We are reasonably confident about improving employment despite its lagging the growth recovery.

U.S. real GDP is back to 3Q – 4Q 2018 levels, whereas jobs are only back to 2H 2015 – 1H 2016 levels. However, it’s worth noting that annualized income from wages and salaries has never been higher, and that a few factors makes us cautiously constructive on the labor market—without considering stimulus or aggressive reopening.

Income from wages and salaries is an aggregate figure and doesn’t address the loss of 8.6 million private sector jobs and 1.3 million government jobs since February 2020. Within the private sector (excluding Leisure and Hospitality, which represents 45% of losses), some 2 million private sector jobs were lost in Healthcare/Social Assistance (899,000), Manufacturing (572,000) and Education (426,000).

Leaving aside manufacturing, it’s rare to see job losses in Healthcare/Social Assistance of this magnitude. For the Education and Healthcare segment, the worst month of job losses prior to the pandemic (since 1985) was -48,000 in September 1989 versus 2.8 million this spring. Since the U.S. Bureau of Labor Statistics started separating out these categories in 1990, there have been only four months previously in which Health/Social Assistance saw negative jobs growth, with the worst monthly result being -18,000 in July 2013 compared to more than 2.3 million losses in this category at the peak.

A key reason why this category has seldom lost jobs is that there is no stopping aging. The elderly will need services, and day care will be required as jobs improve. You can only put off knee replacements for so long. Even if the vaccine rollout is delayed, jobs in this sector could continue to grow, and it’s difficult to see material losses going forward. For example, some 198,000 private sector jobs were lost between November and January; Healthcare/Social Assistance lost just 1,700 jobs in that timeframe, with Healthcare alone gaining nearly 15,000 jobs.

People will age. Healthcare services are needed. Additionally, with the CDC discussing school re-openings, education jobs could come back. There are reasons to anticipate grinding improvement in jobs even with slower reopening in sectors that have seldom seen losses in the past. While it is difficult to see so many without jobs, recent wage and salary gains, as well as resilience in some sectors, provide reason for cautious optimism.