The Biden Jobs Boom Is Bigger Than We Thought
Last Sunday on Meet the Press, James Carville offered Democrats good advice: “Quit being a whiny party and get out there and tell people what you did … the exact truth.” On the vital issue of jobs, they should be cheering, because the Biden administration has helped create and sustain a remarkable employment boom.
When it comes to what’s been called the “Great Resignation,” there’s nothing new about Americans quitting their jobs to look for something better. The Bureau of Labor Statistics reports that from 2015 to 2019, an average of 38 million full-time and part-time working people voluntarily left their jobs per year—and that excludes retirements and layoffs. In 2021, those voluntary “quits” jumped to 47 million, the highest level ever.
The pandemic almost certainly played a role by inspiring workers to reconsider their life choices. But for most people, moving from ruminating to resigning requires confidence that they can find a good position somewhere else. That’s why huge numbers of quits only happen in a booming job market.
People who quit in 2021 generally found new positions much faster than normal. The number of open jobs waiting to be filled averaged 9.6 million per month in 2021, 47 percent higher than the average for 2015 to 2019. Those openings outpaced the high levels of quits by 70 percent. As a result, the median length of unemployment fell from 18.4 weeks in January 2021 to 12.4 weeks by December.
The current employment boom is fueled by a highly successful economy and soaring rates of business creation. The Census Bureau reports that Americans created nearly 5.4 million private businesses in 2021—68 percent higher than the average of 3.2 million per year from 2015 to 2019. This historic level of business formation helped make the record level of quits possible, including those who left their jobs to start their own business. It also should help sustain healthy job gains throughout 2022.
In every recent period, some laid-off workers start their own businesses, often by necessity rather than choice. And they are a small piece of current business formation: All told, 16.7 million people lost their jobs in 2021, compared to 47 million who left their jobs voluntarily.
All of these factors contributed to the strongest job growth in more than 40 years. In 2021, the economy added 6.4 million jobs—a gain of 4.5 percent, or more than three times the average job growth of 1.4 percent from 2015 to 2019.
Of course, it’s normal to see outsized job growth following any period of large job losses. This time, most of the bounce back from the 2020 lockdowns came later that year. Unemployment peaked at 14.7 percent in April 2020 and fell to 6.4 percent by January 2021. The economic success of the Biden presidency was even better, stunning government forecasters. In February 2021, the Congressional Budget Office forecast a 5.3 percent unemployment rate at the end of 2021. Thanks to the Biden administration’s $1.9 trillion American Rescue Plan, passed the following month, the jobless rate fell to 3.9 percent by November, for an additional decline of 39 percent in 11 months.
The impact of that winter 2021 stimulus is clear when we compare 2021 to previous deep recessions. In the serious downturn of 1981–82, after joblessness peaked at 10.8 percent, it took 49 months for the unemployment rate to decline by 39 percent. And following the Great Recession of 2008–09, it took 62 months to recede by 39 percent. Granted, a medically induced economic coma like the shutdowns is not the same as a traditional recession, but it’s also much more severe.
Another advantage of the Biden economic and employment boom is that the greatest benefits are going to people with less education and lower earnings. Data collected by the Federal Reserve Bank of Atlanta shows that for the first time in decades, median hourly wages and salaries in 2021 increased faster among Americans with high school diplomas or some college but no degree. Similarly, median hourly wages or salaries in 2021 increased most rapidly among working Americans in the lowest earnings quartile.
One reason is that two industries employing large numbers of people without college degrees—retail and food services and accommodations—saw especially large increases in both quits and new businesses. Nearly 16.4 million people voluntarily left their jobs in those two industries in 2021, 3.3 million more than the annual average for 2015 to 2019. The two industries also saw nearly 1.3 million new businesses open in 2021, more than twice the annual average for 2015 to 2019. As the economy expanded rapidly through 2021, businesses trying to find and hire millions of new workers had to raise their wages.
Across most of the economy, wage gains in 2021 lagged the sudden onset of inflation: Overall, they were up by 4.6 percent before inflation and down 2.1 percent after inflation. But for regular workers in those two industries—everyone but managers and professionals—inflation-adjusted hourly wages rose by 7.6 percent in food services and accommodations and remained steady in retail.
As with the historic level of quits in this period, much of the current spurt of inflation is tied to the pandemic. Happily, epidemiologists expect the Omicron variant to recede, as already appears to be happening in Cleveland, Newark, and Washington, D.C. Yes, more variants may appear. But with increasing vaccination rates, the new antivirals, the enhanced immunity from Omicron, and the administration’s new program for routine free testing, the COVID-19 crisis should finally subside.
For that reason and others, most economists expect inflation to recede in the coming months. The bond market is not panicking. But we haven’t seen inflation tied to supply-chain problems since 1946–47, so those predictions may be off. If they’re right and inflation ebbs, the sharp increase in wages before inflation will be permanent, since companies know that wage cuts inspire more quits and destroy morale for those who stay. The result would be the strongest GDP growth in a generation, fast-rising new businesses, a red-hot labor market, and real wage gains for most Americans.
All of that might not happen in time for the midterms. But over a longer-term—say, by 2024—Americans will clearly recognize the Biden boom.