Unemployment could fall this year to near the site before the Covid-19 pandemic, according to a Goldman Sachs forecast that predicts a hiring boom.
The company predicts an unemployment rate of 4.1% that could be even lower depending on the strength of the recovery amid greater fiscal stimulus and a return to work for the sectors most affected by the coronavirus.
In addition, the forecast causes the economy to return to its pre-pandemic payroll level well before the end of 2022, an opinion Treasury Secretary Janet Yellen backed in an interview with MSNBC on Monday.
“The main reason we expect a hiring boom this year is that reopening, fiscal stimulus and accumulated savings should fuel strong demand growth,” the economist said in a statement. Goldman, Joseph Briggs. Although the forecast is already the lowest on Wall Street, there is still “some chance of a return to the pre-pandemic rate in the middle of the three years this year.”
In February 2020, just before the success of the pandemic, the unemployment rate stood at 3.5%, the lowest in 50 years. The rate rose to 14.8% in April 2020 amid commercial shutdowns aimed at reducing the spread of coronavirus and has now dropped to 6.2% through February.
However, total employment continues to fall by about 8.5 million compared to a year ago.
The return to work of displaced hospitality workers, combined with another round of massive government spending, is expected to continue to drive this rate lower.
“Another key reason we expect a rapid recovery in the labor market is that two-thirds of the remaining pandemic job losses are in highly virus-sensitive sectors, where employment should pick up as l ‘economy reopens,’ Briggs wrote. “The sharp rise in the category of leisure and hospitality with virus problems in the February employment report provided an early clue of things to come.”
In fact, the sector added 355,000 jobs in February, representing nearly all of the 379,000 non-farm jobs added during the month, according to a Labor Department report on Friday.
In addition, there seems to be a lot of tranquility in the bar, restaurants and hotel. The sector continues to fall by almost 3.5 million workers compared to the previous date, and the unemployment rate is still 13.5%, compared to 5.7% the previous year.
In addition to an increase in hospitality hiring, Goldman says growth in government payrolls should also help reduce the unemployment rate. Government jobs have fallen 1.65 million from a year ago, and the group was the main drag on the February job report as it lost 86,000 positions.
Part of the call also includes an expected growth in the labor force participation rate, a key dynamic for measuring not only employment but also participation.
The rate has dropped to 61.4% from 63.3% a year ago, as 4.2 million Americans have left the workforce. The decline has been particularly rapid among women, down to 57%, from 59.2% last year, and blacks, from 63.1% to 60.1%.
“Most workers who left the workforce still cite the pandemic as a reason and will likely re-enter when life returns to normal,” Briggs said.
While Goldman has the strongest employment vision on Wall Street, many other predictors expect big gains throughout the year.
Citigroup economist Andrew Hollenhorst noted that the payroll gain of 379,000 in February was actually slightly below the 410,000 the firm expected. Hollenhorst noted that “there were clear signs that restaurants had begun to resume activity after slowing down in late 2020 and that came in today’s report.”
“The continued increase in seated gastronomic activity suggests that this will continue to be a source of support for jobs in the coming months,” he added.
An employment rate compiled by the Conference Board reached 101.01 in February, down about 7.8% from a year ago. Gad Levanon, head of the board’s Labor Markets Institute, said the current trend indicates an unemployment rate “well below 5%” by the end of 2021.