2021 Unemployment Forecasts
BY AINSLEE GARCIA
This article is written based on information provided in a myriad of reputable sources and my analysis from these articles. That being said, this analysis is based on carefully understood projections and may offer a glimpse into the state of the job market at a comparatively comprehendible level.
Unemployment after and during the COVID-19 pandemic is a consistent source of worry for all Americans. Projections seem to change with the day, swinging between a return to normalcy and a pit of joblessness for millions. The persistent issues remaining are what projections exist, how they are determined, and how they compare to other predictions. Private and federal entities have vastly differing views. Even within those groups, the estimated unemployment rate changes per the time of release and what economic catalysts and determinants exist. From current projection models, the US economy is likely to experience a decrease in unemployment to within 2.5% of pre-pandemic levels as the country reopens after the pandemic.
One of the most critical things to remember when discussing unemployment is that every entity has a different model for future unemployment. First, let’s look at the Federal Reserve. In a recent projection release, the Federal Reserve estimated that US unemployment would fall to about 4.5% by the end of 2021. This rate would fall to 3.5% by 2023, which is significantly more positive than those offered by other banking and economic institutions. This prediction takes the American Rescue Plan, Biden’s massive stimulus bill, into account, believing that the additional stimulus will kickstart certain industries and prevent major layoffs.
Now, let’s contrast this projection with that of the Congressional Budget Office. The model offered by the non-partisan entity estimates that the unemployment rate will average at approximately 5.7% in 2021, falling to 4.7% in 2023. This seemingly small disparity reflects the possible unemployment of almost 2 million American workers, primarily those in low-wage positions.
Finally, we can compare these previous estimates to that of Goldman Sachs, the lowest projection of these examples. In early March of 2021, Goldman Sachs, a multinational investment enterprise, projected that US unemployment would fall to 4.1% by the end of 2021, only 0.6% higher than unemployment levels before the pandemic. Goldman credits the possible hiring boom with the country’s reopening and the stimulus package. Furthermore, Goldman economists argue that the majority of jobs not filled are in pandemic-sensitive areas, essentially stating that jobs in the government and leisure and hospitality industries will rehire in large numbers when everything is open again.
We can see the stark differences between these three predictions, pointing to the uncertain behavior of the American economy as the pandemic continues. Another factor that plays a huge role in determining models of unemployment is the timing. The CBO released its projections in February of 2021, while the Federal Reserve and Goldman Sachs released their models in March of 2021. Within a month, Biden’s relief bill was passed, and the stimulus was distributed to companies and individuals, acting as a catalyst for the economic recovery. This stimulus encourages more investment into the economy as individuals have more opportunities to spend, causing America’s GDP to grow. Generally speaking, growth in GDP leads to a rise in employment as more people are needed to produce the higher amount of products now being demanded by the consumers. Should consumers remain confident in the state of the country, continued investments in the economy will incite a decrease in unemployment. However, if the Delta variant continues to persist within the unvaccinated communities of the US and another lockdown is mandated, a return to pre-pandemic unemployment is extremely unlikely.
Jeff Stein, Andrew Van Dam. “U.S. Unemployment Rate to Remain above Pre-Pandemic Level through Decade, CBO Says.” The Washington Post, WP Company, 1 Feb. 2021, www.washingtonpost.com/us-policy/2021/02/01/cbo-economy-biden/.
JeffCoxCNBCcom. “Goldman Sachs Forecasts a Jobs BOOM, Says Unemployment Rate Could Fall to 4.1% by the End of 2021.” CNBC, CNBC, 8 Mar. 2021, www.cnbc.com/2021/03/08/goldman-sachs-forecasts-a-jobs-boom-says-unemployment-rate-could-fall-to-4point1percent-by-the-end-of-2021.html.
Sheiner, Louise, and Gian Maria Milesi-Ferretti. “How Many Jobs Is the US Likely to Add This Year?” Brookings, Brookings, 24 Mar. 2021, www.brookings.edu/blog/up-front/2021/03/22/how-many-jobs-is-the-u-s-likely-to-add-this-year/.
Siegel, Rachel. “U.S. Jobless Rate Will Fall to 4.5% This Year, and Inflation Will Rise TEMPORARILY, Federal Reserve Projects.” The Washington Post, WP Company, 17 Mar. 2021, www.washingtonpost.com/us-policy/2021/03/17/powell-fed-inflation-stimulus/.