Coronavirus, State of the Labor Market

May 2020 Jobs Day Preview: Tracking the Spread of the Coronavirus Shock

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The cumulative change in employment since the pandemic began will give us a clearer picture of which industries have been hit hardest.

The coronavirus has devastated the US economy, leading to the destruction of over 21 million payroll jobs since February. The hope at the onset of this downturn was that a sudden drop in economic activity concentrated in a few sectors could be quickly reversed. But that possibility might not be the reality we live in. Friday’s new data might show that the cumulative change in employment by industry has become more diffuse. That would be a sign the initial virus shock has mutated into a broader and more enduring displacement.

The concentration of job losses so far is unsurprising, with the leisure and hospitality sector seeing total employment drop by almost 50%. Employment in the utilities sector has barely fallen, losing less than 1% of jobs. If the cumulative employment drop starts to pile up in utilities or other indirectly affected sectors, that could mean that more of the aggregate job loss is due to a systematic, economy-wide shock rather than a sector-specific one.

Cumulative job loss will also put the eventual jobs recovery in a fuller context. For example, a month of data in the future might show that employment rose by 50% in leisure and hospitality. Yet that wouldn’t be enough to climb out of the employment hole. A 50% increase from a 50% decline means employment would only be 75% of its initial level. 

The already troubling drop in employment can become even more disturbing if it becomes more widespread. Hopes for a V-shaped recovery were already fleeting, but if more and more employers are shedding jobs, they might be gone for good. 

Elsewhere in the report, I’ll be looking for the answers to these questions:

  • Will unemployment due to reasons other than temporary layoff start to rise, as job loss becomes permanent?
  • Will employers continue to reduce work hours and shift more workers to involuntary part-time work?
  • How much further will the drop in the labor force participation rate hold down the rise in the unemployment rate?
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