EDITOR NOTE: Last week’s jobs report might have provided relief to some investors, as the 6.7% unemployment rate was far lower than what most analysts had anticipated. Good news? It can be, if you consider that we’re only 10 million jobs short as compared to pre-pandemic levels. Think about it again: 10 million jobs short. Bear in mind, that figure is backward-looking. We’re entering a new lockdown phase. Not a conducive environment for job creation. Now do you get the picture?
During the first few months of the coronavirus pandemic, some 22 million U.S. workers lost their jobs. In response to these record-breaking numbers, many White House officials promised that a swift “V-shaped” recovery would occur once the pandemic was under control.
Since then, many have returned to work, but there are still 10 million fewer U.S. jobs than before the pandemic began. With new Covid cases continuing to set records and a disappointing November jobs report, some economists fear that economic recovery will take longer than expected — and that workers will pay the price.
“We’ve set ourselves up for some very real severe weakness in the labor market going forward,” says Erica L. Groshen, former head of the Bureau of Labor Statistics and current Cornell University professor.
The most recent jobs report from the BLS indicates that in November, the U.S. economy added 245,000 jobs and the unemployment rate fell to 6.7%. But even this total concerns economists.
“It feels weird to say a report that shows 245,000 jobs added and a 0.2-point drop in the unemployment rate is worrying,” Daniel Zhao, an economist for job site Glassdoor tells CNBC. ”[But] this feels like the calm before the storm.”
“The jobs that were regained through September were highly correlated with the places where jobs have been eliminated. Which is not surprising, most of the workers were on temporary layoff and they were recalled to the job they had before,” explains Groshen. “But now a higher and higher proportion of the people who are unemployed are permanently adrift. They’ve lost their connection with their employer. And so getting them rehired is going to take longer. And for many of them is going to mean a cut in pay.”
The November jobs report indicates that 3.9 million Americans have been out of work for at least 27 weeks, which is considered “long-term unemployment.”
“Initially, people were saying we’d get a V-shaped recovery. Then economists were saying it’s going to be a lot slower than that, especially if there is long-term unemployment and businesses shut down,” says Harry J. Holzer, former chief economist for the Department of Labor and current professor at Georgetown University. “The labor market recovery was probably faster than many of us thought in May, June, July, but now it’s really slowing,”
What can be done
For those who are out of work, Holzner and Groshen suggest that workers seek out opportunities to shift to fields with expected long-term demand.
“Recessions tend to speed up structural changes in the economy. And right now those include trends like more automation,” says Groshen, recommending that workers consider how automation could impact their field.
“For instance, retail employment is declining in brick and mortar, but at the same time that the shift to online has created a lot of new jobs in warehousing and transportation,” says Holzner. “There are some sectors where things seem to be growing,”
To avoid the most painful economic repercussions of the coronavirus recession, Holzner stresses the need to “get money quickly to the people who need it the most” by extending and expanding unemployment insurance benefits that were included in the CARES Act.
A recent report from the Economic Policy Institute found that reinstating the expired $600 weekly jobless benefit could save or create 3.3 million jobs and boost personal income by more than $290 billion over the next year.
Groshen adds that the federal government could give the economy a boost by increasing spending in select areas.
“This is the time for infrastructure spending to try and take up some of the slack in the labor market and position ourselves for a solid recovery — projects like roads and bridges and hospitals,” she says. “And also education spending, because we know that underserved communities are the ones suffering most from the disruption to the education system.”
And while prospects of a new stimulus package appear to be improving, Groshen stresses that timing when to implement such a policy will be important.
“You probably wouldn’t want [a stimulus package] to really start until the vaccines were pretty widely distributed,” says the economist. “But in some ways, we should start sooner because too often when we do stimulus spending it’s sort of too little, too late.”
Originally posted on CNBC