COVID-19 triggered seismic shifts in the U.S. economy
Long after a vaccine is widely distributed and a sense of normalcy returns, the changes the COVID-19 outbreak has wrought will continue to reshape the U.S. economy for years to come, according to economists at The Conference Board.
“By 2022 and 2023 the pandemic will be behind us. What will the economy and labor market look like beyond the pandemic?” asked Gad Levanon, head of the Labor Markets Institute at The Conference Board, during a webinar Thursday.
The U.S. economy went from having its worst downturn since the Great Depression to its swiftest recovery. But that shock, like an earthquake, widened several fault lines already in play, chief among them the migration to online retail, the acceptance of remote work arrangements, industry concentration, and the rise of automation.
“Remote work is productive. People are finding the work is getting done,” said Elizabeth Crofoot a senior economist specializing in labor markets at The Conference Board.
More online ads are offering remote work as an option and employers and workers are more comfortable with working at home. Offices will reopen, but not on the same level as before. That carries implications for city centers, which won’t be as popular as they once were even after the pandemic passes.
Although unemployment rates remain elevated both nationally at 7.9%, and in Colorado at 6.7%, labor markets don’t have the slack typically associated with recessions. Employers report having a hard time finding help.
“Typically, when unemployment rates are high, companies find it easy to recruit. This time it is not the case. People are not actively looking,” Levanon said.
Many workers in the hardest-hit industries are waiting patiently to be called back, staying attached to jobs that may or may not return. Others are concerned about catching the virus and are laying low, while some parents, unable to find adequate child care, aren’t available to work.
Difficulties finding workers in some industries, like technology, will combine with the wider acceptance of remote work arrangements to push employers to look more widely for the help they need, including overseas. It will also add to the incentive some employers have to automate jobs.
The financial stress associated with closures and reduced sales have already or will sink many smaller and medium-sized firms, resulting in increased industry concentration. Local government budgets are also under pressure, which will weigh on any recovery.
Levanon expects the increase in COVID-19 cases with colder weather and the inability to reach an agreement on stimulus will slow the recovery in the months ahead.
“The next time we will have a boost in economic growth will be when there are clear timelines for treatment, when people are less afraid of going out and about,” he predicts.