Every month for the past three years we have been singing the same refrain – the job market is hot. Except there is a limit to the number of jobs that can be created. And not every person qualifies for every job. For example, if there are many job openings for doctors, it is not likely that most of us can apply. In other words, the unemployment rate is not likely to drop to zero. On the other hand, we can’t create more jobs than the employable population. So, let’s take a look at our history.
For the decade of 2011 to 2020 the economy added just over 20.0 million jobs, or approximately 200,000 per month. For a perspective, we lost between 8.0 and 9.0 million jobs in the previous two years during the Great Recession. Therefore, some of this was “catch-up” as we started that decade with a high unemployment rate and ended it with a low unemployment rate. This decade we started the exact same way due to the pandemic recession. We lost almost 9.0 million jobs in 2021. Because of the suddenness of the pandemic, the recovery was much faster, and we have gained over 14.0 million jobs in the past two and a third years, bringing the unemployment rate right back down.
Seem like too many jobs? Not really, if you take a normal year of 1.5 to 2.0 million jobs gained and subtract the 9.0 million jobs we had lost in 2021 from 14.0 million gained, we are now just about caught up. We have added 5.0+ million jobs net in the past three and a third years. Why does it seem like too many jobs were added? For one, many left the work force during the pandemic which brought down the labor participation rate. The participation rate has been coming back slowly and is just now approaching the rate seen just before the pandemic – alleviating some of the employment shortages. Thus, the answer is that we have not created too many jobs. But if we keep adding at the present rate, we could be asking this question again. The jobs report for April will be released Friday.
