business closed unemployment covid

State Legislatures Spotlight:
Are High Unemployment Rates Here for the Long Term?

By Suzanne Hultin and Zach Herman | Aug. 13, 2020 | State Legislatures Magazine | Print the Full Article

You could say the economy was “just right” in 2019—a Goldilocks scenario. The unemployment rate dipped as low as 3.5%, and the U.S. Department of Labor reported more job openings than there were people actively looking for work.

What a difference we face today. The Labor Department reported that unemployment peaked at 14.7% in April, though some estimated it was actually at Great Depression levels. For comparison, peak unemployment during the 2007-09 Great Recession was 10.6%. And although the rate was down to 10.2% in July, there were still 16.3 million people out of work.

“What makes this downturn unique,” said Rakesh Kochhar with the Pew Research Center, “is that it is driven by a health crisis, not an economic crisis.” Whereas previous recessions and downturns have been led by the goods or financial sectors, this one is led by the service sector. The food and beverage, travel, retail, sporting and gambling industries have been hit the hardest so far.

Widespread Pain

But other industries, such as shipping and manufacturing, are hurting as well. International commerce has decreased significantly as nearly every co­­­­­­untry has reduced production and trade. Many manufacturing plants have reduced business and output because of trade decreases and shelter-in-place orders.

In April, the first full month of quarantine in most states, the economy lost 38.5 million jobs. Of those who lost jobs, 18.1 million reported being temporarily laid off, while about 2 million reported losing their jobs permanently.

Most workers now collecting unemployment insurance considered their job losses or furloughs to be temporary. Research from the University of Chicago, however, suggests that almost half the layoffs will become permanent. And many of those lucky enough to hold onto jobs through the first half of 2020 have seen pay cuts and reduced hours, which also are likely to remain permanent. Studies estimate that anywhere from 4 million to 7 million workers have received pay cuts since February.

When states and businesses began to reopen, often with fewer staff, then closed again due to flare-ups in new virus cases, staffing was once again reduced. Many jobs may not return for months, if not years. The Congressional Budget Office predicts that hiring and employment will rebound, but only tepidly, in the third and fourth quarters.

So, what’s to come for workers, nearly 1 in 10 of whom are unemployed? It’s hard to say. The University of Chicago study found that for every 10 jobs lost, three opened. The grocery, delivery and big-box retail industries are hiring to keep up with demand and account for most of the current job growth.

The economy is experiencing a reallocation of jobs, with workers moving from declining labor sectors to those experiencing growth. It appears unlikely, however, that the number of new jobs created this fall will offset all those lost during the first half of the year.

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Keeping Workers Safe

As states reopen, the question of how to ensure workers’ safety has become a top issue. Both the Centers for Disease Control and Prevention and the Occupational Safety and Health Administration released guidelines on how businesses should reopen and what safety measures are necessary. These are guidelines, however, not requirements. Adherence to workplace safety measures varies significantly by state and business.

Many of the industries hardest hit have strong union representation. Unions are defining worker and community safety, playing a large role in asserting how best to keep their members safe. The American Federation of Teachers released a report on how to safely reopen schools, the AFL-CIO published a paper titled “America’s Five Economic Essentials” and National Nurses United continues to push for personal protective equipment, or PPE, for its members.

States are also figuring out how to define safe workspaces. Virginia’s Health and Safety Code Board adopted an emergency temporary standard that goes beyond federal guidelines. The state guidelines require businesses to adhere to certain safety standards from PPE to sanitation protocol. Companies that fail to do so face fines.

leslie herod, colorado representativeIn July, Colorado lawmakers passed HB 1415, establishing whistleblower protections related to workplace safety during public health emergencies.

Colorado Representative Leslie Herod (D) said the bill was meant to be a preventive measure and that she believed most businesses were working in good faith to protect their workers.

“We had a lot of stakeholder engagement with businesses about this bill,” she said. “We heard from nurses, essential workers, food service workers that their employers were not allowing certain personal protective gear or not providing them with adequate protection while on the job. This bill ensures that whistleblowers are not retaliated against if they report a business that is not following the state or city standards.”

Since the bill was enacted, according to Herod, some businesses have changed their tune.

“Whereas before the bill some may have thought that masks or PPE were not friendly to customers, they are now requiring masks for everyone,” she said. “It is about getting people back to work safely.”

josh kail pennsylvaniaPennsylvania lawmakers considered HB 2557, which addresses employers who fail to meet necessary workplace safety standards. The proposed law would define the reasons deemed valid to refuse or quit a job and remain eligible for unemployment compensation benefits.

“My bill would help to balance everyone’s safety with the need of the majority to return to work,” Pennsylvania Representative Joshua Kail (R), the bill’s primary sponsor, said. “While most of us can safely return to work, some people have legitimate safety concerns that should be taken into account. No one should have to choose between a paycheck and his or her health.”

“Thousands of families continue to struggle economically as a result of the pandemic, and [this legislation] would help to ensure some financial stability for some of them,” added Representative Tarah Toohil (R), who co-sponsored the measure.

In Minnesota, SB 4511 would enforce compliance with state and federal COVID-19-related workplace safety guidelines. Neither it nor the Pennsylvania bill has passed, however.

What’s on the Jobs Horizon?

Economists are looking back to the Great Recession for solutions to today’s bleak jobs outlook. But the current downturn is different from the last one. Following the Great Recession, the service sector dominated the job market. The current recession, however, has shown the volatility of that sector, which has 4.4 million fewer jobs today than it did in February. Consumer confidence has fallen significantly since February, making people more likely to save money and spend less, especially on retail, leisure and hospitality items.

A welcome silver lining has been the rapid embrace of working remotely. Many employers in both the private and the public sectors have discovered that a lot of work can be done outside of traditional office environments. An industry’s capacity to incorporate telework may contribute significantly to its viability and that of its workforce. A recent analysis by the Pew Research Center found that as many as 90% of unemployment claims were from workers in jobs that could not be done by teleworking.

Economists estimate that 40% of workers currently have jobs that can be done remotely and that this percentage will likely increase due to the pandemic. Rural communities may benefit as telework opportunities allow people looking to escape expensive city living are able to relocate while maintaining jobs with urban employers.

The pandemic has also increased interest in using artificial intelligence in the workplace to replace workers with machines that can’t contract the virus.

But telework and AI will not rapidly bring back all the jobs lost since February. The creation of a widely available vaccine could allow for many jobs and professions to return to normal, but the U.S. economy faces a long road ahead before it ever reaches the extraordinarily low unemployment rates of just a year ago.

Suzanne Hultin is a program director and Zach Herman is a policy associate in NCSL’s Employment, Labor and Retirement Program.

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