Economists now anticipate that our economy will only slowly recover from the coronavirus pandemic. Heartbreakingly, there is mounting evidence that COVID-19 has inflicted a loss of millions of jobs forever.
The labor market has recovered about half the jobs we lost, some 11 million. The Bureau of Labor Statistics reported in September that the number of people classified as permanently losing their jobs rose to a seven-year high, 3.8 million. Gus Faucher, chief economist at PNC, said, “It is very worrisome – not only for these individuals but for what it says about the recovery.”
The Wall Street Journal reported that more workers identified themselves as permanently laid off. In April, 88% of those who recently lost jobs reported their firings as temporary. In September, this percentage dropped to 51%. The longer that people are out of work, the harder it is for them to get a job.
The benefits of federal aid to households are fading. Many households got up to $1,200 in one-time payments under the Care Act that ended in September.
The unemployment rate dropped to 7.9% in September. In part this decline reflected an increase in permanent layoffs and more people leaving the labor force. Dismal job prospects and child care responsibilities have contributed to a reduced number of job applicants. The share of adults working or looking for work fell to 61.4%.
Lackluster revenue and business uncertainty has retarded hiring and promoted significant layoffs. American Airlines Group and United Holdings recently cut 32,000 jobs. Walt Disney fired 28,000 theme park workers. All State Insurance and Raytheon Technologies have announced thousands of layoffs.
Beth Bovino, U.S. chief economist for S&P Global Ratings, expressed the following concerns: “A lot of businesses where those workers lost jobs are now gone … There is not as much of a punch in terms of rehiring after the opening of stores and indoor dining in many states. It is more of a gym here and there.”
Marianne Wanamaker, a labor economist at the University of Tennessee, expressed concerns that the recovery will take years, not months or quarters.
Austin Goolsbee, former economic adviser to President Barack Obama, told CNN in an email, “If we are on path to only be two-thirds recovered and then have millions of businesses go under and the jobs there be lost forever, we will be years trying to get back onto the path we were on before.”
Job losses ripple through the economy. People out of work stop spending. They are at risk of falling behind on car payments, credit card bills and mortgage payments.” In the aggregate, consumer nonhousing debt levels – student loans, credit card and auto loans – now approach $4 trillion, almost double 2007 levels.
Both President Donald Trump and Democratic presidential candidate Joseph Biden have proposed competing relief plans to create millions of jobs. However, neither plan can become law because of differences over its scope and cost ($600 billion). The Democratic bill proposes spending $2.2 trillion. The Republican counteroffer is $1.6 trillion.
There appears to be consensus on four points: (1) direct payments to households; (2) the Paycheck Protection Program, a loan designed to provide direct incentive to small businesses to keep their workers on the payroll; (3) a revival of a federal add-on to state unemployment benefits; and (4) renewal of aid to airlines and money to help restaurants stay open.
In baseball terms, Congress is down to its last strike. Lawmakers are scheduled to leave Washington shortly for the campaign trail. Given the fits and starts surrounding stimulus talks, skepticism about reaching a settlement appears well-founded. That said, COVID-19 has unleashed so many unpredictable events that unexpected is the new normal. The legacy of widespread urban blight filled with boarded-up stores is such a brutal wake-up call that we must embrace positive change.
