As the number of coronavirus cases continue to increase, the number of Americans who have been jobless for more than 26 weeks jumped to 3.6 million last month.
This worries labor economists and social scientists about the slow rate of economic recovery amid the coronavirus pandemic.
People who don’t work for a long period of time become less likely to return to the labor force at all, said Federal Reserve Chairman Jerome Powell who has been warning of this detachment all year.
Last week, 709,000 Americans filed first-time claims for unemployment benefits, the Labor Department reported Thursday
The number of unemployment claims last week beat economists’ expectations for 730,000 filings but remained above the pre-pandemic record of 695,000 for the 34th consecutive week.
“With each passing week, many businesses see an extension of diminished revenues, particularly those in the leisure, hospitality and travel spaces,” said Mark Hamrick, senior economic analyst at Bankrate. “With more restrictions, either from governments or self-imposed by consumers, there’s no let-up in pandemic fatigue.”
“The longer you’re out of work, the harder it is to get re-employed,” said Maria Heidkamp, director of the New Start Career Network at Rutgers University. “I think we’re on the cusp of catastrophic long-term unemployment. The fact that so many of the layoffs we thought were going to be temporary have turned out to be permanent — we’re just not prepared for that right now,” she said.
“If they’re in mid- to late-career, it may mean a permanent decline in their earnings,” said Jeffrey Wenger, a senior policy researcher at the RAND Corporation. “Losing your job late in your career is a very damaging phenomenon,” he said, one that can damage people’s financial stability and retirement security.
The coronavirus pandemic has altered what economists think of as “typical” recessionary labor market shrinkage. “Jobs that are usually safe, namely service sector jobs, social services, retail sales — those jobs are the ones that were most affected,” said Till von Wachter, professor of economics and director of the California Policy Lab at the University of California, Los Angeles.
One result is that professionals can’t simply find a job as a barista or store clerk to tide them over during a stretch between jobs. Another is that the sheer size of this country’s service sector means that this displacement is happening at a massive scale — and the U.S. doesn’t have the tools to realign workers and their skill sets to this new reality.
“The real question in my mind is to what extent the place-based economy is going to restructure itself because of Covid-19,” Wenger said. “We may just see a permanent decline in demand for restaurant meals or massages or hotels and travel-related services, things that have to be place-based, and if that’s the case, you’re looking at a significant portion of the U.S. labor force struggling to find work.”