Pandemic Recession pain continues, with 3.5 million jobs now gone for good
Another 1.38 million Americans filed applications for initial unemployment benefits last week, with 16 million more now receiving continuing benefits from state or federal programs than was the case at this time last year. Some 25.5 million workers—15% of the workforce—are either unemployed, furloughed, or have seen their hours and pay cut because of the pandemic. Most of the unemployed will sooner or later go back to work at their old jobs, especially now with a growing number of people being vaccinated against the coronavirus. Even before vaccines were available, millions who had filed for benefits since March 2020 when pandemic-related economic restrictions were first put in place returned to earning a paycheck months ago.
But in the past two months, the number of people now categorized as long-term unemployed—out of work for six months or longer—has risen to 3.5 million, according to the Bureau of Labor Statistics. As various assessments since April have concluded, many jobs those long-timers have been laid off from have permanently vanished. “We’re recovering, but to a different economy,” Federal Reserve Chair Jerome H. Powell said in November. “Even after the unemployment rate goes down and there’s a vaccine, there’s going to be a probably substantial group of workers who are going to need support as they’re finding their way in the post-pandemic economy,” he said. According to the Pew Research Center, 66% of the jobless say they have seriously considered changing their occupation or field of work. Just 52% said as much during the Great Recession.
During a recession, furloughed workers can expect to be called back to their old jobs as the economy recovers while those whose jobs have been eliminated have to wait for an employer to create a new one. Accurately predicting how many are permanently lost is no easy task. A study in May concluded that 42% of the layoffs that had occurred by then would probably become permanent. That now seems overly pessimistic. But the picture is still troubling. One example: In a soon-to-be-released report previewed by reporters at The Washington Post this week, the McKinsey Global Institute predicts that 20% of business travel won’t come back. The fallout means fewer jobs at airlines, hotels, restaurants, and retail shops, plus the automation of office support roles as well as some factory jobs.
In November, the Brookings Institution reported:
… we see a large number of workers transitioning out of the labor market altogether. The permanently unemployed are particularly likely to leave the labor force, but there is also a small stream of workers on temporary layoff who depart as well. This trend is even more troubling—and a sign of structural damage to the economy that could take longer to heal, because workers who are out of the labor force, even those saying [they] want a job, have relatively low reemployment rate For example, even in more normal job market conditions, only roughly 40 percent of those out of the labor force who say they want a job are back in the labor force within 12 months.
It’s important to reiterate how profoundly unequal improvements in the economy have been since April and May. Lael Brainard, a Federal Reserve governor, said in a speech a month ago:
The damage from COVID-19 is concentrated among already challenged groups. Federal Reserve staff analysis indicates that unemployment is likely above 20 percent for workers in the bottom wage quartile, while it has fallen below 5 percent for the top wage quartile. Black and Hispanic unemployment stood at 9.9 percent and 9.3 percent, respectively, in December, while White unemployment was 6.0 percent. Labor force participation for prime-age workers has declined, particularly for parents of school-aged children, where the declines have been greater for women than for men, and greater for Black and Hispanic mothers than for White mothers.
To say it another way, the jobless rate of the poorest 25% of Americans is four times the rate of the richest 25%. People of color have been disproportionately hurt by these job losses. They are more likely to be low-wage “essential” workers who are unable to work remotely while more affluent workers have been able to work from home with the same pay and benefits as before the pandemic. Those higher-wage jobs are typically less likely to become automated, at least until Alexa becomes self-aware.
McDonald’s has been automating its ordering services and plans to soon automate its drive-thru operations. It is just one of many companies cutting costs by reducing their employee count while increasing what can be accomplished by machinery. That change is not, of course, new. But e-commerce, which has been expanding over the past two decades, greatly accelerated during the pandemic. While this has meant hiring more drivers and warehouse workers, it has also meant fewer retail clerks. And although truly reliable self-driving software may still be years away, automation is spreading rapidly in warehousing. Over time, there will still be workers on the floor, but fewer of them.
In an interview in November, West Michigan University economist Paul Isely noted, “There will be an upheaval in those types of jobs. When we come out of this recession, those jobs likely won’t come back in the numbers that we previously saw them. People who are in those jobs need to really be thinking about how do I retrain, up the value chain.”
McKinsey head Susan Lund reinforced that view to the Post, saying: “We think that there is a very real scenario in which a lot of the large employment, low-wage jobs in retail and in food service just go away in the coming years. It means that we’re going to need a lot more short-term training and credentialing programs.”
Necessary as that is, two problems face retraining efforts: First, retraining for what jobs? And second, who pays?
President Joe Biden’s $1.9 trillion American Rescue Plan contains no funding for retraining, although lawmakers say additional legislation with money for this could theoretically pass later this year or next. But this ignores the experience of the Obama administration, which could only get a single, inadequate stimulus bill passed by Congress 11 years ago. Training and retraining should, however, constitute a key element of the green transformation that the Biden-Harris administration has made a centerpiece of its efforts to address the climate crisis. Funding and otherwise facilitating green infrastructure and doing it quickly is essential. Getting such legislation passed in the current Congress, of course, could be even tougher than getting the 2009 stimulus onto the books.
Last week, Powell told the Economic Club of New York:
Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy. It will require a society-wide commitment, with contributions from across government and the private sector. The potential benefits of investing in our nation’s workforce are immense. Steady employment provides more than a regular paycheck. It also bestows a sense of purpose, improves mental health, increases lifespans, and benefits workers and their families. I am confident that with our collective efforts across the government and the private sector, our nation will make sustained progress toward our national goal of maximum employment.
Collective efforts obviously require collective agreement. Getting to that when a hefty portion of the Republican side of the congressional aisle decries a policy as modest as unemployment insurance as incentivizing sloth and anything that smacks of a 21st century New Deal as communist is difficult. Getting collective agreement even while the economy makes this huge shift is going to take prodigious amounts of diplomacy, arm-twisting, and grassroots politics.