Amid the pandemic, economists say, some job losses will be permanent

As people return to work during the phased reopening of state economies, a question lingers over how many other pandemic-induced layoffs will result in permanent job losses. 

In a recent analysis, economists at the University of Chicago, Stanford University and the Instituto Tecnológico Autónomo de México predicted that 30% to 43% of U.S. workers will not return to their pre-Covid-19 jobs. Instead, for every 10 job losses there will be 4.2 new hires, leaving millions of people out of work. 

The coronavirus, economic researchers said, is causing major economic upheaval across states that will force the reallocation of labor as businesses adjust to the pandemic or close. 

“There are likely to be material differences across states in the permanent-layoff share due to differences in the industry mix of employment, the demographic mix of the labor force, the severity of the pandemic recession in the state, and the speed of recovery,” Steven Davis, a University of Chicago economist and professor and one of the report’s authors, told IndyStar. 

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The U.S. added millions of jobs in May as temporary layoffs decreased, a silver lining in an economy that has hemorrhaged since mid-March. However, the number of permanent job losses continued to rise, increasing by 295,000 to 2.3 million since April.

Assessing the recovery from the coronavirus recession includes whether jobs will come back, said Michael Hicks, a Ball State University economist.

Jobs that put workers close to other people might be most in peril.

“I still think the majority of losses are going to be people responding to the risk of disease,” Hicks said.

Job gains and losses 

Chelsea Shepherd, a 27-year-old from Warsaw, was furloughed and then laid off in April from a temp job at medical device maker Zimmer Biomet.

After weeks of unemployment, she has picked up part-time work at a supportive living house and is taking further steps. 

“I’m am planning on going back to school to get into a career that isn’t shut down during this,” Shepherd said, adding that she is hoping more permanent jobs will become available. 

Susanne Smith of Fort Wayne had two part-time jobs before the coronavirus hit, including one that she lost as a gig economy worker. Although her husband is still employed, she has been unable to make up the difference in her income. They used up their savings.

While the stay-at-home order was in place, Smith said, her family was not spending on takeout and entertainment. They saved gas by working from home. 

“We’ve been able to scrape by because of not spending on that stuff and that money,” she said. “But, that’s one of those things where people are talking about the economy. Even with things opening back up, the financial position we’re in, we can’t afford to go do things right now.”

Shepherd and Smith are just two of the roughly 797,000 Hoosiers — or more than 47 million Americans — who have filed applications for unemployment insurance over 14 weeks. 

While some workers have found new jobs or returned to work, many others have not. More than 211,000 Hoosiers who filed for benefits earlier were still receiving payments by the week ending June 6, the latest data available.

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According to the Indiana Department of Workforce Development, private sector employment decreased by 405,200 jobs year over year and 380,500 jobs month over month in April. The monthly decrease was primarily due to job losses in leisure and hospitality (-116,000), manufacturing (-78,200), and private educational and health services (-54,200). 

Each of those sectors recovered some jobs in May when Indiana began a gradual reopening of its economy, but not nearly what they lost.

Leisure and hospitality added 34,700, manufacturing increased by 18,100 and private education and health services added 10,700. As a result, the gains in those industries helped private-sector employment increase by 90,100 jobs over April.

However, it was still down by 315,000 year over year and 326,500 below the January 2019 peak.

Additionally, Indiana is still seeing a steady stream of first-time claims for unemployment insurance as more than 31,000 Hoosiers sought benefits for the week ending June 20. 

Will some jobs not return?

At the onset of business disruptions triggered by the response to the coronavirus, Hicks and fellow researchers projected mass layoffs of workers in sectors such as restaurant and hospitality that require close contact with customers and social distancing. 

Indiana's unemployment rate dropped slightly to 3.2 percent for February 2018.

“Those are people who — even if the government lifted their orders —those jobs are probably not going to come back,” he said.

However, Hicks notes that federal employment surveys indicate that most pandemic-induced job losses in the U.S. appeared temporary, with a strong expectation that many workers will return to their jobs. 

This appears to be the case in manufacturing. Factories idled due to supply chain disruptions are back in operation.  

It remains to be seen whether employers will need all of the workers they had before the pandemic. States, including Indiana, are undergoing phased openings of their economies, with bars, restaurants and retailers operating at limited capacity before fully reopening. 

Some states are experiencing summer spikes in positive coronavirus cases. As a result, Louisiana, Texas and Florida have paused or modified reopening plans to mitigate the spread of the virus. 

That also affects whether workers are called back or face permanent job loss. 

“For the most part, the decline of economic activitypreceded government activity, which makes you believe that when the governments release the shelter-in-place order, you’re not going to see big returns back into restaurants, movie theaters and the like,” Hicks said. 

The reallocation of labor

The coronavirus has forced a fast reallocation of labor as companies shifted their focus in response to pandemic-induced demand. Large corporations such as Amazon and Walmart hired more than 100,000 workers to keep up with demand.

Others, such as vape shop Indy E Cigs, shifted their focus to essential items such as hand sanitizer and masks.

Employee Hope Juarez boxes up bottles of Sugar Creek hand sanitizer at an Indy E Cigs warehouse space in Indianapolis on Wednesday, April 15, 2020. Shadi Khoury owns 11 Indy E Cigs retail vaping stores, deemed non-essential, and was forced to close due to coronavirus. Now he has begun using his facilities to bottle hand sanitizer, some of which is being donated and some being sold publicly.

Hicks said some unemployed people may have to relocate to find jobs that match their skills. 

Researchers behind the recent analysis forecast a drawn-out economic recovery, even if the pandemic is largely controlled within a few more months.

“If the pandemic and partial economic shutdown linger for many months, or if pandemics with serious health consequences and high mortality rates become a recurring phenomenon, there will be profound, long-term consequences for the reallocation of jobs, workers and capital across firms and locations,” the report notes.

Contact IndyStar reporter Alexandria Burris at aburris@gannett.com or call 317-617-2690. Follow her on Twitter: @allyburris.