• A full recovery in the labor market is over a year away, but the rebound is still rapid by historical standards.
  • The pandemic has resulted in unprecedented job losses, but payrolls are rebounding faster than in previous downturns.
  • The United States is on track to recover all the jobs lost in two years. The same feat took more than six years after the Great Recession.
  • See more stories on the Insider business page.

The US labor market is far from a full rebound. Compared to the last

, however, the recovery is advancing at a breakneck pace.

The economy added 559,000 non-farm jobs in May, according to data released Friday. The reading marked a fifth straight month of job additions and a big jump from disappointing gains in April. The unemployment rate in the United States has also hit a pandemic low of 5.8%, and major stock indexes have almost hit record highs following the encouraging news.

Yet wage bill growth has not benefited from the kind of V-shaped rebound seen elsewhere in the economy. At the pace of job creation in May, it would still take until July 2022 for the economy to recoup every job lost during the pandemic. It would take about a year from there to recoup the jobs that would have been created had the pandemic not occurred. The projections also do not take into account the national labor shortage, which could further slow job creation.

Calculated Risk Recession Table

Source: Calculated risk

Bill McBride / Calculated risk

Comparing the pandemic recovery to the Great Recession and other downturns tells a whole different story. In an article published Friday, Calculated Risk economic blogger Bill McBride compared job creation in recent months to that seen during recessions after World War II.

The trend is clear: Despite much more severe job losses at the onset of the recession, the labor market recovery is the most V-shaped in modern history.

A few factors explain the pronounced rebound. The government’s response throughout the pandemic has been unprecedented. Congress has approved about $ 5,000 billion in fiscal stimulus, and the

Federal Reserve
eased monetary conditions through historically low rates, massive asset purchase programs and extraordinary lending programs. Combined, the efforts helped economic activity rebound relatively soon after the first hit of the pandemic.

The nature of the recession also played a role. The economic crisis was just one symptom of a once-in-a-century pandemic. Lockdown measures used to curb the spread of the virus were one of the main reasons for lower activity. Once those restrictions were lifted, Americans with pent-up demand and stronger economies came out and kick-started the economy.

The current downturn also does not present the same structural problems encountered in the late 2000s. The Great Recession was fueled by a collapse of integrated financial systems. Long-standing trusted institutions suddenly sparked an economic collapse, and the government was forced to intervene with then-unprecedented support. Mistrust of these institutions and serious damage to the entire housing market led to a painful and laborious recovery.

The COVID-19 crisis, by comparison, was straightforward. A deadly virus was spreading across the country, so authorities forced shutdowns that caused severe damage to the economy.

The United States has also learned the lessons of the Great Recession and the recovery that followed. An early push for fiscal austerity and inadequate support to state and local governments hampered the healing of the labor market for years after the financial crisis. The wage bill did not return to its pre-recession highs until more than six years after the initial decline, longer than any post-war recession.

Policymakers are trying something else this time around. The $ 1.9 trillion stimulus package approved in March included $ 350 billion for state, city and local governments to offset budget deficits. On the monetary front, the Fed’s newly updated targets indicate that it will maintain super-easy monetary conditions long after the threat of a pandemic subsides.

“Now is not the time to talk about an exit,” Fed Chairman Jerome Powell said in January. “I think that’s another lesson from the global financial crisis, ‘be careful not to get out too early’.”