Is the Labor Market Back?

Last month I asked if travel was back. Air travel has recovered a lot from the depths of the pandemic, but it was still only about 80-85% of pre-pandemic levels.

Labor markets also plummeted during the worst of the pandemic, and have slowly (and sometimes quickly) clawing their way back. But are we back to pre-pandemic levels?

The national unemployment rate is now under 4%, a level which is rarely reached even in the best of times. But there is considerable variation across states.

The latest BLS release of state unemployment data shows that some states are at their historic lows, with one state standing out: Nebraska currently has the lowest unemployment rate a state has ever recorded at 1.7% in December 2021 (the data go back to 1976). Utah is also just below 2% in December — at 1.9% it’s the 2nd lowest in history (after Nebraska, of course).

Of course, all is not well everywhere. California and Nevada have the highest unemployment rates, at around 6.5%. This is well above their pre-pandemic levels of about 4%, and also well above what you would expect during normal times, other than during and immediately following at recession.

So is the labor market back in Nebraska, Utah, and other similar states? Not so fast.

Anyone with a passing understanding of labor market data will tell you that the unemployment rate does not paint a complete picture of the labor market. And they are right: no one piece of data can do that! The unemployment rate excludes, of course, those who aren’t looking for and have dropped out of the labor force.

There are a number of other measures we could look at, but the simplest is employment. Are there more people working before the pandemic? Nationwide, of course this isn’t true, but is it true for these low unemployment states? Ideally we would adjust for changes in population, or even the working age population, but such population estimates aren’t available for states on a monthly basis. Still, just looking at the raw numbers can give us some information.

If we compare with two years ago, December 2019, we see that the labor market is not quite back in Nebraska. They are still about 10,000 jobs below pre-pandemic levels. That’s pretty good, only a decline of 1%, when the entire nation is down about 2%, but it’s not quite back (especially if we could do a population adjustment). Comparing December to December also has the advantage of avoiding seasonal adjustment factors, which may not be relevant right now.

However, some states have surpassed pre-pandemic employment levels. Utah certainly has: there are almost 60,000 more people employed in Utah than December 2019, an increase of almost 4%. Other states above pre-pandemic (December 2019) levels include Arizona, Georgia, Idaho, and Texas. Like Utah, Georgia and Idaho also have their lowest unemployment rates in history.

But these are the exceptions. Even states that have remained relatively “open” during the pandemic with few restrictions on businesses, such as Florida and South Dakota, are still below December 2019 (though they are close). And of course, some states are well below pre-pandemic employment levels: California is still down almost 700,000 jobs, or almost 4%.

So in short, the labor market is not quite “back” for the entire nation. But in some parts of the country, it’s almost there.

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