There is no doubt that the economy is now stronger than it was four years ago. But, are people better off than they were before the pandemic? Looking at employment alone, it is clear that the quick and strong jobs recovery has meant that those workers, who were from 25 to 44 years old in early 2020, are indeed better off four years later. And, they fared much better than workers in their prime earnings years at the eve of the Great Recession in 2007. Older prime age workers, those from 45 to 54 years old immediately before the pandemic saw more career stability and later movements into retirement than was the case for the same age cohorts before and during the Great Recession.
The economy and the labor market recovered remarkably quickly after the initial drop when the economy shut down in the spring of 2020. It took less than two and half year – until June 2022 — for total employment to exceed its pre-pandemic level of February 2020. Not only that. The economy has remained strong through the winter of 2024. For instance, the unemployment rate has remained below 4% for 26 months. This is the longest such period in more than half a century.
This quick and strong labor market recovery has been good news for workers of all ages, but especially for younger ones. Consider the employment prospects of workers in their prime earnings years – 25 to 54 years old – at the outset of the pandemic. Those workers were largely out of school and not yet retired. Most of them, roughly 80%, were working when the economy shut down. It is reasonable to assume that they intended to keep working for the foreseeable future. At the same time, it is also reasonable to assume that the career patterns look differently for younger workers, who will increase their labor force attachment, than for older workers, who will gradually withdraw from the labor market. The following analysis thus breaks prime age workers just before the pandemic into three groups – those 25 to 34 years old, those 35 to 44 years old and those 45 to 54 years old.
Let’s start with the youngest group (see figure below). Their employment level dropped from 80.9% in February 2020 to a low of 72.1% five months later. By April 2022, or less than two and half years later, their employment level had bounced back and started to exceeded its pre-pandemic level. Their employment to population rate has stayed above its pre-pandemic level for the subsequent year and a half, through February 2024.
Compare this to the fate of the group of workers, who were in the same age group just before the Great Recession. Their employment level dropped from 79.1% in December 2007 to a low of 73.9% two years later in February 2009. By December 2011, their employment level still had not recovered to its pre-recession level and stood at 75.7%.
Put differently, this time around, an additional 0.6% of workers in this age cohort had found employment compared to before the pandemic, while 3.4% fewer workers were employed at the same point in time after the Great Recession. This is a difference of four percentage points. If the labor market had performed after the pandemic as it did after the Great Recession, 1.8 million fewer people in this age cohort – those who were 25 to 34 years old just before the pandemic – would have had a job in February 2024 than was the case.
The pattern looks similar for those in the middle of the prime age group (see figure below). Their employment dropped sharply and recovered quickly. Four years after the pandemic started, their employment level was also 0.6 percentage points higher than it was at the start of the pandemic – 81.5% compared to 80.9%. Their counterparts during the Great Recession fared much worse. Their employment level at the end of 2011 – four years after the start of the pandemic – was 4.3% lower than in December 2007 – 76.7% compared to 81%. This is a gap of 4.9 percentage points when comparing the performance after the pandemic with that of the Great Recession. Had the pandemic labor market put in the same performance as the labor market after the Great Recession, 2.0 million fewer people in these age cohorts would have a job in February 2024 than was the case.
The employment levels of those who were 45 to 54 years old just before the two recessions was down in both cases (see figure below). This should not be surprising. After all, the oldest in those age groups started to move into retirement four years after the two recessions started. Yet, the drop off in employment was much less pronounced and happened later after the pandemic than it did after the Great Recession. By December 2011, the employment to population ratio for these age cohorts had fallen by 6.9 percentage points, while it dropped by only 3.5 percentage points after the pandemic – a gap of 3.4 percentage points. Moreover, the employed share of this age cohort dropped almost continuously after the Great Recession, while it quickly recovered most its losses before dropping in the past few months, likely indicating a gradual movement into retirement for the oldest cohorts in this group.
The quick and strong labor market recovery after the pandemic has translated into more job opportunities for workers who were 44 years old or younger when the pandemic started. It also meant widespread job opportunities and delayed retirement, compared to the Great Recession, for prime age workers 45 years old and older. Many of those, who were in their prime earnings years at the start of the pandemic, undoubtedly experienced painful disruptions to their careers when the economy shut down. But, those disruptions were short lived and offset by ample job opportunities in short order. In the end, all cohorts of prime age workers enjoyed much more stable careers over much of the four years that followed the pandemic than was the case for the same age groups after the Great Recession. Millions of workers experienced much better career prospects after the pandemic than after the Great Recession because of repeated public investments to stabilize the labor market.
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