The pace of US recovery picked up in June, adding 850,000 jobs and narrowing the gap between the labor market and normality. At the same time, the official unemployment rate edged up to 5.9 percent, while the realistic rate—adjusted to account for misclassification and the unusually large drop in labor force participation during the pandemic—was flat.
Rebuilding a complex economy, which remains 9 million jobs short of its pre-pandemic trend, is no easy task. In recent months, job growth has been constrained by the lower-than-expected rate of unemployed workers transitioning into jobs. In the first five months of 2021, only around 24 percent of unemployed workers moved into jobs, well below the expected rate based on the record number of job openings.
When or if the economy will bring back all 9 million missing jobs remains to be seen. Over time, more workers will connect with employers that are hiring, the pandemic should recede, and expanded unemployment benefits will expire or be replaced by more modest increases. All these factors should help bring more people back to work in the coming months. But restoring the last several million jobs could prove more difficult if people have left the labor force for good or other changes have permanently reduced labor demand.
This PIIE Chart was adapted from Jason Furman and Wilson Powell III’s blog, “Pace of US job growth picks up as signs point to tight labor market.”