Employment, Hours and Earnings

Between March and April, nonfarm employment rose by 266,000. April’s employment was down 5.4% from its pre-pandemic high in February of 2020. The figure below tracks nonfarm employment, total private sector employment and employment in the Leisure and Hospitality industry. Relative to their respective pre-pandemic highs, total private employment was also down 5.4% and Leisure and Hospitality employment was down 16.8%.  However, employment in Leisure and Hospitality, the industry group that has been affected the most during the pandemic recession, increased by 331,000 or 2.4% from March to April, exceeding the overall employment growth for the month.  In fact, total employment excluding Leisure and Hospitality actually decreased.  Professional and Business Services, Transportation and Warehousing, Education, Manufacturing, Retail Trade, and Health Care all had employment declines between March and April. The employment gains in Leisure and Hospitality are expected to continue as vaccination rate rises, as restrictions are lifted, as the populace feels more comfortable getting out, and as Americans make up for what they have missed doing over the last year.

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There are two other aspects of the employment situation that deserve attention: hours of work and average wages. First, average weekly hours of work in April were at their highest levels over the past fifteen years. As seen in the figure below, the 35 hours of work per week for all private employees was up 0.6 hours compared to the average hours for all of the months following the end of the Great Recession up to February 2020.  Other than a few months of below-average weekly hours in March and April of 2020 -- the first two months of the pandemic-induced recession -- hours have been higher over the past year for those workers in private employment who retained their jobs.  The spring 2020 decline in average hours in Leisure and Hospitality was more severe, and the increase in average hours is limited to April’s average hours of 26.7, up 0.7 hours compared to the post-Great Recession average.

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Second, real average hourly earnings rose markedly in April of 2020 among all private workers and among workers in the Leisure and Hospitality industry, as seen in the figure below. Between March and April of 2020, hourly wages grew 5.4% among all private employees and were up 7.3% in Leisure and Hospitality. Hourly earnings in April of this year are 2.6% higher than in February 2020 for both series.

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The immediate real wage growth in April of 2020 indicates that higher paid workers retained their jobs last spring at the start of the recession.  As employment rebounded, lower-paid workers were being hired, and the average wage declined. In Leisure and Hospitality, wages declined to their previous levels, but in recent months have shown additional growth. Across all private sector workers, the decline after the spike last April was less dramatic and wages have stayed above the pre-pandemic trend. The higher wages are compensating for the longer work hours.

So, what do lower employment, higher hours and higher wages mean for total earnings?  The figure below depicts total weekly earnings for all private employees and for workers in the Leisure and Hospitality industry. Altogether, the real weekly earnings for all private employees in April 2021 were 98.8% of the real weekly earnings in February 2020.  In Leisure and Hospitality, real weekly earnings in April 2021 were 88.3% of the real weekly wages in February 2020.  So, while the progress upward in total earnings for all workers in private employment is definitely great news, April’s earnings were still well below what they could have been had the economy continued it pre-pandemic growth.

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Posted: May 13, 2021 by Dennis W. Jansen, Andrew J. Rettenmaier