After massive business shutdowns and job losses last spring, the job market rallied. From May through August last year, the economy added back 11 million of 21 million lost jobs, and it looked like a rapid “V-shaped” recovery was underway. But it wasn’t. Job growth flatlined during the winter as the Covid death toll soared and gloom spread.
The V is back. Employers added 916,000 jobs in March, the most since last August. It’s not a fluke. The stars are aligning for robust growth for the rest of 2021, and what may be the fastest recovery from a deep recession in modern U.S. history. Total employment is still 8.4 million below pre-crisis levels of last February, but economists expect sizzling job growth to continue.
It’s no mystery why. Covid vaccines are finally working their magic, with nearly 20% of the U.S. population fully vaccinated and most Americans now eligible for shots. Vaccinations are obviously crucial to the safe reopening of the retail and hospitality sectors that have been hurt the most during the coronavirus pandemic. There’s hope, and people feel it.
President Biden’s $1.8 trillion stimulus plan, enacted in March, is a powerful tailwind blasting money into the economy, with stimulus checks already boosting spending. Americans have also saved record amounts of money during the last year, with many consumers ready for a summer binge. The Centers for Disease Control has opened the door to travel, saying vaccinated Americans are free to move about the country.
Biden had a front-row seat at the last recession and recovery, when he was Barack Obama’s vice president. That recovery was painfully slow and it may have cost Obama and his fellow Democrats control of Congress, corking Obama’s agenda for six of his eight years in office. It might even have contributed to Hillary Clinton’s loss to Donald Trump in the 2016 presidential election, since some voters associated Clinton’s economic plans with Obama’s iffy record.
Biden is not going to have that problem. “The prior economic cycle (2007 through 2019) was one of the slowest recoveries in post-war history,” Rick Rieder of investing giant BlackRock wrote to clients this week. “The recent cycle is shaping up to be one of the most rapid. Extraordinary fiscal and monetary policies have led to an economy that is already booming in many areas.”
Economist Ian Shepherdson of Pantheon Macroeconomics predicts employers will add more than 5 million jobs during the next three months. If that happens, the slight upturn in this chart showing total employment will move sharply upward, completing the V. Call it a swollen V, given the lag of the last six months.
Biden’s timing is extremely fortuitous. He’s hardly the only one who learned that the Obama recovery was unacceptably slow. Before he took office, Congress had already passed nearly $4 trillion in fiscal stimulus, four times the response to the 2008 recession. The Federal Reserve had mustered nearly every tool in the box to do its part. And of course vaccines were already rolling out.
Biden’s American Rescue Plan will keep supplemental unemployment benefits flowing into September, for those jobless workers who don’t participate in the summer job boom. If those benefits are keeping some workers from looking for jobs, because they’re worth more than a paycheck, there could be a surge of people rejoining the workforce in the fall. Businesses might be happy to have them.
It’s almost ironic that this week Biden introduced another huge legislative package called the American Jobs Plan. This is Biden’s infrastructure and green-energy plan, and he wants Congress to find another $2 trillion for the biggest such effort since at least the 1960s. That’s going to be harder to pass than the recent stimulus bill, and by later this year some members of Congress may be wondering whether we need to stimulate job growth at all. That’s a good dilemma to have.
Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.
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