What has the pandemic done to the labor market? That’s the question on the minds of many employers, economists, and policymakers. The answer remains far from clear, as the economy reopens, now more slowly as the delta variant brings back masks and social distancing.
Even before the pandemic, labor shortages and jobs-skills mismatches were affecting many employers trying to fill open positions and expand operations. Josh Lerner, an economist with the Oregon Office of Economic Analysis, writes at the OEA blog about the restructuring of the labor market. He begins by reviewing a New York Times podcast featuring business owners and restaurant employees. The anecdotal takeaway:
…the business owners have struggled to fill job openings and largely blame the federal government and the enhanced unemployment insurance benefits for that. The workers, on the other hand, acknowledge that UI is keeping them afloat financially and are not currently willing to jump right back into jobs that are physically demanding, underappreciated by both their bosses and the customers, and pay low wages. Many former workers say they have taken the past year to improve their health (better sleep and eating habits, more exercise), and are looking for jobs with better working conditions like regular schedules, paid breaks, and the like. Research has shown some job switching into retail, warehousing, and even the postal service as mentioned by the former Portland restaurant worker on the NYT podcast.
As he acknowledges, the anecdotes are supported by data. With respect to enhanced unemployment benefits, he writes,
I do not believe that the enhanced UI is a problem problem, and to the extent it is, it is temporary and was purposefully designed to keep households afloat during the pandemic. But we have to acknowledge it is a labor supply constraint.
And a constraint at a particularly sensitive time. Some of this will have a permanent effect.
On a population-adjusted basis we have lowered our forecast for leisure and hospitality employment by about 7%.
Outside the hospitality sector, other pandemic adaptations will also linger. Consider remote work.
A new report from Upwork even goes so far as to show that a sizable share of workers are willing to take a pay cut to stay remote, and even become freelancers in order to do so.
Here the real question continues to be where does remote work ultimately land. Is it a couple days a week or 100% remote? That’s what’s going to matter the most and we just don’t know yet. For now our office is of the opinion it will generally be a day or three a week instead of fully remote…Such changes still can have some big implications for downtowns, commercial real estate and restaurants that rely on the lunch crowd, etc, but in general most of us will return to the office in the months ahead.
His blog post considers the implications for Oregon, naturally, but is generally applicable. There’s still a lot to learn in the coming months. He concludes,
The changes we have made in the past 18 months, and in those still to come will stick to varying degrees. Some shifts, like more e-commerce, strong home sales and even retirements, are really just accelerating these longer-term structural changes that were already occurring. In general I would place working from home in that group as well, however to the extent it is fully remote and/or an increase in freelancing and the like, that would be a new structural change in the labor market and overall economy.
In another sign of the labor shortage, ADP reports the private sector added 330,000 jobs nationally in July.
“The labor market recovery continues to exhibit uneven progress, but progress nonetheless. July payroll data reports a marked slowdown from the second quarter pace in jobs growth,” said Nela Richardson, chief economist, ADP. “For the fifth straight month the leisure and hospitality sector is the fastest growing industry, though gains have softened. The slowdown in the recovery has also impacted companies of all sizes. Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new COVID-19 concerns tied to viral variants. These barriers should ebb in coming months, with stronger monthly gains ahead as a result.”
Calculated Risk writes, “This was well below the consensus forecast of 675,000 for this report.”