Employment recovery continues in 2021, with some industries reaching or exceeding their prepandemic employment levels

According to data from the U.S. Bureau of Labor Statistics (BLS) Current Employment Statistics (CES) survey, total nonfarm payroll employment in the United States continued to recover in 2021, moving further away from the widespread job losses caused by the coronavirus disease 2019 (COVID-19) pandemic in 2020. (See chart 1.) Employment rose by 6.7 million in 2021, the largest calendar-year gain in the history of the CES employment series (see chart 2) and the strongest relative gain (+4.7 percent) since 1978.

Nearly all major industries experienced employment gains in 2021. (See chart 3.) Leisure and hospitality led these gains, adding 2.4 million jobs over the year, followed by professional and business services, which added 1.1 million jobs. Employment in transportation and warehousing continued to expand in 2021, after fully recovering in November 2020. Both financial activities and retail trade added jobs in 2021, essentially reaching their prepandemic (February 2020) employment levels.^[1] (See chart 4.)

Employment recovery and expansion

After declining considerably in early 2020, employment in most industry sectors started to recover later that year and continued to increase in 2021. Three sectors—professional and business services, transportation and warehousing, and information—reached their prepandemic employment levels and then exceeded them in 2021.

Professional and business services

Employment in professional and business services grew by 1.1 million in 2021, exceeding its prepandemic level by 428,000 jobs. (See chart 5.) The expansion in this sector was concentrated in professional and technical services, in which employment had recovered in March 2021; over the year, this industry added 632,000 jobs. (See chart 6.) The 2021 job gains in professional and technical services were spread across component industries and driven by management and technical consulting services (+147,000) and computer systems design and related services (+146,000).

The administrative and waste services industry—another component industry of professional and businessservices—also added jobs over the year (+495,000), reaching its prepandemic employment level by December 2021. Within this industry, employment services added 392,000 jobs in 2021, with temporary help services accounting for 303,000 of these jobs (these gains coincided with a 19.5-percent increase in the American Staffing Association’s Staffing Index).^[2] Employment in office administrative services and in services to buildings and dwellings rose at a more moderate pace in 2021, increasing by 43,000 and 38,000, respectively.

Transportation and warehousing

Transportation and warehousing added 432,000 jobs in 2021. (See chart 7.) Employment in this sector grew strongly before and after the 2020 recession and, after recovering in 2020, continued to expand in 2021, ending the year 485,000 above its prepandemic level. These gains were consistent with a 2021 increase (+7.7 percent) in the Cass Freight Index, which measures shipment volumes in the United States.^[3]

Within transportation and warehousing, job gains in 2021 continued in warehousing and storage (+152,000) and couriers and messengers (+33,000). (See chart 8.) These gains coincided with a consumer behavioral shift toward online shopping and delivery services.^[4] Over the year, job growth also continued in air transportation (+93,000), truck transportation (+54,000), support activities for transportation (+58,000), and transit and ground passenger transportation (+36,000). Employment in air transportation experienced the largest percent increase (+21.9 percent) in the history of the series (since 1990), and employment in truck transportation experienced its largest percent increase (+3.7 percent) since 2011.

Information

Employment in the information sector increased by 194,000 in 2021, slightly exceeding (by 10,000 jobs) its February 2020 level. This increase was driven by gains in motion picture and sound recording industries (+129,000), with growth also occurring in other information services (+30,000) and publishing industries, except internet (+28,000).

Retail trade

Retail trade added 425,000 jobs in 2021, reaching its prepandemic employment level. (See chart 9.) This growth was concentrated in general merchandise stores (+115,000), clothing and clothing accessories stores (+102,000), health and personal care stores (+90,000), miscellaneous store retailers (+65,000), and nonstore retailers (+36,000). (See chart 10.) In contrast, after adding jobs for most of 2020 and reaching an employment peak in December of that year, building materials and garden supply stores shed 50,000 jobs in 2021. Employment in electronics and appliance stores changed little (+2,000) over the year.

Consistent with the strength in retail trade employment, retail sales continued to expand in 2021.^[5] Likewise, the Consumer Confidence Index increased by 20.9 points over the year.^[6] However, despite these increases in retail sales and consumer confidence, high lumber prices, low inventories, and rising inflation in 2021 signaled potential employment weakness in some retail industries, especially building materials and garden supply stores.^[7]

Financial activities

Employment in financial activities grew by 142,000 in 2021, ending the year just 7,000 below its prepandemic level. (See chart 11.) This growth was concentrated in real estate (+71,000); securities, commodity contracts, investments, and funds and trusts (+41,000); and rental and leasing (+36,000). (See chart 12.) On the other hand, employment in credit intermediation changed little over the year (+8,000). Within this component industry, nondepository credit intermediation and activities related to credit intermediation added jobs (+22,000 and +12,000, respectively), whereas commercial banking shed 33,000 jobs. The employment decline in commercial banking likely reflects the impact of growth in digital banking and the continuing effects of pandemic-related closures of bank branches.^[8]

Job growth in real estate and in nondepository credit intermediation was consistent with economic indicators for these industries in 2021. Although the federal funds rate remained low over the year, the 30-year fixed mortgage rate edged up by 0.44 percentage point; however, at 3.12 percent in December, the mortgage rate was still low by historical standards.^[9]

Continued employment recovery

Although supply shortages and business restrictions eased in 2021, some industries continued to suffer the effects of the COVID-19 pandemic. This section discusses the sectors that experienced job growth over the year but did not reach their prepandemic employment levels.

Leisure and hospitality

Leisure and hospitality added 2.4 million jobs in 2021 and, by December, had recovered 6.3 million of the 8.2 million jobs lost in March and April 2020. (See chart 13.) Within this sector, food services and drinking places experienced the largest employment gain in 2021, adding 1.6 million jobs over the year, an increase that helped the industry recover 4.9 million of the 6.0 million jobs lost in March and April 2020. (See chart 14.)

Employment in food services and drinking places trended up at a steady pace in 2021, adding an average of 130,000 jobs per month. Monthly sales in this industry rose during the first half of the year, but they tapered off and changed little during the second half.^[10] (See chart 15.) Sales data suggest that the industry’s weak employment recovery was likely due to surges in cases of the COVID-19 Delta and Omicron variants in 2021, which threatened the reopening and capacity expansion of dine-in restaurants. In addition, over the year, inflation rose to 7.1 percent (as measured by the Consumer Price Index for All Urban Consumers),^[11] and this increase may also have affected consumption and contributed to some employment weakness. Another factor likely adding to employment weakness was a 9.8-percent over-the-year increase in the average Employer Costs for Employee Compensation for private sector workers in accommodation and food services.^[12] According to data from the CES survey, average hourly earnings of all employees in food services and drinking places rose sharply in 2021 (+14.9 percent), and this increase resulted in higher labor costs for employers.

Employment in arts, entertainment, and recreation increased by 483,000 in 2021. Similarly, employment in accommodation increased by 307,000 over the year.

Government

The government sector added 450,000 jobs in 2021 and, by December, had recovered 725,000 of the 1.5 million jobs lost between February and June 2020. Within this sector, state government education added 216,000 jobs in 2021, with employment in the industry ending the year just 10,000 below its February 2020 peak. (See chart 16.) Local government education added 279,000 jobs in 2021, but that industry’s employment level in December was still 387,000 below its prepandemic peak. In 2021, employment declined in federal government (except U.S. Postal Service) (−17,000) and in state government (excluding education) (−59,000).

Private education

Like public education, private educational services experienced employment gains in 2021, adding 331,000 jobs over the year, but the industry’s employment level in December was still 93,000 below its February 2020 peak. (See chart 17.)

Manufacturing

Employment in manufacturing grew by 365,000 in 2021, advancing in both durable goods manufacturing (+236,000) and nondurable goods manufacturing (+129,000). With these gains, the sector was able to recover 1.1 million of the 1.4 million jobs lost in early 2020. (See chart 18.)

Driving the employment gains in durable goods manufacturing were transportation equipment (+50,000), fabricated metal products (+46,000), miscellaneous durable goods manufacturing (+32,000), and machinery (+28,000). Within transportation equipment, most of the employment gains were driven by motor vehicles and parts, which added 38,000 jobs over the year. (See chart 19.) Despite this increase, the global semiconductor shortage that began in early 2021 hampered automobile production and was further exacerbated by the automobile sector’s competition with the personal electronics sector, whose demand soared since March 2020 and into 2021.^[13]

The employment strength in durable goods manufacturing was consistent with 2021 increases in new orders for manufactured durable goods.^[14] In December 2021, the Purchasing Managers’ Index (PMI) of the Institute for Supply Management reached 58.7 percent, after expanding for 19 consecutive months since April 2020.^[15] A PMI greater than 50 percent indicates expansion in manufacturing activity.

Employment gains in nondurable goods manufacturing were concentrated in miscellaneous nondurable goods manufacturing (+40,000), chemicals (+26,000), and plastics and rubber products (+20,000).

Wholesale trade

Employment in wholesale trade grew by 152,000 in 2021, contributing to the recovery of 262,000 of the 405,000 jobs lost in March and April 2020.

Other services

Other services added 285,000 jobs in 2021 and, by December, had recovered 1.1 million of the 1.4 million jobs lost in 2020. (See chart 20.) Personal and laundry services drove most of the sector’s job growth in 2021, adding 144,000 jobs. Repair and maintenance also showed employment strength, adding 93,000 jobs over the year, followed by membership associations and organizations, which added 48,000 jobs.

Construction

In 2021, construction added 189,000 jobs and, by December, had recovered 1.0 million of the 1.1 million jobs lost in March and April 2020. (See chart 21.) The sector’s job gains in 2021 were driven by employment advances in residential specialty trade contractors (+64,000), nonresidential specialty trade contractors (+49,000), and residential building (+44,000). (See chart 22.) Over the year, employment changed little in civil engineering construction (+21,000) and nonresidential building (+11,000).

In 2021, job growth in construction coincided with a relatively stable and low federal funds rate (0.08 percent in December) and a low 30-year fixed mortgage rate (3.12 percent in December).^[16] However, this growth was likely dampened by sharp and volatile increases in the prices of building materials over the year—increases measured by the Producer Price Index and reflected in the costs for new nonresidential building.^[17]

Healthcare and social assistance

Healthcare added 103,000 jobs in 2021 and, by December, had recovered 1.2 million of the 1.6 million jobs lost in early 2020. (See chart 23.) The industry’s employment gains in 2021 were concentrated in ambulatory healthcare services, which added 274,000 jobs, an increase driven by offices of physicians (+89,000), offices of other health practitioners (+85,000), and offices of dentists (+48,000). (See chart 24.) In contrast, nursing and residential care facilities continued to lose jobs over the year (−139,000), with the industry shedding 410,000 jobs (nearly all since February 2020) after reaching an employment peak in July 2019. Hospital employment showed little net change (−32,000) in 2021.