How the pandemic completely upended the US job market in 2020, leaving permanent scars in its wake
By: Business Insider
Tags: Unemployment, Jobs, Covid 19 Crisis, Economy, Recession

By Ben Winck and Juliana Kaplan

Amanda Clark is worried about getting evicted — again.

The 38-year-old mother of three had been in the restaurant industry for 15 years, working as a server and bartender.

Then the coronavirus pandemic struck in March, and she — like 22 million other Americans — found herself unemployed. Since the first time she was laid off, she’s worked at three different jobs, but none of them have stuck.

“I would just get hired and would start, and then business would be so terrible that I would get laid off again,” she told Insider.

Clark wasn’t able to get unemployment benefits until May. And even when they did kick in, she was receiving just $117 a week, she said. For three and a half months, she had no money coming in, and that’s when she lost her apartment.

“Now it’s just like this big backlog of, ‘You’ve been evicted here, and you’re going to be evicted there,’” she said. “And so now my credit’s going to be ruined, and it is the hole that I cannot seem to dig myself out of.”

Clark isn’t alone: The US labor market’s recovery is just over halfway back to pre-pandemic levels, but millions of still unemployed Americans face an increasingly difficult return to the workforce. As they attempt to regain footing, they’re having to contend with a job landscape permanently marred by the coronavirus.

Amanda Clark. Photo: Amanda Clark

For a year of dire superlatives, economic data showed some of the bleakest. The economy contracted at a record 31.4% annualized rate in the second quarter amid coronavirus lockdowns and frozen activity. The unemployment rate spiked to 14.7% in April, its highest point since the Great Depression. Consumer spending nosedived to its lowest point in five years.

Yet while conditions have improved since — and COVID-19 vaccine distribution is lifting hopes for healthy growth — the labor market still hasn’t seen the V-shaped recovery enjoyed by other pockets of the economy. And economists fear the rest of the rebound will be even more taxing than what’s already played out, even in the presence of a $900 billion stimulus package just passed by Congress.

The initial bounce back “was the easy bit,” Jonathan Wright, an economics professor at Johns Hopkins University, told Insider. He said businesses that partially reopened in the summer were able to quickly rehire workers who had been temporarily laid off.

“What’s much harder is somebody who loses their job in a business that has closed. The process of them finding a new job is going to be an awful lot slower,” Wright added.

Recent data points to a weakening recovery that could soon tip into another decline. The US economy added just half of the 460,000 payrolls expected in November, according to the Bureau of Labor Statistics. Meanwhile, the unemployment rate saw its smallest month-over-month decline since the recovery began.

The labor market hasn’t fared any better this month. New filings for unemployment insurance defied economist forecasts and posted a surprise increase for the week that ended December 12. The reading added to recent upward inflection and marked a 14-week high for US weekly jobless claims.

Put simply: The data is going in the wrong direction.

“It’s darkest before the dawn, and we’re likely to lose ground again before we actually are able to fully reopen the economy with herd immunity and a vaccine,” Diane Swonk, the chief economist at Grant Thornton, told Insider.

Looming hurdles

The US continues to endure an increasingly dire wave of the pandemic, while a new strain of the virus in the UK has prompted fresh lockdown measures overseas. The US reported 178,191 new cases on Monday, according to the COVID Tracking Project. Deaths neared 311,000, and virus-related hospitalizations climbed to 115,351.

The rapid rise in cases has prompted several state and municipal governments in the US to employ stricter lockdown measures in hopes of slowing the virus’ spread. Major metropolitan areas like New York are considering full lockdowns for the second time since the pandemic hit the US in the spring.

With the economy down about 10 million jobs, the surge in cases will further hinder gains and could even drag the labor market into a new decline, Heidi Shierholz, a senior economist at the Economic Policy Institute, said.

“To get those jobs back, we have to have an economy that’s strong enough that people are opening new businesses to meet demand for goods and services,” she said. “And that stuff just takes longer.”

The sheer length of time in which millions of Americans have been unemployed also presents a challenge. Finding work tends to become more difficult after several months of joblessness, and prolonged bouts of unemployment often lead to people accepting lower-paying jobs just to rejoin the labor force, Swonk said.

That compounds the fact that many of those workers taking these jobs were already near the bottom of the pay scale. In the event that they do return to low-paying jobs, they’ve already missed a prolonged period of wages. The result is a situation where even people who desperately want to work get discouraged by the grueling process.

“Once you hit six months of unemployment, you end up getting a blow to mental and physical health in the midst of a pandemic,” Swonk said.

Ebony Mitchell in Louisiana is one of the many American workers who found herself out of work for a long stretch — six months. She recently began working part time again, this time as a remote Google IT instructor, after months of successfully collecting unemployment benefits she described as a “lifesaver.”

Ebony Mitchell. Photo: Ebony Mitchell

But Mitchell’s success story is a rarity in the increasingly grim labor landscape. She said she felt bad navigating the joblessness system with ease as she saw acquaintances on social media struggling.

Mitchell knew two people who were eligible for benefits but didn’t initially apply. They said they didn’t want to receive $600 for doing nothing, but she insisted on helping them apply anyway, she said.

“Contrary to popular belief, underrepresented communities want to work and we want to earn our money,” Mitchell said.

Deep scarring in previously thriving industries

Complicating matters further is that taking measures to bring the unemployment rate back to 4% won’t eliminate the pandemic’s lasting effects. It’s increasingly looking like some industries might never return to their past health.

The 80-year shift toward more discretionary spending and services was “turned on its ear” by the pandemic, Swonk said. The travel and leisure sectors are particularly endangered, as businesses in both areas entered the health crisis with twice as much debt on average than companies in other industries, according to the Federal Reserve Bank of New York.

Lori Jay, 66, lives in Maui. She worked in the recreational-activity industry for about 15 years and has been a ride-hailing driver for the past four. She’s felt the economic suffering of the pandemic — particularly in the leisure sector — firsthand.

She, like many people she knows, came to Hawaii to make a change and get out of the rat race, she said. But the state’s economy has a particular dependence on tourists.

Lori Jay. Photo: Lori Jay

“We used to joke kiddingly to each other, everybody here, ‘What happens when the ships stopped coming?’” Jay said.

In March, they found out: Business ground to a halt. Hawaiian tourism was hit the hardest by the pandemic in the US, according to a WalletHub analysis.

“Everybody I know stopped working,” she said. “And I know a lot of people.”

Other industries are enduring tectonic shifts. In the retail sector, the rapid expansion of e-commerce traffic and simultaneous hit to physical stores accelerated the yearslong transition to online shopping. The pandemic drove a “decade worth of shift” from brick-and-mortar stores to Amazon in a single year, Wright said.

And increased remote-work activity presents a severe risk to the businesses that serve as commercial hubs for cities. A drop in office workers cuts down on prospective revenue for everything from nearby restaurants and bars to dry cleaners and public-transportation agencies, the Economic Policy Institute’s Shierholz said.

Contending with long-term wounds

Beyond unemployment, recovering all payrolls lost during the pandemic would also leave the US economy far behind the level of output it was previously poised to achieve. The nation was generating about 200,000 jobs each month before the pandemic hit. If that pace held steady, the country would have added roughly 2.4 million more jobs since February.

A full recovery is not “just about regaining what was lost, it’s also about regaining what could have been,” Swonk said.

Returning to a 2019-like job market would still mean the US would have to contend with age-old structural problems that already existed. It wasn’t until the final years of the last economic cycle that income among the lowest earners began to rise and a more diverse pool of talent was tapped, Swonk said. The pandemic swiftly washed those gains away, and the economic recovery has so far been markedly uneven.

While the unemployment rate for white Americans sat at 5.9% in November, one in 10 Black Americans remained unemployed, according to the Bureau of Labor Statistics. The unemployment rates for Asian and Latino workers were 6.7% and 8.4%, respectively.

The gender gap widened as well. The closure of schools across the country overwhelmingly weighed on women with children, forcing many to replace their jobs with childcare. It will take an active effort across companies to retain women in their workforces and avoid a “permanent blemish” on female employment and earning potential, Swonk said.

Different recession, same mistakes

Another hurdle facing the labor-market recovery is that high-ranking economic officials have seemingly not learned from past mistakes.

When the US was faced with an entirely different recession compared with the previous downturn — one characterized by historically ferocious velocity and depth — the country responded by repeating errors that previously slowed growth for years the last time around, after the global financial crisis.

While the federal government can borrow to offset a drop in tax revenue, state and local governments are forced to slash costs to balance their budgets. Public workers are laid off, and funding for aid programs is cut.

All told, budget shortfalls in state and local governments delayed a full recovery from the Great Recession by more than four years, Shierholz said. And the latest wave of fiscal support appears to lack the billions of dollars needed to avoid such fallout.

Without another tranche of aid for governments, “there will be just years and years of elevated unemployment” mirroring those after 2009, Shierholz added.

State governments will also play a critical role in rolling out the coronavirus vaccines over the coming months. While Congress’ latest stimulus package included funds for vaccine distribution, the omission of additional relief could further hinder the country’s economic rebound.

“If Congress were to give state and local governments no further relief at all, then they’re going to have to do an awful lot more on the public-health side, while still cutting their overall costs by 10%,” Johns Hopkins’ Wright said.

A light at the end of the tunnel

But it’s not all doom and gloom. The $900 billion stimulus package passed by Congress on Monday renews aid after months of legislative gridlock. Measures including $600 direct payments, $300 per week in federal unemployment benefits, and funding for the Paycheck Protection Program offer new support for households and businesses struggling through the coronavirus recession.

But the direct payments and bolstered unemployment benefits are half the size of those included in the CARES Act, the rescue package Congress passed in March. Lawmakers have indicated they’re open to passing additional fiscal support in 2021, but the delay in reaching the latest stimulus deal suggests future aid might not arrive fast enough to heal growing problems.

For many, the $300 boost to weekly unemployment benefits will expire on March 14. Vaccination of the general population is projected to start in February or March, but herd immunity isn’t likely to arrive until well into 2021. The months in between are set to see unemployment insurance dry up while case counts remain too high to allow for a full reopening.

Jobless benefits also didn’t discourage unemployed Americans to keep searching for jobs through the downturn, a study from the Federal Reserve Bank of San Francisco found. The spring expiration of the aid program could see people drop out of the labor force and create a lasting drag on growth.

“The fact that we’ve delayed and kicked the can down the road for so long on aid, it ups the ante that you have more wounds that fester because you’re not dressing those wounds while the war is still on,” Swonk said.

In the meantime, unemployed Americans are doing what they can to get by. Jay said she was fortunate to be old enough to get Meals on Wheels. Clark has looked into moving to Texas to work for her husband’s family — but that’s only if business can rebound after his mother’s and sister’s hospitalizations for the coronavirus, she said.

A stimulus package may not eliminate all the difficulties that unemployed Americans are facing. But the immediate relief it would offer could make a real difference.

“That would be great. It would get me out of the debt that I’m in right now,” Clark said of a second stimulus check. She said she’d use any stimulus money to pay off her apartment and fend off a future eviction as moratoriums lift.

“There’s a lot of people that don’t — they’re not living this life,” Clark said. “Their whole life hasn’t changed any, and a lot of it has for the rest of us. We just want the world to go back to normal. That’s all we all want, I think.”

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