Thirty-three million Americans have filed for unemployment since the coronavirus lockdowns began in earnest. Many more have tried and failed thanks to an extremely creaky system running on ancient software, easily overwhelmed by a tsunami of layoffs.
But 20.5 million, the official number of jobs lost in April, according to a report released on Friday by the Bureau of Labor Statistics, is a terrifying figure in its own right. That’s the worst single month for job losses in a data set that dates back to 1939. As in, when Franklin Roosevelt was president and the Great Depression was still fading in the rearview mirror.
After weeks of mounting evidence of economic collapse, the official U.S. unemployment rate has spiked to 14.7 percent, and that number was biased down because 6 million people just gave up and dropped out of the labor market and were thus not counted in the jobless rate. That rate will almost surely go even higher from here.
ADVERTISEMENT
When looking at numbers like these, it’s easy to lose track of their human cost—and not just the monthly toll, but the annual and even decades-long ones. Unless we take strong, targeted action to avoid this fate—I’m talking about direct job creation for specific groups of displaced workers, not $500 billion slush funds for major companies—this damage will be with us long after we return to whatever the post-vaccine, new normal looks like.
Let me explain by way of separating, at least for a moment, two different dimensions of the crisis—what economists refer to as “cyclical” and “structural,” and which normal people think of as near-term and longer-term. Policies like unemployment insurance benefits or stimulus checks can contain the damage in the near-term. If they can help to offset the cyclical downturn, then job losers have a better chance of coming out on the other side of this crisis mostly intact, economically. They may have binge-watched Netflix, but they kept their home, fed their family, and are ready and able to get back to work.
But the longer this sharp, deep recession lasts, and the less effective “countercyclical” policy is in offsetting its pain, the higher the likelihood of lasting, structural, scarring effects. What was separable becomes united; the cycle bleeds into the structural; the damage in the downturn persists into the expansion.
And it hits some people harder than others.
In fact, economists have found these effects to be significant for three groups in particular: younger people who have the misfortune to start their career in a recession, lower-income non-whites who always get disproportionately knocked off course in recessions, and people who live in geographic areas that get hit especially hard by persistently high unemployment.
In his take on scarring effects from the last recession, the one we used to think of as uniquely deep, the economist Jesse Rothstein found negative scarring effects for the jobs and earnings prospects of newly minted college graduates. That’s intuitive; it’s as if they were running a marathon in a huge snowstorm while earlier and subsequent generations started running on a spring day. But Rothstein found the negative effects for the unfortunate cohort didn’t fade when the storm passed, and instead that they lasted through their careers.
Many will never catch up.
My own recent research focuses on the impact of this kind of shock on non-white, working-age people. The punchline is that groups that disproportionately face labor market barriers—including race-based discrimination—work very hard to overcome those barriers, but it’s a tough slog for them. It took 10 years, 2010-2020, for African American employment for “prime-age” workers (25-54) to climb 10 percentage points, from 66 to 76 percent of their population.
Interestingly, we do not see these differences emerging yet. Friday’s jobs report showed equal sized increases—giant ones—in unemployment by race as both rates among both whites and African Americans jumped an identical, and historically unprecedented, 10 percentage points… in one month. But my forecast, in which I’m sorry to report I have considerable confidence, is that given the crisis, the gains that black workers made over the long expansion that ended in March will evaporate in less than a year.
The last example of long-term, or structural scarring is place-based. Economist Danny Yagan finds that places that took the biggest hit from the last recession often took the longest to recover. Some of these places were those that felt the brunt of the bursting housing bubble, like Florida, Arizona, and California. Others were vulnerable due to the loss of their manufacturing jobs base, like Michigan and Ohio. They didn’t begin to bounce back until years after the recession ended.
Taken together, these findings have massive relevance at this very moment. There are measures we can take to diminish the scarring. Even though businesses facing huge revenue losses are under terrible stress right now, we’ve yet to see waves of bankruptcies (though we’ve seen a few high profile ones). If that wave comes, as it well might, we’ll be sure to see Yagan’s findings play out on steroids: many places across the land will take years to recover as compared to a scenario where government interventions preserve businesses until commerce gradually returns.
Vulnerable populations need targeted programs that offset the last-hired, first-fired dynamic playing out with a vengeance right now. One creative idea going around is to marry the massive numbers of these folks who need work with a lot of work that needs to get done because of the coronavirus, including contact tracing and, once businesses start to open, childcare. Such jobs’ programs would require a training component, but again, that would be beneficial not just for these workers but for the broader population.
In terms of helping younger, more highly educated people, the best thing we could do for them, by far, is to get back to whatever the new normal is as soon as possible. And that requires a much deeper investment in testing, and the application of careful reopening plans, like the one Gov. Cuomo is following, to the nation at large.
That, in turn, requires able national leadership. And therein lies the biggest problem of all.
Like I said, these are awful numbers, but each one of them must be considered in the context of a nation with a safety net that is as inadequate as its leadership. A context where the crisis is mapping onto structural racism and inequality that make it a nuisance for some people and livelihood- and life-threatening for others.
In that regard, perhaps the loudest message from these dry reports is that if we fail to correct these imbalances before the next crisis, we will have missed an opportunity to build a much better, more inclusive country. And to save lives.
