As of April 2021, the United States Bureau of Labor Statistics (BLS) reported 144.3 million nonfarm payrolls, down from the high of 152.5 million just prior to the COVID-19 pandemic. The economy will need to add a further 8.2 million jobs to return to pre-pandemic levels. Furthermore, to keep pace with population growth, it will require approximately another 1.5 million jobs, for about 10 million total, in order to repair the damage brought on by the pandemic.

Given the substantial economic and social benefits of employment, it is best that these 10 million jobs return as quickly as possible.

COVID-19 is the greatest barrier to this return. Some employment activities, and the purchasing activities that help finance them, have been curbed by a combination of individual choices and government-imposed restrictions, in order to stem the spread of COVID-19.

One common feature of typical recessions is that people do not have as much personal income as they did before, and this makes them less able to purchase goods and services at the prevailing prices. While this would ordinarily be a concern in returning Americans to work, this is not a big concern in the current recession, because personal income was sustained through a variety of policy measures. Instead, what we see is a lack of spending despite ample income.

Figure 1. The Covid-19 Recession: Above-Trend Disposable Income, Below-Trend Consumption

^{Source: BEA}

This suggests that the binding constraint on the economy is COVID-19, not a lack of income to households.

Furthermore, another way of seeing the constraint imposed by COVID-19 is to look at the economy by sector. Sectors requiring limited personal contact, such as finance, lost relatively few jobs from the pandemic and have recovered most of them. By contrast, the leisure and hospitality sector, which often involves catering to travelers or crowds, has suffered much more.

Figure 2: Employment in Selected Sectors (Seasonally Adjusted, February 2020 = 100)

^{Source: BLS}

All told, these observations strongly suggest that consumption can resume in activities as they are deemed safe. The COVID-19 vaccines, discussed at last month’s Joint Economic Committee (JEC) Hearing, Vaccinations and the Economic Recovery, offer the best means of returning Americans to work.

The vaccinations are highly effective; in her testimony before the JEC, Dr. Céline Gounder highlighted powerful real-world evidence by a Centers for Disease Control (CDC) study. Between December and March, 3950 people with no prior COVID-19 infection were tested continuously, regardless of symptoms, in order to fully track any COVID-19 infections among the group. Some of these people were vaccinated, while others were not vaccinated. The vaccinated group were far less likely to contract COVID-19; an individual fourteen days past his or her first dose was 80 percent less likely to contract COVID-19 than an unvaccinated individual. By fourteen days after a second dose, the vaccinated were 90 percent less likely to contract COVID-19 than their unvaccinated counterparts.

In addition to being highly effective, the vaccines are also a one-time investment consisting of one or two brief appointments, rather than a continuous drag on daily life. They do not inhibit activities on an ongoing basis; non-pharmaceutical interventions (NPIs), such as social distancing or wearing a mask, frequently do.

In addition to having private benefits to the vaccinated person, the vaccines also likely have social benefits, in that most of the vaccinated can no longer transmit the disease. The efficacy described in the CDC study was not merely efficacy in relieving symptoms: it was against any detectable presence of the virus at all. It is therefore also safer for others to be around vaccinated people than unvaccinated people.

A final point about the extremely high value of the vaccines is that their transmission-blocking property compounds over generations. To the extent that vaccines directly stop transmission to one person, they also have a powerful indirect effect, where they stop the entire chain of transmission that would have resulted from that one person’s illness. Furthermore, this effect happens very quickly, as the virus’s time to reproduction is quite short. The compounding happens over weeks, if not days.

This compounding effect can be seen in the data for countries with robust vaccination programs, such as Israel, the United Kingdom, and the United States. All three countries have seen persistent declines in their infection rates. While vaccines are not the only variable affecting these infection rates, these highly-vaccinated countries have seen unprecedented success stemming COVID-19 infections, and this has generally remained true over several months, under many legal regimes, and on three different continents.

Figure 3: New COVID-19 Cases per Million Population (7-day Trailing Average)

^{Source: Johns Hopkins University CSSE COVID-19 Data}

This success at bringing down COVID-19 infection rates in the United States has enabled consumers to safely spend on new activities, and enabled employers to add 1.8 million jobs so far in 2021. If these trends continue or accelerate, the U.S. could recover fully from the job losses relatively quickly.

In his testimony before the JEC, Dr. Alexander Tabarrok noted that the economic benefits of the vaccines greatly exceed any plausible cost for them. In the United States, the value is in the trillions of dollars, and globally, Dr. Tabarrok estimates the vaccines to be worth $17 trillion in added economic activity. These estimates are just approximations, but their order of magnitude is what matters: vaccines will unshackle the economy.

While vaccines are now relatively plentiful in the U.S., it is valuable to make the vaccination process as painless as possible, in order to encourage more volunteers. Signup processes should be streamlined, or abandoned entirely in favor of simple walk-in systems. Furthermore, Dr. Tabarrok suggests that one factor in vaccination hesitancy is aversion to needles; he highlighted new delivery mechanisms in development, such as nasal sprays or pills, that may be less bothersome for the needle-averse.

A final important point in returning Americans to work is that the U.S. economy is dependent in part on the health of the world economy, and the world also needs vaccinations. In addition to obvious sectors such as tourism, a variety of U.S. companies sell intermediate goods to companies around the world that have been constrained by the pandemic. For example, aircraft manufacturing is a critical export industry for the United States, and without safety on global flights, demand for aircraft is likely to be suppressed. As the U.S. vaccination campaign earns domestic success, it is worth considering looking abroad to help the rest of the world, and by extension, our jobs in export industries.

The vaccines have already yielded significant benefits in terms of returning Americans to work. They have done so by whittling down the COVID-19 case numbers, enabling safe reopenings, and allowing Americans to spend their income more freely. It is best that these trends continue. Ensuring the plentiful and easy availability of vaccines, not just in the U.S. but around the world, is one of the most important ways to keep improving the employment situation.

Alan Cole
Senior Economist