Labor data highlights post-pandemic struggles for several key industries as economy reopens
June 1-7, 2020
By Daily Record Staff
Although not quite the economic apocalypse that some forecasters predicted, the post-pandemic business landscape is still expected to leave some key sectors and laid off workers in dire straits over the next several months.
In Arkansas and across the U.S., the consumer-facing retail, leisure and hospitality, and professional and business service sectors all face a long climb out the COVID-19-induced recession. On the blue-collar side of the economy, the transportation, manufacturing, and aviation sectors also are expected struggling as the economy reopens for business.
Nationwide, the most recent U.S. job report shows that total nonfarm payroll employment plummeted by 20.5 million in April as all key sectors of the economy saw across-the-board job losses. The April over-the-month decline is the largest job decline since the U.S. Bureau of Labor Statistics (BLS) began compiling such data going back to the Great Depression.
According to BLS data, job losses in April were widespread, with the largest employment decline occurring in leisure and hospitality. That sector, which includes restaurants, bars and hotels, fell by 7.7 million or 47%. Employment declined by 2.5 million in education and health services in April as local dentist and doctor’s offices, and other healthcare practitioners shuttered their due to social distancing nationwide.
Employment in the hard-hit retail trade was close behind with job losses of more than 2.1 million as clothing and clothing accessories stores, motor vehicle and parts dealers, home furnishings, and other miscellaneous retailers lost ground. By contrast, general merchandise stores that included warehouse clubs and supercenters like Walmart, Sam’s Club, Costco and Trader Joe’s gained 93,000 jobs.
In the manufacturing sector, employment dropped by 1.3 million with about two-thirds of the decline at durable factories where so-called hard goods motor vehicles, auto parts and fabricated metal products are made. Nondurable “soft” goods that have short shelf life also shed 416,000 jobs.
Employment in the other services industry declined by 1.3 million in April, with nearly two-thirds of the decline occurring in personal and laundry services. Other sectors such as government, construction, transportation and warehousing, financial services and mining also send millions of U.S. workers to the unemployment line as jobless claims topped 38 million for the week ending May 16.
In the Conference Board’s monthly Employment Trends Index, all components of the U.S. job market have fallen into negative territory. Gad Levanon, head of The Conference Board Labor Markets Institute, called the magnitude of job declines in April “unprecedented.”
“The principal objective of the economy going forward is to accommodate the delicate balance of getting people back to work while minimizing the spread of the virus,” said Levanon. “Millions of workers in businesses that were shut down will return to work over the coming months as states start to reopen their economies.
However, for many companies, massive layoffs will continue in the coming months as they try to adjust to lost revenue with cost cuts,” continued the highly influential Wall Street economist. “Beginning in May or June, we expect that the number of workers returning to work will be larger than the number being furloughed or laid off. This would mean the unemployment rate will start to decline. At the end of the year, however, the labor market may still be in worse condition than it was at the peak of the Great Recession.”
In a May 22 op-ed with CNBC, Levanon said before Covid-19 hit the U.S. economic, paychecks were rapidly rising for workers in jobs that do not require a college degree. “Wage inequality had actually begun to narrow, due in large part to the gains being made by blue-collar workers. Poverty had been dropping, too, as more African Americans were in the workforce, and the employment rate for Hispanic women had reached an all-time high,” said the Conference Board’s chief economic forecaster.
But now, with job claims likely to near 50 million going into June, the pandemic has literally erased the long-awaited wage and employment gains made by America’s more economically vulnerable, “making their path to recovery will take longer than for the rest of us,” he said.
“Ultimately, it comes down to social distancing. A disproportionate number of less-educated workers and minorities work in jobs that have and will continue to suffer from the economic impact of social distancing,” he said.
In his CNBC report, Levanon said the types of jobs most sensitive to social distancing are in entertainment, travel, lodging, food services, health care, retail sales, transportation, maintenance and repair and cleaning services. This group also encompasses those working in personal care, such as barbers and manicurists. For these highly impacted workers, about 8 in 10 have less than a bachelor’s degree.
And in some of these specific categories, the share of those without a bachelor’s degree is even higher, approaching or coming in at 9 in 10 workers. For example, those in food services, cleaning services, maintenance and repair and personal care.
In the most recent U.S. unemployment report, In April, average hourly earnings for all employees on private nonfarm payrolls increased by $1.34 to $30.01. Average hourly earnings of private-sector production and nonsupervisory employees increased by $1.04 to $25.12 in April.
However, BLS officials noted that the recent spike in average hourly earnings largely reflected the substantial job loss among lower-paid workers. “This change, along with earnings increases, put upward pressure on the average hourly earnings estimates,” said the economic research arm of the U.S. Labor Department.
Meanwhile, St. Louis Federal Reserve economists Fernando Leibovici and Ana Maria Santacreu, along with research associate Matthew Famiglietti, have recently released two research notes on the impact of social distancing on jobs with the highest risk exposure to COVID-19. The report comes as the Trump administration and state governments across the U.S. are considering the potential of reopening the U.S. economy “an industry at a time.”
In the brief research report on May 12, the economic forecasters for the expansive Eighth District of the Federal Reserve constructed a “novel index of physical contact exposure.” The index ranks the first industries that should reopen based on the individuals with high proximity to others to carry out operations and their reliance on inputs from other industries that also require “physical proximity” to complete their jobs.
Using those indicators, the Federal Reserve economists began classifying industries as “contact-intensive” according to their required degree of physical proximity. Out of a total of 149 industries in the BLS’ job classification system besides local, state and federal government jobs, the St. Louis Fed identified 38 high contact-intensive industries, representing 55% of total employment and 46% of labor income.
“We find that dentists, hospitals and air transportation require a high degree of physical exposure and, thus, might not be the first industries to reopen. Other industries have a high degree of physical exposure indirectly via their intermediate inputs,” said the St. Louis Fed economists. “For example, clay product manufacturing is not itself considered a contact-intensive industry, but it is highly vulnerable to the pandemic because more than 90% of its inputs are purchased from contact-intensive industries.”
The St. Louis Fed economist said an illustration of the usefulness its research can be observed when sorting industries based the index. For example, the report found that the 26th most contact-intensive industry is “animal slaughtering and processing,” and the industries ranked as more contact-intensive are either related to health care or are considered nonessential industries except for “food and beverage stores.”
“This finding is consistent with news that the slaughterhouse industry has recently been affected by high rates of infection and difficulty in continuing operations,” said the St. Louis Fed economist. “Given our index, this is likely not coincidental, and other nonmedical essential industries that are similarly contact-intensive, such as the postal service and truck transportation, should also be monitored closely for signs of outbreaks.”
Even with the new index, the St. Louis Fed economists conclude that government policymakers and business executives in Arkansas and other states across the expansive Eighth District are still struggling on figuring how to reopen the economy without further damage that could lead to a prolonged recession.
“Figuring out how to reopen the U.S. economy to minimize both the health and economic costs of the COVID-19 pandemic is an ongoing problem that is being addressed from multiple alternative angles,” said the Leibovici, Santacreu and Famiglietti.
PHOTO CAPTION: (Photo provided)
Several businesses – retail, hospitality, service – across the U.S. all face the challenge of getting out of the COVID-19-induced recession.