Two years ago, in late March and early April 2020, a public health response was initiated
in attempt to help control the spread of coronavirus disease 2019 (COVID-19) which had been
confirmed to have reached the United States by January 2020. As part of this initial response,
state governments issued varying degrees of “stay-at-home” orders in attempt to minimize
social contact to reduce the spread of COVID-19. Irrespective of the utility of these measures
from a public health perspective, these orders had a devastating impact on the economy. In
the second quarter of 2020 (i.e. April through June 2020), the national gross domestic product
(GDP) declined 31.2%. This represented the largest quarterly decline in U.S. history.
Fortunately, the economy rebounded relatively quickly as GDP rose by 33.8% in the third
quarter of 2020 (i.e. July through September 2020). This quick rebound in productivity,
however, did not translate to our national employment which was also ravaged by the effects
of the COVID-19 outbreak and our public health response and which has taken much longer to
recover.
In February 2020, the national unemployment rate was just 3.5% with 158.8 million of
the 164.5 million members of the civilian labor force gainfully employed. This marked the
lowest monthly national unemployment rate in over 50 years (i.e. since December 1969). Just
two months later, in April 2020, the national unemployment rate skyrocketed to 14.7% with
only 133.4 million of the 156.5 million members of the civilian labor force gainfully employed.
This marked the highest monthly national unemployment rate since the Great Depression.
While GDP had rebounded and largely stabilized by the end of quarter 2020 (i.e. end of
September 2020), the national unemployment rate in September 2020 remained elevated at
7.9% with only 147.6 million Americans employed, over 11 million fewer than in February 2020.
Even by March 2021, one year after our public health response to the COVID-19 pandemic
began, the unemployment rate was still over 70% higher than in February 2020 at 6.0% with
150.8 million Americans employed. Slowly but steadily, it has taken another full year for the
labor force to return to pre-pandemic levels. In March 2022, national employment increased to
158.5 million while the civilian labor force reached 164.4 million, resulting in an unemployment rate of 3.6%. These figures are almost identical to February 2020 which was just before COVID-
19 restrictions were initiated.
While national employment appears to have finally recovered from the COVID-19
pandemic and our public health response two years after its outbreak, there is a new threat to
our well-being. Rather than a health hazard, this new threat is an economic peril that can
insidiously eat away at an individual’s purchasing power. Inflation, or the increase in the price
of consumer goods and services, began rising significantly in the second half of 2021. Once
thought to be “transitory” in nature, inflation has yet to show any signs of easing through the
first quarter of 2022. From March 2021 through March 2022, prices of consumer goods and
services increased 8.6%. This is in comparison to the historically low inflation experienced
throughout the previous decade which averaged 1.7% per year from December 2010 through December 2020. Evidence of how problematic inflation can be to American workers is evident
when evaluating the change in prices relative to the change in wages. From March 2020 to
March 2022, average hourly earnings among American workers have increased 10.9% from
$28.62 to $31.73. However, during this same time period, prices have increased 11.4% which
indicates that despite the significant wage increases over the past two years the average
American worker has experienced a slight decline in his or her purchasing power.
In conclusion, the good news is that two years following the COVID-19 outbreak the
American labor force is finally back to its pre-pandemic state. The bad news is that, in part due
to the economic stimulus intended to help Americans get through the pandemic, inflation has
essentially negated any wage increases the average worker has received since early 2020. It
appears likely that the Federal Reserve Board will impose multiple raises to the federal funds
rate in 2022 and 2023 in attempt to combat inflation. While this action is likely necessary to
slow the economy by curtailing consumer demand (particularly given widespread supply
shortages), it also risks unintentionally engineering a recession which could reverse many of the
recent employment gains. Please continue to follow Hankins & Hankins Vocational Consulting
for future updates regarding the impact of inflation on employment and earnings and the effect
of Federal Reserve Board policy on our economy as we continue to emerge from the COVID-19
crisis.
