Pre-Pandemic Job Levels Not Happening Until 2023, Economists Survey Says

The U.S. job market is unlikely to return to its pre-COVID-19 pandemic levels until 2023 or later, according to a new survey released by the National Association of Business Economists (NABE).

GDP Muscle Building: The organization, which has more than 2,900 members, conducted its latest NABE Outlook from Feb. 8-16. For the most part, the NABE members were optimistic about the near-term U.S. economy, with 82% of panelists forecasting real gross domestic product (GDP) to return to pre-pandemic recession levels sometime this year and 52% predicting it would occur in the second half of the year; 14% believed this will happen in 2022 while 4% were anticipating a return by 2023 or later.

The median forecast for the first quarter of 2021 called for an increase of 3.4% in inflation-adjusted GDP, quarter-over-quarter annualized. On an annual-average basis, the NABE experts believed real GDP would increase by 4.8% in 2021 and taper off to 4.0% growth in 2022.

As for the risks to growth this year, 51% of respondents viewed risks as skewed to the upside, while 22% were concerned about more downside risks and 25% viewed risks to the outlook as weighted neither to the upside or downside.

“Panelists point to a large fiscal stimulus program and a faster vaccine rollout as the main upside risks,” said Holly Wade, survey chairwoman and executive director of the NFIB Research Center.

Furthermore, 41% of NABE’s experts believed the Federal Reserve’s fiscal policies were “about right,” while 25% felt it was too restrictive and 34% believed it was too stimulative for the economy.

As for the Fed’s vow not to raise rates for two years, 12% of respondents believed the central bank will take its foot off the brake this year and 46% expected that to occur in 2022.

Job-Creating Enervation: On the job front, however, 59% of survey respondents anticipated nonfarm payrolls would only return to their pre-pandemic environment in 2023 or later, while 27% expected this to occur in the second half of 2022 and 10% in the first half of next year. Wade noted the pessimistic view on job creation comes even though unemployment is “projected to decrease every quarter through 2022.”

The wariness by the NABE experts on continued weakness in job creation was mirrored in a note published last week by Joseph Brusuelas, chief economist at RSM US LLP.

“Top line claims increased to 770,000 versus an expected decline to 700,000 for the week ending March 13,” Brusuelas wrote. “There were 282,394 new pandemic unemployment assistance claims and 4.12 million continuing claims. The total number of people filing for unemployment benefits declined to 18.2 million for the week ending February 27 from 20.1 million previously.”

Brusuelas pointed out this data came on the “52nd week of massive increases in newly filed jobless claims — a grim anniversary of sorts,” warned of “long term scarring in the labor sector” despite the potential for a vibrant economy over the next two-to-three years.

“One year ago there were 2 million individuals receiving regular state unemployment benefits,” he continued. “Through February 27 there were 4.5 million. But by the next week, state employment agencies were processing 2.9 million initial jobless claims and then 6.0 million the following week. Even so, those numbers understated the level of labor market distress as state agencies struggled with a backlog of applicants that would continue for months.”

(Illustration by Mohamed Hassan/Pixabay)