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The Employment Landscape | Equity Commentary

The Employment Landscape | Equity Commentary

Published on November 22nd, 2021


The Federal Reserve estimates that 1.5 million more boomers have retired during the pandemic period than would have otherwise.1  In a sense that extra 1.5 million appears meaningful because it was what drove the Federal Reserve to revise its definition of “full employment” – what it needs to see to raise interest rates.2 The old definition contemplated the total number of employed individuals returned to pre-pandemic levels.3 They are not making that a necessary condition to raise rates anymore.

However, the 1.5 million is not so meaningful, in our view, when compared to the total number of employed (154.0 million4 ) the total number of unemployed (7.4 million4 ) or the total job openings (10.4 million5 ).  We also think it is not so meaningful when compared to the 36% of U.S. adults who would not cover a $400 emergency expense using cash or its equivalent.6

Higher unemployment benefits may have kept 0.5 to 0.8 million people from finding jobs and these jobs may come back at 200 to 250 thousand jobs per month over the next several months.7 Similar to accelerated retirements, this is not so meaningful, in our view.

We think the biggest gap is in health and childcare concerns. This is visible in where the jobs have not come back – front-line work in hotels, restaurants, and leisure, and the wide employment gap between women and men, which is opposite of what is typical following a recession.Of course demand impact plays some role here as well. The Delta wave significantly interrupted the labor market recovery, which appears back on track for now, though with risk of a winter wave following holiday gatherings. We think the age 5 to 11 child vaccination may accelerate the labor market recovery. There are 28 million children in that age cohort, which is the largest unvaccinated cohort.However only 27% of parents plan to vaccinate their children quickly.9

The experience of the last economic cycle – in particular the second half of the last cycle, when unemployment was below 5%, as it is now – was that the Federal Reserve could keep policy easy for longer than it expected – and interest rates stayed lower, for longer than expected – because workers kept coming off the sidelines. This was true even as President Obama doubled eligibility for food stamps and made it easier to collect disability. That experience is a reason why we believe the Federal Reserve changed their framework to be more patient this time around. We attribute that experience to the hangover from the financial crisis, which created long-term unemployment, loss of skills for workers, and therefore required a really tight labor market to make employers hunt for sidelined workers who may have lost skills. This time the employers are hunting while the workers need to be cajoled, but we still think we can get back to where we were before, in the base case, assuming something doesn’t interrupt the expansion. We believe we can go even farther than before, because the widespread adoption of collaboration tools for remote work can unlock more labor force participation than in prior cycles, though it will take some time to get there.



1 Source: Federal Reserve Bank of Dallas. “The Labor Market May Be Tighter Than the Level of Employment Suggests.” May 27, 2021.

2 Source: Federal Open Market Committee. Press Conference. June 16, 2021.

3 Source: Federal Open Market Committee. Press Conference. September 16, 2020.

4 Source: Bureau of Labor Statistics. “Employment Situation Summary.” November 5, 2021.

5 Source: Bureau of Labor Statistics. “Job Openings and Labor Turnover Summary.” November 12, 2021.

6 Source: Federal Reserve. “Survey of Household Economics and Decision-Making.” May 17, 2021.

7 Source: Evercore ISI. “What Happens Now That Enhanced Unemployment Insurance is Over?” September 14, 2021.

8 Source: Centers for Disease Control and Prevention. “CDC Recommends Pediatric COVID-19 Vaccine for Children 5 to 11 Years.” November 2, 2021.

9 Source: Kaiser Family Foundation. “KFF Covid Vaccine Monitor.” October 28, 2021.


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