Question #2 for 2022: Will the remaining jobs lost in 2020 return in 2022, or will job growth be sluggish?

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by Calculated Risk on 1/03/2022 05:03:00 PM

Earlier I posted some questions on my blog: Ten Economic Questions for 2022. Some of these questions concern real estate (inventory, house prices, housing credit, housing starts, new home sales), and I posted those in the newsletter (others like GDP and employment will be on my blog).

I’m adding some thoughts, and maybe some predictions for each question.

2) Employment: Through November 2021, the economy added 6.1 million jobs in 2021. This makes 2021 the best year for job growth ever – by far. However, there are still 3.9 million fewer jobs than in February 2020 (pre-pandemic). Will the remaining jobs lost in 2020 return in 2022, or will job growth be sluggish?

Last year, I wrote: “I think something like 6 to 8 million jobs could be added in 2021”. It looks like close to 6.5 million jobs were added in 2021. The previous record was 4.3 million in 1946 (post-WWII boom).

For review, here is a table of the monthly change in total nonfarm jobs in 2021.

Jobs Added per Month in 2021
Total nonfarm (000s)
Jan-21
233
Feb-21
536
Mar-21
785
Apr-21
269
May-21
614
Jun-21
962
Jul-21
1,091
Aug-21
483
Sep-21
379
Oct-21
546
Nov-21
210
Dec-21
—

The consensus forecast is for 400 thousand jobs added in December.

Unfortunately, it appears this will be another difficult winter with the pandemic, and it seems likely job growth will slow over the next couple of months. Also, given slow population growth it seems likely labor force growth will be sluggish in 2022.

My guess is something like 2.5 to 3.0 million jobs could be added in 2022, but it will depend on the pandemic (and policy). This fits with my view of sluggish labor force growth, an increase in the participation rate, and a decline in the unemployment rate. That would mean there are still fewer jobs at the end of 2022, than before the pandemic.

Some thoughts: