were forced to shut down or limit operations. Many employees were able to transition to remote work arrangements, but millions lost their jobs with no clear timeline for return. As we emerge from the pandemic in the US, the recovery of these jobs and a return to full employment is one of the most closely tracked trends — and it is sending mixed signals.

Market action over the last month has seen the S&P 500 bouncing sideways with weekly declines and recoveries that reflect investor uncertainty. In addition to employment trends, the combination of rising inflation concerns, Bitcoin’s extreme volatility, and the tragic violence in the Middle East are creating an atmosphere of instability in financial markets.

In economic news, the recovery reached a new milestone with weekly jobless claims hitting a new pandemic-era low this week. These headline numbers don’t tell the full story of a fraught employment landscape, with ‘help wanted’ signs outpacing job applications in recent weeks.

Roadblocks to Returning

There are currently more job openings in the US than before the pandemic triggered shutdowns last March, and yet businesses are still struggling to lure millions of unemployed Americans back to work. Some people have opted out of the labor market entirely, while others who are looking are having difficulty matching available positions to the constraints still felt by the labor force. Potential employees are concerned about inadequate wages, a lack of reliable childcare, and increased exposure to the virus.

Childcare is a major roadblock for millions of primary parents. Only 60% of the 200 largest US school districts were fully reopened the week of April 27, according to Georgetown University’s FutureEd think tank, and many child-care centers continue to operate at reduced capacity. The abatement of this roadblock will depend on the availability of summer camps, consistent childcare, and wider vaccination of 12–16 year-olds. Otherwise, we may not see relief for primary parents until schools resume in the fall.

The concern about contracting Covid-19 is also preventing people from returning to work, as chronicled in various personal stories.1 Many workers are deciding that the benefits of returning are outweighed by the risks. We cannot assume these obstacles will be resolved overnight, and investors are adjusting their expectations of the timeline for employment recovery.

Balancing Unemployment Benefits

Businesses are seeing demand resurge as the economy opens, mask mandates are loosened, and shoppers and even travelers emerge from their pandemic cocoons. They need to hire in order to meet that demand. One cited roadblock to filling open positions is that some potential employees are earning more from unemployment benefits than they would be working hourly positions.

Under relief bills passed by Congress, jobless benefits are providing an additional $300 a week on top of regular state benefits, which average $318 a week, according to the Labor Department. This combination results in the average unemployment recipient earning roughly the equivalent to working full time at $15 an hour. Those enhanced benefits are available until September. In total, the number of people receiving benefits from state and federal programs totaled 16 million as of May 1. For context, fewer than 2 million people were getting benefits before the pandemic began.2

As businesses compete for a smaller pool of workers, some are opting to raise wages to attract talent. Amazon is aiming to hire 75,000 new employees and is offering some of them $1,000 signing bonuses.3 McDonald’recently announced it is also raising wages for workers at the restaurants it owns.4 Costco is another company hoping that higher wages will attract more workers, as the company raised its minimum wage to $16 earlier this year.5

In a contrasting strategy, governors in 22 states have announced plans to end the enhanced unemployment benefits sooner than their scheduled expiration in September.6 This includes the additional $300 per week available to all jobless Americans. The hope is that it will incentivize workers to return as government benefits are reduced, but many of those workers aren’t able to return yet. Now, they will have to get by without the benefits that were keeping them afloat.

Sustainable Recovery

Both employers and employees are navigating an economic re-opening that has no playbook or historical analog. We believe that the recovery will continue, but the timeline will require patience on behalf of employers — and investors. One thing is clear, any sustainable recovery will need to include a robust employment recovery.

Employers are starting to offer more flexible schedules to accommodate childcare needs, and the rise of hybrid and remote work options also benefit many families caring for children or elderly parents. Incremental shifts towards workers’ rights will benefit broad economic stability after decades of a trend in the opposite direction. In the longer term, we believe a healthy labor market and fair wages will benefit everyone — employers, employees, and investors.

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[1] The Other Reason the Labor Force Is Shrunken: Fear of Covid-19 WSJ

[2] U.S. unemployment claims continue to set new pandemic lows MarketWatch

[3] Amazon Hiring 75,000 Workers, Offering Some $1,000 Signing Bonuses WSJ

[4] McDonald’s Raises Pay for U.S. Restaurant Workers WSJ

[5] Costco to Raise Minimum Hourly Wage to $16, as Congress Debates $15 WSJ

[6] 3.6 million Americans will lose extra unemployment benefits — here are the states where it’s happening MarketWatch

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