The current issue of the National Council on Compensation Insurance, Quarterly Economics Briefing – Q1 2021, surveys recent developments related to employment and wages and considers the risk to the emerging economic recovery from a possible fourth COVID surge.
The two-month fall in coronavirus case rates, coincident with the appearance of new vaccines, has kindled optimism. The expectation that new vaccines will bring the coronavirus pandemic under control by year-end, if not sooner, is itself a powerful driver for rapid recovery of spending and jobs in the United States – if that expectation is borne out in coming months.
After stagnating during the nationwide coronavirus (COVID-19) surge last winter, the pace of job recovery picked up in February and March. The rollout of new vaccines and a fall in coronavirus case rates are creating an expectation that the COVID recession may be over by year-end, if not sooner. This is also boosting discretionary consumption and new hiring.
However, an uptick in case rates beginning in late March casts a shadow on the prevailing mood of optimism.
Key Themes and Takeaways
– – Strong employment growth in February and March, plus declining coronavirus case rates and increasing vaccinations, point to an accelerating pace of economic recovery in 2021.
– – The March national employment gap is down to -=5.4%, a shortfall of 7 million jobs relative to seasonally expected employment levels. Lost jobs remain concentrated in service sectors, especially Leisure and Hospitality. Construction and Manufacturing are recovering strongly, but both sectors face material shortages and supply chain bottlenecks.
– – Unadjusted average weekly wages rose by more than 7% in 2020, in large measure because COVID-related job losses are concentrated among low-wage workers. Adjusting for the effect of COVID-related job losses on the wage distribution, average weekly wages rose by 3% in 2020 among workers who remained employed.
– – Economic impact payments from two new federal stimulus programs enacted in December and March were distributed to households during the first quarter. Transfer payments have kept national household disposable income and savings above pre-pandemic 2019 levels. Strong household balance sheets provide wherewithal to drive a rapid rebound in discretionary consumption spending in 2021.
– – About 30% of the United States population received at least one vaccine dose by the end of March, and vaccination rates are currently on the order of 3 million people per day. New coronavirus cases in March were down to about one-third of January’s rate. However, several states reported increases in cases and hospitalizations in late March attributed to a new and more contagious variant of the coronavirus.
– – Job losses from a new COVID surge, if it develops, may be modest – like those during last winter’s surge, but much lower than in two previous virus surges in spring and summer 2020.
Read the full Quarterly Economics Briefing for an in-depth look at the economy and how it is impacting workers compensation.