Goldman economists see 4.1% unemployment in U.S. by end of year

The U.S. is on course for an employment boom this year once pandemic restrictions ease and the economy reopens, according to economists at Goldman Sachs.

“Reopening, fiscal stimulus, and pent-up savings should fuel very strong demand growth,” Chief Economist Jan Hatzius and colleagues wrote in a report highlighting an outlook that’s more optimistic than most other forecasts. They predict the unemployment rate, currently at 6.2%, will fall to 4.1% by the end of the year.

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The assessment follows last week’s payrolls report for February showing an increase in jobs that was almost twice as much as forecast, suggesting growth momentum is gaining pace. Unemployment surged dramatically last year as the Covid-19 pandemic forced shops and restaurants to close, but economists now expect hiring to recover along with increased immunizations.

The Goldman Sachs forecasters also expect participation in the jobs market to pick up, because “most workers who left the labor force still cite the pandemic as their reason, and will likely re-enter once life normalizes.”

One mitigating factor to the economists’ outlook is that there’s more of a mismatch in workers’ skills than there was, after employers invested in automation during the crisis. Federal jobless benefits could also slow the recovery for a few months, they said.