Unemployment Rates in 2021

With organizations reviewing their structural needs, compensation decisions being finalized, and many individuals contemplating transition, c

ompanies considering involuntary or voluntary separation plans have been asking us:

What does the economy and employment market look like for 2021? 

As 2020 drew to a close, we desire to return to some semblance of normalcy in 2021, which will hopefully include a better job market in conjunction with declining unemployment rates. By the end of 2019, the U.S.’s unemployment rate dropped to 3.5%, representing nearly the lowest rate in 50 years due to an economy operating on all cylinders. However, the unemployment rate trajectory turned during the first quarter of 2020. On March 13, 2020, former President Donald Trump declared the Covid-19 pandemic a national emergency and took action to shutter the country to prevent the spread of the virus. Schools and workplaces closed down causing millions of American workers to become furloughed or lose their jobs entirely. Although The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, the aid provided through CARES to small businesses and American families did little to improve the unemployment rate. By the end of April, nearly 20.5 million people lost their jobs, causing the U.S. unemployment rate to spike to 14.7%. According to the Congressional Budget Office (CBO), the industry hit hardest by the pandemic was the hospitality and leisure industry. 

Although the overall unemployment market was down in 2020, the market for transitioning individuals is the strongest it has been in years. As companies transition to virtual environments, talent acquisition teams are looking to hire individuals to fill these roles. Furthermore, a virtual environment removes proximity as a requirement for many jobs, meaning that companies will be able to hire the “perfect” candidate. Additionally, many companies have held off hiring new employees given the uncertainty associated with the beginning of the pandemic, but as the economy continues to reopen, businesses can no longer put this off. One Fortune 500 CPG company is already committed to expanding its summer internship program and returning to the January 2020 pace of recruitment in anticipation of a strong fall and winter business surge. The company put out a statement saying “we can’t wait to train our team.” 

The first real glimmer of hope that the U.S. would soon be exiting the crisis occurred on December 11th when the Pfizer vaccine received Emergency Use Authorization (EUA) by the FDA for the prevention of Covid-19. Approximately one week later, on December 18th, the Moderna vaccine also received EUA approval. As more and more Americans are able to get vaccinated, people will go back to resuming their pre-pandemic lives and doing what they most enjoy, including going out for dinner, catching a movie or performance at a local theater, and commencing leisure travel, boosting the prospects of the hospitality and leisure industry, which is currently operating on life support. Already there are signs in parts of the country that Americans are beginning to feel more comfortable leaving their homes. More normalized production and consumption rates have contributed to improvement in the unemployment rate;

by the end of 2020, the U.S. unemployment rate declined to 6.7%. Although this rate reflects gains from April 2020, the December 2020 rate remains nearly double what it was a year prior. Retirement rates are also supposed to increase in 2021, leaving job opportunities open for younger individuals. Given that age is one of the factors related to having a negative outcome with the virus, some older individuals have used Covid as an excuse to retire early, or at least earlier than planned. Some older workers will consider a composite of part-time work with other engagement and leisure-based activity. 

Additionally, President Joe Biden’s proposed $1.9 trillion covid-relief plan is expected to boost the economy. President Biden’s plan would send direct payments of $1,400 to most Americans, provide additional financial support to state governments and schools as well as bolster vaccine distribution. Although there are some who insist that this plan will mostly augment savings, most economists believe that the proposed legislation will encourage consumption of products and services, which should translate into job creation and declines in the U.S. unemployment rate. 

At the same time, although the vaccine roll-out continues to gather momentum, the virus has recently mutated to become more contagious. In fact, scientists are becoming increasingly concerned about vaccine efficacy. Given the continually evolving situation, it is nearly impossible to predict what will happen to the unemployment rate in 2021. In a fairly recent report published in September 2020, the Federal Reserve Board members and Federal Reserve Bank Presidents predict that the 2021 U.S. unemployment rate would decrease to 5.5% by year-end 2021, a downward revision from the 6.5% year-end 2021 figure contained in its June 2020 report. Although the predicted 2021 unemployment rate is still way above the “pre-covid” rate low last seen in the fourth quarter of 2019, it is a significant improvement from April 2020, and signals that the U.S. job market continues to strengthen. 

Sources: 

https://data.bls.gov/timeseries/LNS14000000 

https://www.bls.gov/opub/mlr/2020/article/job-market-remains-tight-in-2019-as-the-unemploym ent-rate-falls-to-its-lowest-level-since-1969.htm 

https://www.nytimes.com/interactive/2020/05/08/business/economy/april-jobs-report.html https://www.fema.gov/press-release/20210121/covid-19-emergency-declaration https://www.fda.gov/emergency-preparedness-and-response/coronavirus-disease-2019-covid-19/ moderna-covid-19-vaccine 

https://www.fda.gov/emergency-preparedness-and-response/coronavirus-disease-2019-covid-19/ pfizer-biontech-covid-19-vaccine 

https://fas.org/sgp/crs/misc/R46554.pdf 

https://www.cbo.gov/publication/56368 

https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20200916.pdf

https://www.whitehouse.gov/briefing-room/statements-releases/2021/01/22/fact-sheet-president bidens-new-executive-actions-deliver-economic-relief-for-american-families-and-businesses-ami d-the-covid-19-crises/ 

https://www.wsj.com/articles/biden-to-propose-1-9-trillion-covid-19-package-11610661977?mo d=article_inline 

https://fortune.com/2021/01/05/now-is-a-great-time-to-make-a-drastic-career-change/