At the start of the pandemic, from February to April 2020, non-agricultural employment in the United States fell by approximately 32 million persons—or 14%. But since then, the US labor market has been experiencing an historic run.

The first FRED graph plots monthly total payroll employment in the nonfarm sector over the past five years, ending in April 2023, the latest data point at the time of this writing. The series is reported as an index, constructed to equal 100 in the “trough” month of April 2020. So, one can read the percentage employment growth from any month relative to the trough directly from the graph. For example, for the three years from April 2020 to April 2023, this employment measure grew by 19.4%, which is a remarkable increase.

One has to go back nearly 80 years to see three-year employment growth of this magnitude. Specifically, the end of World War II in September 1945 brought about the demobilization of over 7 million US troops. According to the National WWII Museum, “the Army had decreased from eight million soldiers in 1945 to 684,000 on July 1, 1947.” Many returned to search for and take up jobs.

The second FRED graph plots the same index, but between September 1943 and September 1948, constructed to equal 100 in the “trough” month of September 1945. After the World War II demobilization, US employment grew 17.6% as servicemembers returned home. This three-year employment growth is nearly as large as the post-COVID increase.

Although driven by very different factors, both can be viewed—in part—as the relenting of contractionary labor market supply shocks.

• After World War II, servicemembers were no longer sequestered for military duty and thus allowed to return to the labor force.
• After the initial contractionary impact of COVID, the economy saw gradual reductions in lockdown mandates, lifting of emergency unemployment benefits, and unwinding of voluntary withdrawals from the workforce. Employment growth was likely further fueled by expansive monetary and fiscal policy during much of the period.

How these graphs were created: First, the inspiration for this blog post came from George Hall and Thomas Sargent’s 2021 working paper “Three World Wars: Fiscal-Monetary Consequences.” To create the top graph, seach FRED for “All employees, total nonfarm.” To change the time span, adjust the “year-month-date” dialogue boxes to “2018-04-01” and to “2023-04-01.” Next, click the “EDIT GRAPH” box and change the “Units” option to “Index (Scale value to 100 for chosen date)” and enter the date “2020-04-01” as the date that equals 100 for your custom index. For the bottom graph, use the same series but adjust the start month, end month, and reference index month accordingly.

Suggested by Bill Dupor.