Women Hit Hardest By Pandemic Job Loss
Dear Rich Lifer,
There is a lot of conflicting news circulating about the job market. Some data shows the labor market is slack, while other data suggests it’s tight. Meanwhile, consumer spending is increasing as more people are getting the Covid-19 vaccine and easing back into “normal” life.
Many economists expect economic activity to ramp up faster than payrolls, which could potentially cause bottlenecks and wage pressure.
Today, we will explore why economists are anticipating this trend and what is actually going on with the labor market.
Economists surveyed by The Wall Street Journal predict U.S. gross domestic product (GDP) will grow 6.4% this year, measured from the fourth quarter of 2020 to the same quarter of 2021. This would increase output to almost 4% above pre-pandemic levels.
Meanwhile, economists predict employers will add 7.1 million jobs between December 2020 and December 2021, a gain of 5%. This would result in employment levels 1.6% lower than they were in the fourth quarter of 2019.
The graph below shows how significantly job growth is trailing economic growth…
Economists believe there are two main reasons that job growth will continue to fall short of GDP…
First, many companies will be reluctant to hire workers until they are absolutely certain that consumer demand will continue to increase.
Although vaccination rates are increasing, the coronavirus is continuing to spread in many parts of the country due to new variants and easing of restrictions.
Many companies are unsure how much demand to expect since Covid has changed basically every aspect of life. For example, business travel may never return to its prior levels.
Service businesses like hair salons are uncertain about when revenue will bounce back, so hiring continues to be delayed out of caution.
Steven Blitz, chief U.S. economist at TS Lombard, stated, “They’re very happy to see this surge as everything reopens, but they still have tremendous uncertainty over what their revenue stream is going to look like.”
The second reason job growth is growing slowly is because millions of Americans took themselves out of the workforce during the pandemic and may not be willing to return to it.
The group of Americans ages 25 to 54 who are holding or seeking jobs (referred to as the prime-age labor-force participation rate) was 81.3% in March, down from 82.9% in February 2020. This represents a loss of 1.9 million workers.
Many of these people have dropped out of the workforce to care for children or elderly family members. According to a March Census Bureau survey, 2.6 million people cite this as their reason for not returning to work.
The survey also revealed that 4.2 million are fearful of contracting or spreading coronavirus and, therefore, continue to delay searching for jobs.
Although job openings are exceeding pre-pandemic levels (there are currently 7.4 million jobs open), Google Trends data shows that worker searches for jobs online are declining. Daniel Zhao, senior economist at Glassdoor, remarked that this recent drop “raises concerns that labor-force participation may not recover quickly even after the pandemic is over.”
This results in rising numbers of long-term unemployment. In March, 4.2 million Americans were facing jobless streaks of 27 weeks or more, a huge increase from the 1.1 million in February 2020.
Long-term unemployment is a vicious cycle. Jay Bryson, chief economist at Wells Fargo’s Corporate and Investment Bank, explains, “The longer people remain unemployed, the more those skills do start to atrophy and then it’s harder for them to get back into the labor force.”
Women in the Workforce
The economy may not be able to fully recover until women are able to return to the workforce.
Since February 2020, women have accounted for 55% of net U.S. job losses — almost 2 million women. In addition, many women have been forced to reduce hours or give up career opportunities.
This is because women often have the responsibility to care for children and the elderly, which has grown increasingly necessary due to the closures of schools, daycares, and assisted living facilities. Women also account for the majority of workers in education, leisure, and hospitality — all sectors that have been hit hardest by the pandemic.
According to a February paper by the Minneapolis Fed, nearly all fathers who had left the workforce at the onset of the pandemic in 2020 had returned to work by November, while mothers had barely returned.
U.S. labor-force participation for women fell to a 33-year low of 56.3% and has recently ticked up to 57.4%. This is still a far cry from the male participation rate, which is 69.5%.
Getting women back into the workforce means there needs to be more access to in-person school and childcare. It also means companies may need to make flexible hours and work-from-home setups a permanent part of employment.
The Economic Effect
If this slow workforce recovery continues, it could result in bottlenecks that will have negative effects on consumers until labor demand and supply balance out.
We may begin to see airport security lines stretching longer than usual due to an influx of travelers but not enough staff. We might have to pay more at restaurants, as owners attempt to gain employees by raising wages.
Mr. Bryson stated, “Over the next few months you could see really strong demand, and you could get some of these pressures…in terms of wages, etc.”
Pimco economist Tiffany Wilding believes the U.S. economy won’t return to pre-pandemic levels until the middle of 2023, especially due to the imbalance between men and women’s abilities to return to the workforce. She believes “There will be lingering scars,” particularly in the service sector.
Eventually, job growth and GDP will balance out; until then, get ready for longer lines and higher prices…
To a Richer Life,
The Rich Life Roadmap Team