What’s Holding Back Employment in the Recovery from the COVID-19 Pandemic?

When the World Health Organization declared COVID-19 a pandemic in March 2020, US businesses shut down, millions of people were laid off or furloughed, and unemployment skyrocketed. Today, the labor market has tightened substantially, with unemployment rates well below 5 percent nationwide, but many previously employed individuals are neither working nor looking for work. In this Economic Commentary, Cleveland Fed researchers Rachel Widra and Mark Schweitzer examine the reasons why and share how these reasons have shifted throughout the pandemic.

“We find that the number of people who are nonemployed because of labor-demand reasons such as furloughs and firm closures has decreased, while nonemployment for labor-supply reasons such as lack of childcare and fear of the virus have risen from May 2020 to October 2021,” say the researchers. “The lack of progress in nonemployment because of a lack of childcare, virus concerns, or other supply-side reasons highlights the potential barriers to employment that must be addressed in order to bring workers back to the labor force.”

These distinct barriers all have different implications for the labor force and different solutions beyond ending the current health crisis. By distinguishing which reasons for nonemployment are most limiting for each demographic group, policies can be better designed to help address specific issues for the populations most affected.

Read more: What’s Holding Back Employment in the Recovery from the COVID-19 Pandemic?

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.455.4479