Friday, June 4, 2021

Who Lost Their Jobs?

 Popular Economics Weekly

This would be a good jobs report at any other time. Total nonfarm payroll employment rose by 559,000 in May, from a revised 278,000 jobs in May, and the unemployment rate declined by 0.3 percentage point to 5.8 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, in public and private education, and in health care and social assistance.

Employers are crying labor shortage because they were surprised by the sudden 6.4 percent Q1 GDP growth pickup, so they were hoping for more new hires in the May report.

But maybe there is another reason for some workers not taking new jobs as quickly as employers would like—the businesses that employed them may be permanently closed, hence the large number still receiving unemployment benefits.

The WSJ reported that the pandemic resulted in the permanent closure of roughly 200,000 U.S. establishments above historical levels during the first year of the viral outbreak, according to a study released Thursday by economists at the Fed. In recent years, about 600,000 establishments have permanently closed per year, or about 8.5 percent, according to the study, so the total number could be upwards of 800,000 businesses permanently closed during the first pandemic year.

Then why would those losing permanent jobs, permanently, want to return to work quickly? Why shouldn’t they be given time to get over their loss? Have sociologists and psychologists even studied such traumas in detail?

We know something about the hurt from permanent job losses in the Rust Belt—soaring drug use and suicide rates in studies by Nobelist Angus Deaton and Anne Case.

The Federal Reserve gives a preliminary estimate of jobs permanently lost, and as of May it was 3.234 million from 3.529 million permanently lost in April. The calculated Risk graph shows the percentage losses over all recessions since WWII, and the time it took to return to normal levels; 5 years in 2001 (light blue line), 8 years in 2007 Great Recession (dark blue line) and is still below par just 15 months from the current pandemic (red line).

Calculated Risk

Individual companies account for about two-thirds—or roughly 130,000—of the extra business closures if historical patterns hold, according to the Fed economists who examined businesses with employees, cited by WSJ. Other closed establishments are units of major companies—say, a Gap or Pizza Hut—that closed some locations while remaining in businesses.

The service sector was hardest hit and is roaring back with 292,000 jobs in Leisure and hospital, followed by Education and health, and government. More women will return to the workforce, particularly mothers when schools are fully open in the fall. Other service-oriented businesses such as hotels, museums, parks and entertainment venues also added a flush of new jobs.

And many work sites are relaxing restrictions on masks or customer occupancy with coronavirus cases falling to the lowest levels since the first month of the crisis. 

MarketWatch’s Jeffry Bartash reports the global tally for the coronavirus-borne illness climbed above 172 million on Friday, while the death toll rose to 3.7 million, according to data aggregated by Johns Hopkins University. The U.S. remained in the lead globally in cases with 33.3 million and deaths with 596,434, JHUniv data show, but the seven-day average for cases has fallen 48 percent from two weeks ago, according to a New York Times tracker, for deaths has dropped 28 percent and for hospitalizations has declined 22 percent as vaccinations continue to increase.

This all points to labor participation rates continuing to rise in the fall, though it could depend in part on those workers that lost permanent jobs working through the debilitating effects of their losses.

Who is willing to help them, other than the Biden administration that is extending jobless benefits through September, and the 25 states that have not cut off their benefits too early?

Harlan Green © 2021

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