The unemployment rate fell to 3.9% last year, beating most expectations.

While all the numbers for the 2021 economy are not released yet, the December jobs report has been released. And though the December numbers will be subject to two revisions, we do have a good idea of how we have fared in 2021 – and the news is very good in this regard. Let’s start with the headline number. 

The unemployment rate started the year at 6.3%, as the economy was still recovering from the pandemic shutdown.  We ended the year with an unemployment rate of 3.9%.  That is a reduction of 2.4%.  This is better than what was forecasted at the beginning of the year, as initially it was predicted that we would not reach “full employment” levels until sometime in 2023. Now this target has been moved up to 2022.  The addition of 199,000 jobs in December brought us to 6.45 million jobs added in 2021, the highest on record. 

Along with the 141,000 revision of the previous two months of job gains, this means that approximately 90% of the jobs lost in the pandemic have been recovered.  We really have more jobs to go because of labor force growth during this recovery time. Even though many left the labor force during the recession, some are expected to return, which will increase the labor participation rate. Who could have predicted that we would have a labor shortage in 2021? Certainly, forecasters did not see this coming when we were in the midst of losing 20 million plus jobs during the pandemic induced shutdown.