American jobs will not return to pre-pandemic levels until 2024, says CBO

American jobs will not return to pre-pandemic levels until 2024, says CBO

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The projection shows how long the labor market still needs to heal after suffering the biggest loss ever recorded in April, when 20.5 million jobs evaporated and the unemployment rate soared to 14.7% in a single month.
This could put pressure on the White House and Capitol to accelerate the approval of another relief bill, as well as an economic recovery package. President Joe Biden is already facing resistance in Congress to the $ 1.9 trillion bailout he revealed last month. He is due to meet on Monday afternoon with a group of Republican senators, who have set up a $ 618 billion counter offer. The president also plans to launch a recovery package later this month.
The country’s recovery remains unstable, with the economy recovering only about half of the positions that have disappeared. An impressive 140,000 jobs were lost in December, the first monthly loss since April. The forecast for the January report, which will be released Friday, foresees the addition of just 50,000 vacancies. The unemployment rate is expected to remain stable at 6.7%, where it has been stagnant since November.

Labor market conditions will continue to improve, according to CBO’s 10-year perspective. The economic expansion will bring many people back to the labor market, which includes both working and job seekers. It is expected to return to its pre-pandemic size next year.

The unemployment rate will gradually decrease and the number of employed Americans will fully recover to the pre-pandemic level in 2024, the agency estimates.

He is projecting the unemployment rate at 4.2% in 2024-25. It was 3.5% last February, before the pandemic hit.

Economy will recover faster

While the labor market is recovering, the economy in general is also recovering. After all, the United States depends on consumer spending, so the more consumers are working and spending their wages, the better.

The CBO predicts that the real gross domestic product of the United States, the broadest measure of economic activity, will grow at a rate of 4.6% in 2021. With this forecast, the economy will be back to pre-pandemic size in the middle of the year. year.

Although the 4.6% growth looks very good, the economy could shake after the US GDP fell 3.5% in 2020 – its worst decline since 1946. It was the first decline in GDP since the financial crisis. The final bulletin for 2020 made one thing clear: the economy needs more help.

It is important to note that the CBO report does not include the stimulus plan proposed by President Joe Biden, which could give the economy a much-needed sugar rush.

The pandemic ended the longest economic expansion in the history of the United States last spring, when business closed and the country was paralyzed. Despite rapid growth in the second half of last year, the US economy has not yet fully recovered. According to the CBO, it will take until 2025 for America to close its product gap, which is the term that economists use to describe the difference between real GDP growth and potential GDP growth.

In the next five years, real GDP will grow by an average of 2.6%, according to the report released Monday, before exceeding its potential in 2025. Between 2026 and 2031, real GDP is expected to grow 1.6% in average.

More stimuli will accelerate recovery

Biden’s $ 1.9 trillion stimulus proposal could further accelerate the economic recovery, according to a report by Moody’s Analytics. Even with the size of the bill causing some legislators and exports to back down.

“Today’s CBO report, in line with other recent estimates, shows that the economy is recovering,” said Maya MacGuineas, chairman of the Committee on Responsible Federal Budget, a non-partisan oversight group.

“More funding is guaranteed to help the unemployed because of the pandemic, prevent layoffs from state and local governments, boost economic demand, prevent a decline in family income and end this pandemic once and for all. But it shouldn’t cost $ 1.9 trillion to fill a $ 400 billion or $ 800 billion hole, “she added.

But Moody’s predicts that GDP could jump more than 7% on an annualized basis in the first quarter of this year and almost 8% for the entire year. In 2022, the economy may register an additional gain of almost 4%.

At this rate, 7.5 million jobs would be created this year and another 2.5 million next year, allowing the economy to recover all lost jobs. The unemployment rate would be between 4% and 4.5%.

Biden’s plan would accelerate the recovery by about a year, compared to no additional fiscal support, according to Moody’s.

Left-wing activists are already using the CBO report to pressure the president not to compromise with Republicans and to curtail his proposal.

“This report makes it clear that much more needs to be done to get people back to work,” said Zac Petkanas, senior consultant at Invest in America, an advocacy group. “We cannot afford half-measures that bite the edges. Our country requires large and bold public investments now to get people back to work as quickly as possible.”

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