Joe Biden is inheriting a huge problem from Donald Trump: America’s job recovery is stuck in a rut

The US labor market is at a pivotal point 10 months into the pandemic: Millions of people remain unemployed while infections keep rising, and the fledgling jobs recovery has stalled out.

When President-elect Joe Biden moves into the White House next month, he will inherit a labor market on the ropes. In just two months, America’s jobless rate went from a near-50 year low of 3.5% to 14.7% – the highest level on record – in April.

Over the summer, the job market recovery looked decent, steadily chipping away at the more than 22 million jobs lost during the pandemic. But the jobs recovery has turned anemic in recent months.

The Biden administration will need to stimulate job growth and continue to support the unemployed, economists agree. They point at sobering comparisons from just about a decade ago: It took more than five years for the US job market to recover after the end of the Great Recession, when far fewer jobs were lost.

The jobless rate inched down to 6.7% in November, for example, but the decrease came on the back of more workers leaving the labor force for good. Over the past few months a disproportionate number of women have dropped out of the work force and older people have been forced to retire early.

“As the Covid-19 crisis continues, more employer-employee bonds break, amplifying the economic and societal damage,” the Bureau of Labor Statistics said in its Monthly Labor Review on Tuesday.

Meanwhile, weekly claims for unemployment benefits remain stubbornly high – nearly four times higher than a year ago. Thursday’s Labor Department report is expected to show another uptick to 833,000 seasonally adjusted first-time claims in the Christmas week. Separately, economists predict the jobless rate will go up to 6.8% in December, the first increase in the unemployment rate since April.

Help is on the way … but not soon enough

The jobs recovery is stuck in a rut – and the biggest source of help, a widespread vaccination program, is still months away.

“The timing of the vaccine rollout is the main factor affecting the speed of the labor market recovery,” said Cailin Birch, global economist at The Economist Intelligence Unit, in emailed comments.

More than two million Americans have already received the first dose of the two-shot vaccine, but Birch believes it will take until the third quarter of 2021 for vaccination rates to be high enough to allow consumer behavior to resume to pre-pandemic levels. Until then, the muted activity will be a drag on the economy.

Eventually, the vaccine will help revive jobs in sectors that require face-to-face contact, like hospitality. Economists at Goldman Sachs expect a hiring jolt around mid-year to push the unemployment rate down to 5.2% by the end of 2021. Until then, lower income jobs such as in the hard-hit restaurant industry continue to be most at risk to be temporarily lost again as states hunker down to prevent the virus from spreading further. And the colder winter weather isn’t helping matters either.

As the United States waits for widespread vaccination, the job market will continue to suffer greatly. Tighter restrictions in response to high infection rates will mean more unemployment over the winter months, said Birch.

A shot in the arm

Unfortunately for Biden – and the jobless – he has few tools at his disposal for a short-term boost.

One key tool is stimulus. While more pandemic stimulus was just signed into law last Sunday, many economists agree that more stimulus from Washington will likely be needed both to support the recovery and those who haven’t been able to return to work yet.

“Stimulating the economy to create jobs is crucial,” said Heidi Shierholz, senior economist and director of policy at the Economic Policy Institute, “both to the 26.1 million workers who are being directly harmed by the recession because they are either out of work or have had their hours and pay cut, and to the millions more who saw their bargaining power disappear as the recession took hold.”

These 26 million include the officially unemployed, those who dropped out of the work force, unemployed but misclassified workers and the still-employed whose hours and wages have been cut. The higher the unemployment rate, the more workers will be forced to take whatever job is available, which erodes bargaining power, especially for lower paid jobs.

Missing the boat on more stimulus next year could exacerbate these disastrous consequences and slow the recovery.

Washington’s lawmakers will have to consider worker protections in their plans for more stimulus, especially because many still can’t return to jobs that would put themselves or family members at risk of contracting the virus.

Looking ahead, Biden has also proposed investing heavily in America’s infrastructure, which would create jobs – as well as workforce training programs like apprenticeships. Such initiatives could change America’s jobs market in the medium and long term.