What’s Holding Back Employment in the United States?

The United States has finally reported strong gains in payrolls after months of sluggish growth. However, in my view, the employment picture remains disappointing. Total non-farm payrolls have only recovered about 75% of the jobs lost during the pandemic.[i] The graphic below shows just how much payrolls have recovered from the steep losses during the pandemic, including a breakdown by sector.


The pandemic’s lingering effect on employment

I see three pandemic-related factors that have been holding back employment in the US.

1) Enhanced unemployment benefits. Some workers could be delaying a return to work while enhanced federal unemployment insurance remains available. Because the enhanced benefits are mostly tax-free, in some cases, they could generate a higher income than paid work that is subject to taxes. However, many states have started to curtail their participation in the federal program, which should help boost payrolls going forward.